CPF Members To Choose Lifelong Income Scheme Packages At Age 55

Source : Channel NewsAsia, 13 February 2008

From 2013, CPF members eligible for the new Lifelong Income (LI) Scheme, which is now called CPF Life, will have to make two major decisions when they turn 55.

Firstly, they will have to decide how much of their Minimum Sum will go into the LI Scheme.

This because their Minimum Sum cash balances will be split into two parts - a larger part that remains in the Retirement Account (RA), and a smaller part, the Refundable Premium (RP).

The RA pays a monthly income from age 65 to the LI payout age, which the member chooses. The RP continues the same monthly payouts from the LI payout age as long as the member is living.

If the member dies after the LI payouts start, the RP less the sum of LI payouts given will be returned to his beneficiaries.

LI scheme participants will also have to decide when they want the lifelong income payouts to begin - at age 65, 70, 75, 80, 85 or 90.

The plans with refundable premiums are thus named - Refund 65 (R65), Refund 70 (R70), Refund 75 (R75), Refund 80 (R80), Refund 85 (R85) and Refund 90 (R90).

If participants do not choose the LI age, they will be placed into the default "Refund 80" Plan with LI starting age at 80.

To illustrate, a member at age 55 has $67,000 in his Minimum Sum.

If his LI payout age starts at 65, his entire Minimum Sum will go towards CPF Life, giving him $650 a month for life.

But if the LI payout age starts at 80, 24% of his Minimum Sum will go into CPF Life.

He will get $610 every month.

If the member delays his LI payout age to 90, only 6% of his Minimum Sum will be locked in.

But the payouts will be lower -- $560 each month.

The National Longevity Insurance Committee says women will pay higher premiums and receive lower payouts because they live longer than men.

Upon a member's death, the remainder of his Retirement Account and Refundable Premium will go to his beneficiaries.

But he can also decide to forego the refund of his premium in place of a higher payout each month.

Once options are exercised, no changes can be made.

"I won't even know what's going to happen tomorrow. So, how will I know what's going to happen in the next 40 years?" asked an Indian woman.

"What if I make a decision at age 55, and then at age 56, I get a stroke or my health deteriorates? I think it's good if the government can provide at least one provision or one amendment in life," said another woman.

"Maybe, a few years down the road, I think I made the wrong choice. I want to relook, re-evaluate. There should be some, maybe, five years, to renew or re-evaluate the plan again," said a man.

"Once you opt, you will come into a pool and that pool has to be fixed. The pooling is very important for the whole scheme. If you come in one day and go out another, the pool becomes variable and we cannot calculate how much money to pay out. That is an administrative problem. So we cannot allow people to shift from payout 65 to payout 90. The shifting age is not feasible once you agree," said National Longevity Insurance Committee chairman, Professor Lim Pin.

But while payout ages are fixed, members can raise the payout amount by topping up their Minimum Sum after age 55.

The top-ups can come from the pledging of property, continued employment and the withdrawal of CPF investments. - CNA/ir

Couple Say CPF Life Is Fair, Applaud Flexibility To Choose Income Payout Age

Source : Channel NewsAsia, 12 February 2008

SINGAPORE; The National Lifelong Insurance scheme, now called CPF Life, is set to affect families like the Lims.

Sales engineer Edwin Lim is 35 years old and does not have the Minimum Sum of $40,000 in his CPF account right now. His wife, Sharon, is a homemaker and no longer makes CPF contributions.

The Lim family

But the parents to two boys said they are not worried about financing their old age now, even though they do not have private annuity policies.

"I will not consider it right now because 20 years down the road, I will not know what will happen to me. Probably, near to the age, about 55, then I will consider," said Sharon.

When Edwin and Sharon turn 65 years old, their children, Nicholas and Nigel, will be in their 30s.

But the couple believe they cannot and should not rely on their sons for financial support in their old age.

They feel the new CPF Life is fair and especially applaud the flexibility to choose the lifelong income payout age.

Edwin said that if he had to choose, he will pick 70 as the age to start receiving his CPF Life monthly payout, with two factors in mind.

"I would actually look at my health - how healthy I am at the moment - and secondly, inflation. I would consider buying other private annuities, mainly because I do not think that the government recommendation is enough when I reach that age," he said.

Meanwhile, the labour movement says the CPF Life will make CPF contributions more important than ever.

It also says the CPF Life proposed by the National Longevity Insurance Committee is more attractive than when the scheme was first announced.

The CPF Life has an option of allowing premiums to be refunded, and the monthly payout is also larger.

"Now the CPF (contributions) become even more important than before. Before, CPF Minimum Sum is for 20 years until age 85, now it's going to be a lifelong income, so it's becoming a much more important social safety net. So people must make sure that they regularly contribute to the CPF," said NTUC Deputy Secretary-General Halimah Yacob.

That is why the NTUC has been working for the last one year to encourage the self-employed and contract workers to contribute to CPF.

So far, it has managed to attract 6,000 of such workers to do so. But some 100,000 of them are still not on the CPF scheme.

So what's the advice for those below or above 50, when they look at the CPF Life scheme?

