THE magic figure we need for a perpetual income stream could be just $8,000.
If that's the figure, it will be just a tiny bite of the minimum sum of your CPF account - but it could give you $400 for the rest of your life after 85.
How?
The Government has said that it wants to make some form of annuity compulsory because Singaporeans are living longer.
Annuities are financial products that pay out a sum of money for as long as you live, in exchange for a fixed sum upfront.
The Government is introducing them to make sure that retirees have enough to go by, and will not outlive their savings.
Currently, the minimum sum does not ensure a stream of income past the age of 85.
Manpower Minister Ng Eng Hen said that the annuity premium would be a 'small portion' of the minimum sum.
(The minimum sum is the amount that must be kept in the CPF accounts of members after they withdraw their money at 55. They can begin to draw down on this sum when they hit the drawdown age - now put at 62.)
The full plan has not been released. 'It is not that I am keeping something back... but we are consulting widely,' Mr Ng explained at a media briefing on Tuesday.
He did give the assurance that most of the minimum sum will still be meant for members to withdraw when they reach the draw-down age of 62.
Dr Ng is making a ministerial statement next month, where he is expected to give more details.
But from the rough calculations of former NTUC Income chief and actuary Tan Kin Lian, the amount needed to be set aside could be between $6,000 to $8,000.
Mr Tan is not a fortune teller. But when it comes to collective futures, it becomes the science of insurance - and that's second nature to him.
We told him the two things we knew:
The sum is supposed to protect against 'extreme longevity'.
And it is payable only, possibly, after the person hits 85.
His reply: 'My guess is to provide $300 a month payable from age 85 for a lifetime, it will probably cost $5,000 to $8,000 (payable) at age 65.
'This annuity can increase by 1 per cent to 2 per cent per year. So, in 20 years time, $300 will probably grow to $400.'
To get a better figure, he said, he would need firmer numbers. For example, what is the proportion of people who live to 85, and what is the expected lifespan from there?
Such detailed empirical data can only be provided by the Government.
The private sector will put it into their cauldron of mathematical odds and business risk. We should hear their best guess soon.
.jpg)
No comments:
Post a Comment