private annuities

[foozgarden]

Essentially to have 0% tax, you cannot exceed 40k/year in your payment.

I wonder if tax reliefs can count.

correct. there is abit of planning.

reliefs count. you have to max it.

 

[final1]

4.05% is a projection that assumes that the PAR fund performs at 4.75%.
If the PAR fund performs at less than 4.75%, you will get less, and if the PAR fund performs at more than 4.75% you will get more.

The next thing you would want to ask yourself is... why not just invest the money yourself instead of giving 0.7% away every year to the insurance company?

These plans don't really provide any longevity insurance like CPF Life does.

You are right. In one my earlier comments, I opened by questioning this compared to building an equity portfolio and taking dividends instead.

 

[tangent314]

Fully SRS qualified life annuities are genuine longevity insurance. And, for those who can save significantly on their taxes and who end up with “big” SRS accounts, they can make financially sense....

....But usually the annuity would be purchased when you’re in your early 60s, unless you think the insurer is offering a particularly good deal now versus what you think is likely later.

Anyway, I can see an argument for them in these particular, fairly narrow circumstances.

I don't call them 'real' longevity insurance because they are structured in a way where the principal is not drawn down on, unlike CPF Life. This way, there is no need to calculate anything using mortality tables. It's like putting money into the bank and the bank giving you the interest every month and when you die your nominees take the principal amount back. Of course for some of these plans the principal amount can go up if PAR fund > 3.25% performance although the monthly payout remains the same.

Compared to CPF Life, the premiums will be a lot higher. For that Manulife Signature Income plan we are already looking at $500k single premium + 5 years accumulation to reach FRS level of payouts. Naturally the bequests will be a lot higher too.

I suppose for some people who don't like the idea of pooled longevity insurance, they could buy this plan and apply for CPF Life exemption.

 

[BBCWatcher]

I suppose for some people who don't like the idea of pooled longevity insurance, they could buy this plan and apply for CPF Life exemption.

No, only life annuities qualify as CPF LIFE substitutes. Anything with an age 99 limit (weird!) doesn’t qualify.

As it happens, Manulife does offer a fully SRS qualified and qualified CPF LIFE substitute life annuity: RetireReady Plus Lifetime.

 

[JuniorLion]

No, only life annuities qualify as CPF LIFE substitutes. Anything with an age 99 limit (weird!) doesn’t qualify.

As it happens, Manulife does offer a fully SRS qualified and qualified CPF LIFE substitute life annuity: RetireReady Plus Lifetime.

Would you happen to know if ManuLife Retirement ReadyPlus LifeTime or NTUC Guaranteed Life Annuity is better?

 

[BBCWatcher]

Would you happen to know if ManuLife Retirement ReadyPlus LifeTime or NTUC Guaranteed Life Annuity is better?

Usually NTUC wins that particular battle (from what I’ve seen/read), but of course you can ask both companies for their best offers.

If you’re not planning to use SRS funds, then you can also check with Tokio Marine to see what their two life annuities are like. One of them is a joint life annuity, which could be rather interesting in certain circumstances.

I’ve briefly looked into foreign annuities, and apparently it is possible to buy life annuities from Switzerland — and denominated in a fairly wide choice of currencies. I doubt they’re good values. They seem to cater to wealthy individuals who are looking to nail down some financial security that’s not dependent on a particular home country.

 

[elviskua]

https://www.straitstimes.com/business/banking/better-returns-eyed-for-participating-funds-in-2018

Bigger insurer have better par fund return

https://www.straitstimes.com/business/aia-spore-to-pay-out-494m-in-policy-bonuses

Please pm me if got any questions and would gladly assist as my job focus a lot on retirement planning with 19 years experience and 2 chartered papers.

 

[JuniorLion]

Usually NTUC wins that particular battle (from what I’ve seen/read), but of course you can ask both companies for their best offers.

If you’re not planning to use SRS funds, then you can also check with Tokio Marine to see what their two life annuities are like. One of them is a joint life annuity, which could be rather interesting in certain circumstances.

I’ve briefly looked into foreign annuities, and apparently it is possible to buy life annuities from Switzerland — and denominated in a fairly wide choice of currencies. I doubt they’re good values. They seem to cater to wealthy individuals who are looking to nail down some financial security that’s not dependent on a particular home country.

Using SRS for life annuities is the best - you can have 600k and above in SRS yet still don't need to pay a single cent in tax if you use it to buy life annuities.

 

[foozgarden]

Using SRS for life annuities is the best - you can have 600k and above in SRS yet still don't need to pay a single cent in tax if you use it to buy life annuities.

I second that.

Just need a bit of planning to avoid the taxes.

 

[BBCWatcher]

Using SRS for life annuities is the best - you can have 600k and above in SRS yet still don't need to pay a single cent in tax if you use it to buy life annuities.

Maybe. It still depends on whether SRS works out to be a good deal. When you start making qualified SRS withdrawals, in any form, half of the withdrawal is taxable at ordinary Singapore income tax rates. If that’s your only taxable income, then a $40,000 withdrawal means zero Singapore tax. But....

