Flexible Annuities Scheme To Start In 2013

Source : The Straits Times, Feb 13, 2008

WORKERS aged 50 and below are set to get a steady retirement income for life under a new annuities scheme to be run by the Central Provident Fund Board.

They will have 12 types of annuity plans to choose from, and can decide whether to start their payouts as early as age 65 or as late as age 90.

They can also opt to give their families a refund of their annuity premiums if they die early, before they get it all back in monthly payouts.

The new scheme is the result of a redesign of the old compulsory annuities plan proposed some six months ago to much public criticism.

A committee with members drawn from the unions, the civil service, companies, and academia was then set up to recommend an alternative better suited to Singaporeans' needs.

They unveiled their new scheme, which the Government has accepted, yesterday.

To be called CPF Life, the scheme will roll out in 2013.

The first batch of workers to come under it are those who turn 50 this year. There are about 35,000 of them.

Depending on how much they have in their Minimum Sum cash balances at age 55, they can expect a lifelong income of between $350 and $1,100 a month.

That is, if they opt for the standard CPF Life plan that starts their annuity payouts at age 80. The majority of them - 60 per cent - can expect monthly payouts of $600 or more for life.

Another 15 per cent will get between $350 and $600.

The remaining 25 per cent will be exempted from the scheme as they will have less than $40,000 in the CPF Minimum Sum cash balances at age 55 - not enough for payouts to last a lifetime.

The committee has called on the Government to offer 'one-off assistance measures' to those with insufficient CPF retirement funds to help them take part in the scheme.

Manpower Minister Ng Eng Hen is expected to make an announcement on that issue today, when he responds to the committee's report.

Exemptions also apply to those who are seriously ill and those on pension or approved private annuity plans.

The CPF Life scheme is a key piece in a comprehensive plan to tackle the problem of an ageing population, with people's retirement savings not keeping pace with longer life spans.

The Government is also putting in place measures to help Singaporeans work longer, enhance the returns on CPF savings and make these savings last a lifetime.

In a letter thanking the 18-member committee, Dr Ng hailed its proposal as 'a landmark report that will significantly strengthen our CPF system'.

The committee had collected feedback from some 600 members of the public before drawing up its 55-page report.

Yesterday, with his work done, a smiling Professor Lim Pin, the committee's chairman, said: 'We've designed a product which we think reflects the diverse needs of Singaporeans. We're confident it will go down well with the public.'

The scheme is not cast in stone, he added, and will be reviewed periodically, in line with new data and feedback.

Financial experts and Members of Parliament said it was an improvement on the old annuities plan as it tackled the main concerns of Singaporeans over lack of flexibility and refunds.

But critics pointed to the needy folk who would not be covered by the scheme.