Annuity

Source: Wo Bao 21st Aug 2007
Author: Mr. Tan Kin Lian

Other Link: Insurance Supermart

After the National Day Rally, I think this might be one of the most talked topics, maybe most searched topic? (Not sure)

The day before, my dad had mentioned that our PM wants to buying annuities compulsory for all. Suddenly I have an image of a parental figure forcing me to start saving since young for the rainy days. Sometimes I really wonder are Singaporeans a spendthrift lot that do not think much about their future or is our government worrying excessively. Until today, I have no answer for it. I guess it is good that our government will help us think and help protect us. But being too over-protective is not giving us a chance to take responsibility of our own life. I fear the day where Singaporeans when meet any adversity will say, it is ok, the Government has already planned for me.

Anyway back to the main topic – annuity. Annuities are products where beneficiaries pay a premium and get monthly payouts for the rest of their lives. It is not a very well known product and only a few will buy it because its payout is lesser than what CPF can give. The stark difference is it will pay you until you are deceased whereas CPF is only for a stated period.

What if the annuitant dies young? It depends on the capital protection and the type of protection entitled. In some cases, the annuity payment continues to be paid to the annuitant’s beneficiary for a number of years. In other cases, the balance of the capital is refunded.

Whether it is capital protected or not, the interest is definitely kept in the fund. In a way, this is a fair arrangement because this money is used to finance the monthly incomes of the annuitant who had live longer.

The most important question is how much do I get from my capital sum? It depends on your age and gender, commencement date and the type of annuity. Woman generally receives a lower monthly payment compared to the male counterparts and the older you are, the higher the monthly payment will be.

Overall, I think it is quite an okay product to consider. But currently, it seems like only NTUC and Great Eastern offers annuity packages. Hmm..