I THINK that longevity insurance should not be made compulsory. While the government has the best interests of the retirees at heart, I believe that this insurance scheme should have a opt-out clause. This gives retirees the option of staying out of the scheme if they believe they can better plan their retirement. There should be incentives - maybe better rates of return compared to private schemes - to encourage retirees to take up the insurance.
There could also be more education about the benefits of taking up an annuity scheme. Of course, the tricky part of the proposed scheme is that the payout only starts from age 85. To make it attractive, the payout age should be lowered to, say, 75 years in the beginning to attract retirees to sign up. The payout age can then be progressively increased once the scheme is more fully understood and appreciated.
Once such a scheme is made compulsory, there will be a Pandora's box of exceptions, such as those who already own annuities. There will be endless arguments about who should be excluded from the scheme.
- Wee Piew
CEO
HG Metal Manufacturing Ltd
AS A believer in annuities, I am confident many will appreciate in time to come what the government is doing to help Singaporeans plan for retirement and old age. For the scheme to be workable, it should be flexible and generic with options for citizens to choose from. It should also be affordable for the majority and should address a key concern that the majority are paying for the minority who live beyond 85 years.
Longevity insurance presupposes that people stay healthy to live as long as possible. To make the scheme more palatable, the government might consider linking it with an incentive for people to stay healthy. It would have the dual effect of boosting national efforts to create a healthy nation - an economic imperative, considering the fact that our only natural resource is human capital.
When more people can be incentivised to take personal ownership of their health, we can expect healthcare costs per capita to come down, notwithstanding an ageing population. The savings arising from that can be shared, perhaps as a top-up to the retirement accounts of those who made efforts to live a healthy lifestyle. Such top-ups can also make up for loss of access to members' CPF contributions, as a consequence of the proposed deferment of CPF withdrawal to beyond 62 years. The longevity insurance must also be able to be tested against market benchmarks; it must be reviewed from time to time to ensure that it offers the best returns and protection, given that it is, in a way, a social security net.
Lastly, the longevity insurance should not be viewed in isolation from other major reforms: higher interest rates on CPF savings, enhanced Workfare income supplement for mature workers, Medicare and Medishield, which are all designed as integral parts of a holistic framework to better prepare Singaporeans for retirement and old age. We should be thankful that our government is not shirking its responsibility by taking this step to introduce compulsory longevity insurance. It may seem like an unpleasant proposal but, in my opinion, it is a correct and prudent one.
- Lim Soon Hock
Managing Director
Plan-B Icag Pte Ltd
IT MUST be kept in mind that the most significant function of this scheme is to assist poorer citizens who may not have the means or ability to plan for subsistence past the age of 85. This means that the scheme should be kept as basic and comprehensive as possible to keep it affordable and feasible for nationwide adoption.
Singaporeans will find an expense hard to accept if the benefits are not tangible. That is why planning for an uncertain and seemingly distant future is met with initial resistance. Flexible options like an opt-in for those above 50 and the exclusion of the chronically ill are practical variations that reflect the different demographics. However, more can be meted out for the broader masses. One way would be to incorporate a dependency feature that allows the family to receive a sum of money, or enjoy lower premiums, in the event that the recipient does not live beyond 85. Another would be lowering the payout age to 80. To make the scheme unanimously accepted, it must have perceived value.
Ultimately, Singaporeans should view the longevity insurance scheme as an optimistic buffer. A long life is a blessing, and a manageable minimal investment to make that stage in life more comfortable and worry-free is worth every cent.
- Annie Yap
CEO
The GMP Group
I AGREE that the longevity insurance scheme should be simple and basic, with clear rules that the man-in-the-street can understand. It should hopefully push him to plan more for his old age needs and appreciate that longevity insurance is not the be-all and end-all. It must be cost-effective so that the administration cost does not take a hefty first bite of the scheme money. Other related issues would be affordable healthcare and promoting a healthy lifestyle in old age.
I know there is impending legislation on extending the retirement age. But why not make it easier for people to do self-created work which can be done from home and enabled by the Internet? We need to think out of the box and put together a holistic and attractive arrangement for Singaporeans.
- Liu Chunlin
Managing Director
K&C Protective Technologies Pte Ltd
IT'S hard to give comments at the moment as we are not sure what the premiums are for the scheme. Such premiums must be kept very low as the majority feel that most will not live beyond 85. Thus, to be workable and widely accepted, the premium must be low.
Also, create a range of plans with different payout ages to choose from. An opt-out should be made available for those with doctor-certified health problems. These are the people who are more in need of money now than after 85.
- Kelvin Pang Koon Heng
Managing Director
Xyrix Electronics Pte Ltd
IT IS essential for the longevity insurance scheme to have various options to address the needs of different individuals. For instance, people should be allowed to choose the year of payout, say, at 65 rather than 85, as long as they can afford to pay higher premiums through their own CPF funds. Moreover, we should also consider granting exemptions to those who have already invested in their retirement plans.
- Eric Khua
CEO
Freight Links Group
Don't leave out various groups
THE challenges posed by an ageing population in Singapore have been a topic of great interest since Prime Minister Lee Hsien Loong's National Day Rally Speech.