"For those below 50, prudence is still something that one should observe, in terms of using CPF money for housing. For those above 50...., although you're not automatically included (in the CPF Life), the immediate reaction should be, 'I want to be included because it's important, because this is a source that's going to provide me with income lifelong, not just until the age of 85'," said Madam Halimah.

When asked, Madam Halimah said she will opt for refundable premiums with payouts to begin from the age of 80.

The labour movement will explain the new scheme to union leaders on Wednesday. - CNA/ir

IMF Sees Significant, Prolonged US Slowdown

Source : The Business Times, 12 February 2008

(MUMBAI) The economic slowdown in the United States will be significant and will last for some time, the chief of the International Monetary Fund yesterday.

The slowing of the US economy has worried investors and policymakers and concerns have also surfaced that the US downturn is spreading to the 15-nation euro zone economy.

IMF managing director Dominique Strauss-Kahn told a conference in the country's financial capital that decoupling between emerging markets and developed economies was a 'misleading idea'.

'US slowdown will be both significant and will last for some time,' he said in a speech. 'Decoupling is a very strange idea, very misleading idea.

'The linkages between the financial and real sector, developed and emerging markets, are much more complex than they were before.'

Last month, the IMF cut its forecast for world growth this year in the face of continued stress in global credit markets, and warned that economic activity could slow even further.

It lowered its global 2008 growth projection to 4.1 per cent from 4.4 per cent, reflecting a marked slowdown from the 4.9 per cent pace achieved last year.

It has also cautioned that the main risk to the global outlook was ongoing turmoil in financial markets, which would further reduce domestic demand in advanced economies and create more significant spillovers into emerging markets and developing economies.

Mr Strauss-Kahn is on a three-day visit to India.

The Group of Seven has warned of further financial-market turmoil, which may lead to more rate cuts and tax reductions to prevent a slowdown of the global economy.

Finance ministers and central bankers ended a weekend meeting in Tokyo with a statement that 'downside risks persist', including the US housing slump and tighter credit conditions.

Without proposing specific remedies, the group pledged 'appropriate actions, individually and collectively'.

The US Congress has passed and sent to President George W Bush a US$168 billion stimulus package, seeking to end a housing slump that threatens to push the world's biggest economy into recession.

The US Federal Reserve reduced its key rate twice by a total of 1.25 percentage points in nine days through Jan 30.

The Bank of England also lowered its benchmark interest rate by a quarter-point to 5.25 per cent last week, as predicted by 59 of the 61 economists surveyed by Bloomberg News.

But Axel Weber said yesterday that the European Central Bank has not relaxed its view on inflation risks, suggesting he does not see an interest rate cut on the agenda.

Asked by the Frankfurter Allgemeine Zeitung (FAZ) whether the ECB was any closer to cutting interest rates in the euro zone, the ECB governing council member said: 'My view is different. It would be an exaggeration to say that we are facing a weakening in growth that by itself would slow inflation in such a way as to cause a rapid easing.

'Our primary mandate is price stability,' said Mr Weber, who is also head of the Bundesbank. 'There is no sign of a relaxation in the ECB council concerning price risks, quite the opposite.' - Reuters, Bloomberg

A Good Plan To Retire On

Source : The Straits Times, Feb 13, 2008

THE Government-initiated insurance plan for retirees, released yesterday, has been retooled to gain broad acceptance. Two aspects of the original formulation which drew the loudest objections - capital sums to lapse upon a CPF member's death and the late access age for payouts - have been confirmed amended in the report of the Lim Pin committee. First, the amounts remaining will revert to members' heirs. It should have been proposed at the start to avoid muddying the waters, as annuities are not a concept readily understood here. Second, a range of starting ages is offered for members to choose from, as to when they wish to begin receiving the money. This concession does not invalidate the statistical profile of Singaporeans' lengthening life span, but it does satisfy a primal urge in people. That the plan will be managed by the CPF Board, another recommendation, was never in question. There was little chance of the proposal carrying if a private company were to run it. Members will insist on a state guarantee for the investing and management of their savings, more so in an age of bolder and riskier investments by global finance houses. It has nothing to do with the CPF's better interest yield compared with a commercial provider designing annuities on the assumption of lower rates of investment returns.

All told, this is a plan that ought to sell itself. Retirement planning for a non-welfare state, with its trademark absence of taxation-funded old-age pension, does not come more carefully thought out than this. The Straits Times recommends it thoroughly. The public education which the committee proposes the CPF Board carry out to acquaint members with the scheme should address issues arising, not the hard-cast features. One such is ironically the need to sign on because of creeping inflation which will erode monetary purchasing power at a faster clip henceforth. The first members, now aged 50, will draw on their annuities in 15 years' time if they choose the age-65 access plan. (The access range goes up at five-year intervals to a rather ambitious 90.) These monies are not inflation-indexed.

How much a notional monthly payout of $600 at today's prices can buy 15 years from now will make for lively speculation. Premiums and payouts and their underlying investments will be reviewed periodically in accordance with actuarial change and economic cycles. This is the minimum assurance against monetary inflation. One trusts the Board to be fair to members. One other educating job is getting those outside the plan's actuarial scope - those older than 50 this year - to join up by opting in. These individuals should be making their own calculations. They will see the merits readily.

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.