Annuities, Insurance, Retirement

The Silver Industry Conference and Exhibition (Sicex) that took place recently saw issues like financing longevity, CPF schemes and annuities that provide regular draw downs upon retirement hotly discussed.

It was noted that there have been innovations in variable and fixed annuities that provide long-term payment options retirees. Despite the fact that Asians are less receptive to these products, it is the solution to the inadequate draw down of state-mandated compulsory savings from the Central Provident Fund (CPF).

At present, a retiree accumulates a sum of money by retirement and draws down that sum to meet daily needs. This may seem adequate for life after retirement. However, enormous increase in longevity, which has reached the point where we have the expectancy of 20 to 25 years after retirement, has made this system totally inadequate. On top of this, most Singaporeans utilizes this accumulated amount on housing and insurance, due to this cultural climate here, there may be nothing left for the beneficiaries to draw down after retirement.

An annuity scheme is proposed with benefits that requires either higher premiums or lower drawdowns but that allows beneficiaries to receive the remaining payment should an elderly pass away before he reaches 85, as opposed to a pure annuity that stops payment upon early death.

Packaging annuities with medical insurance that pay for long-term care, as it makes economic sense for insurance companies since clients that require annuities would not require long-term care and vice versa. This package allows cost saving, instead of having to buy each scheme separately.