Will lower income be the only ones left to buy annuities?
Letter from LEONG SZE HIAN
I REFER to media reports that perhaps not all Singaporeans will need to buy compulsory annuities when they turn 55 years old.
Those with chronic diseases may be excluded, since they may not live long enough to enjoy the life insurance payouts. This was a possibility raised by the Minister in charge of ageing issues, Mr Lim Boon Heng, in response to a question raised at a seminar organised by the Community Development Councils on Sunday.
In a recent announcement that Medisave will be made available for the treatment of more chronic illnesses, the Ministry of Health estimated there are about 1 million people with the four chronic illnesses —diabetes, high blood pressure, high cholesterol and stroke.
Does this mean that a rather large number of people may be exempted from buying the Central Provident Fund (CPF) compulsory annuity?
For example, studies in the United States and the Netherlands have found that high blood pressure at the age of 50 shaved five years off one’s life.
Mr Lim also remarked: “There are also some people who are already buying annuities — do we need to have double coverage? The answer obviously is ‘no’. So those who are adequately covered and the policy which they bought fulfils a certain requirement may also be exempted.”
Currently, hardly anyone buys an annuity before age 55 because I believe most insurance companies do not sell them to people at a young age.
So, is the Minister referring to those who already have a life insurance policy with cash values that can be converted to a life annuity? Will we see insurance companies coming out with new life annuity plans for people below age 55?
Maybe some people might like to buy a deferred age 85 life annuity whenever a child is born, as the premium will be extremely low since the payout will only occur if their child is alive 85 years later. I estimate the one-time single premium for such an annuity to be less than $200.
The original intention was to get Singaporeans from all walks of life to share in the pooling of risk.
Now, is it possible that more affluent Singaporeans with, say, $3,000 of life insurance policy cash values at age 55 may be exempted from the compulsory annuity?
Would those who buy them come mainly from the lower-income group?
It is this group who would have less in their CPF Minimum Sum and thus find the premium less affordable, resulting in even lower CPF withdrawal amounts at age 55 and from 65 to 85.
Taking these into consideration, have any studies been done to show whether the life expectancy of the lower-income may generally be lower?
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