(a) Another country doesn’t care about that. In the case of U.S. persons, U.S. taxes apply. If you retire outside Singapore, your home country probably won’t care either and will tax that income per their normal rules.(*)

(b) If you have other taxable income in Singapore, the SRS withdrawal layers on top of that taxable income. That could push you over the top into taxability, maybe even high taxability.

A fully SRS qualified life annuity can only stretch out the withdrawals beyond the 10 year limit. That can help push down the effective tax rate, or even eliminate it, but “it depends.”

(*) Your ability to retire in another country may critically depend on your demonstration of a strong financial foundation. A lot of countries want to see evidence of a decent or better pension from a reliable payer. Your CPF LIFE retirement income counts, but it generally won’t be enough to qualify for immigration purposes, even at ERS level.

 

[JuniorLion]

I second that.

Just need a bit of planning to avoid the taxes.

Any idea if one can do something like that, in the scenario below?

At age 62, has $800k in SRS. Decided to withdraw $40k per year for 9 years. So left with $440k after 9 years. Purchased a life annuity, and the life annuity starts to payout @ $40k/year from age 71 onwards..

 

[sg_investor]

If one has annuities worth 1200K, bought with cash and SRS and it pays 60K a year after 70 years old, does one need to pay income tax?

 

[JuniorLion]

If one has annuities worth 1200K, bought with cash and SRS and it pays 60K a year after 70 years old, does one need to pay income tax?

Depends on whether:
1) The person has any taxable income, e.g. from employment.
2) On the split of the 60k/year between SRS payout and cash payout.

 

[sg_investor]

Depends on whether:
1) The person has any taxable income, e.g. from employment.
2) On the split of the 60k/year between SRS payout and cash payout.

Assume 10K SRS, 50K the other portion.
And an well to do retiree has no employment income.

And another retiree with 50K from SRS, 10K from the other portion.

 

[JuniorLion]

Assume 10K SRS, 50K the other portion.
And an well to do retiree has no employment income.

And another retiree with 50K from SRS, 10K from the other portion.

Case 1 no tax.

Case 2 tax on 25k.

 

[sg_investor]

Case 1 no tax.

Case 2 tax on 25k.

Thank you. so the key is annuity income derived from tax exempt SRS is taxable, no matter whether it's principal or interest, am I right?

 

[BBCWatcher]

Thank you. so the key is annuity income derived from tax exempt SRS is taxable, no matter whether it's principal or interest, am I right?

All gross distributions from a Supplementary Retirement Scheme (SRS) account count as taxable income. Qualified distributions are multiplied by 50% before determining the contribution to taxable income.

If you have no other taxable income in that calendar year, then up to $40,000 of gross distributions can be made without Singapore income tax.

Once you start distributions, you have up to 10 years to make them. At the end of the 10th year, anything remaining is deemed distributed and subject to tax. So if you've been pulling out $40K/year for 10 years ($400K) but still have $200K left over, in that last year the distribution (whether you make it or not) would be "deemed" at $240K ($40K withdrawal plus $200K remaining), reduced by 50% (=$120K), and then the $120K would be added to your taxable income for the year. That would trigger some Singapore income tax, obviously.

The only way to extend distributions past the 10 year window is to buy a life annuity in a single premium using SRS funds. NTUC Income and Manulife sell fully SRS qualified single premium life annuities. Those annuities stretch out the distributions over >10 years, and consequently they reduce or eliminate income tax when you have a "big" SRS. You can end up with a "big" SRS if you've saved a lot, had excellent investment results, or some of both. And a big SRS is a happy problem to have, of course.

 

[foozgarden]

Any idea if one can do something like that, in the scenario below?

At age 62, has $800k in SRS. Decided to withdraw $40k per year for 9 years. So left with $440k after 9 years. Purchased a life annuity, and the life annuity starts to payout @ $40k/year from age 71 onwards..

800k in srs?!!

 

[BBCWatcher]

800k in srs?!!

Unusual, but possible. It's more common among foreigners (non citizens/non PRs) since they are allowed to contribute substantially more into SRS each year.

 

[JuniorLion]

All gross distributions from a Supplementary Retirement Scheme (SRS) account count as taxable income. Qualified distributions are multiplied by 50% before determining the contribution to taxable income.

If you have no other taxable income in that calendar year, then up to $40,000 of gross distributions can be made without Singapore income tax.

Once you start distributions, you have up to 10 years to make them. At the end of the 10th year, anything remaining is deemed distributed and subject to tax. So if you've been pulling out $40K/year for 10 years ($400K) but still have $200K left over, in that last year the distribution (whether you make it or not) would be "deemed" at $240K ($40K withdrawal plus $200K remaining), reduced by 50% (=$120K), and then the $120K would be added to your taxable income for the year. That would trigger some Singapore income tax, obviously.

The only way to extend distributions past the 10 year window is to buy a life annuity in a single premium using SRS funds. NTUC Income and Manulife sell fully SRS qualified single premium life annuities. Those annuities stretch out the distributions over >10 years, and consequently they reduce or eliminate income tax when you have a "big" SRS. You can end up with a "big" SRS if you've saved a lot, had excellent investment results, or some of both. And a big SRS is a happy problem to have, of course.

Do you know if one can withdraw for 9 years from SRS, and then on the 10th year start the annuity?