Singaporeans are faced with the twin challenges of longer lifespans and smaller families. The fear is that with rising longevity, one is likely to outlive his money with no family member to look after his needs. The longevity insurance scheme then seeks to strengthen the CPF system and ensure basic longevity protection for all Singaporeans.
As this concerns public welfare, it is commendable that the committee takes in public views so that their study is transparent and consultative. We are all for an established channel for the government to explain the details in layman's terms, and in turn for the public to let the government know about their needs and aspirations.
While a public forum is good, it may not be enough to represent the range of opinions across many sectors. I suggest a market survey conducted for various age and income groups where people can freely air their views on these issues. This could reveal flexible ways of accommodating the different circumstances of CPF members and offer various options for structuring the annuity scheme.
The quality of data gathered will be critical in coming up with a longevity insurance that is affordable even to low-income groups with a range of options across income groups. Such a scheme will be truly effective in seeing that retirement is all it should be - a sweet time of reward for many years of hard work.
- Dora Hoan
Group CEO
Best World International Ltd
IT IS a good move considering the nation's present stage of evolution where the population has started to age while healthcare and lifestyle have allowed lifespans to stretch. Many developed nations have stumbled with their social security models. These societies have seen that the next generation of retirees (based on the burden of the current aged population) are being left completely exposed financially.
The key to successful deployment of this initiative would be to build a scalable model that is simple, flexible, realistic and affordable. Some degree of enforcement is needed to ensure that the 'unaware' is also protected. Affordability will therefore be key. Since the initiative is untested in Singapore, the planning committee should ideally get feedback from a diverse sample involving the industry, academia and the government. The longevity insurance framework should then be built on a platform of these consolidated responses.
- Deb Dutta
Vice-President, Asia Pacific & Japan
Brocade
IT HAS been rightly pointed out that the devil is in the details. A 'one size fits all' scheme would not be acceptable. Studies have shown a clear correlation between the retirement age and the longevity of employees.
In some circles, it is noted that the government's terms of reference are not sufficiently broad-based. Often, ageing and poor health go together. For psychological support, the scheme could be developed around the family unit. Other features to be considered:
- The presence of beneficiaries or dependants would ensure continuity;
- Should there be a cap and if so, how should it be calculated; and
- Allowance should also be made to cover the few who, for whatever reasons, are not in the CPF system and consequently are devoid of such savings.
- R Theyvendran, PBM
Chairman / Managing Director
Stamford Media International Group
IT IS reassuring to know that the government is addressing the problem of old age by proposing the national longevity insurance scheme.
However, the crux of the problem is that the CPF Board is not able to obtain better returns on members' balances. The Government of Singapore Investment Corporation (GIC) had earned returns of 8.2 per cent in Singapore-dollar terms over its 25 years of existence and expects returns of 6 to 8 per cent a year over the next 25 years. Why are the CPF members not enjoying the benefit of GIC's fund management expertise?
In comparison, the rate of return to CPF members has been poor at 2.5 per cent for the Ordinary Account and 4 per cent for the Special Account for many years. Surely, the CPF members deserve better returns.
I understand the government does not want to subject CPF funds to market risks and thus invests in 'safe' financial instruments, although many of us do not quite understand how the CPF funds are currently being invested. I think it should be made transparent. I hope the committee evaluating the longevity insurance scheme would consider the following:
- The government should consider a guaranteed return of what the CPF members are currently getting, with an additional variable amount depending on the economic situation. Commercial financial institutions have financial instruments to guarantee some sort of returns on initial invested amount with an expected bonus payout at the end of a certain tenure.
This will be more palatable to CPF members as the longevity insurance is not enough to pay out to many CPF members in their old age. The additional variable amount is an upside to what the CPF members are currently enjoying.
- The scheme should be extended to the many who are not CPF members such as housewives, entrepreneurs, retirees, etc. This should be done on a voluntary basis. Some of these people may find the scheme attractive for their retirement funding. This will enlarge the pool of insured and increase the eventual payout of the longevity insurance scheme.
- Whatever scheme the government introduces should not encroach on the existing ownership rights over the use of members' CPF funds and extend the withdrawal period. Thus, it should be done on an opt-in basis. The government should look at better returns that can be generated on the CPF funds.
- Teng Yeow Heng Michael
Managing Director
TR Formac Pte Ltd
THE government is truly kind to the citizens in developing a longevity insurance scheme flexible enough to accommodate all Singaporeans since insurance companies providing such insurance to clients can go bust, dead before the insured.
Using part of the CPF to secure longevity insurance is also good. But the scheme must also take care of the member's spouse and medical expenses of the insured and his spouse when they are over 85.
- Ng Kong Yeam
Group Executive Chairman
Sino-America Tours Corporation Pte Ltd
I THINK it is fantastic that the government is looking into the welfare of old and retired Singaporeans, especially those from the lower income group.
The key factor of this longevity insurance scheme is to make sure that the have-nots will be able to retire comfortably in Singapore. Due to the strong western influence in our educational system, those who are retired can no longer depend on their children to look after them. The government will need to subsidise the insurance premiums of those in the lowest income group so that the minimum payout is sufficient.
- Yeo Ker Kuang
Group CEO
Salcon Pte Ltd
WHILE the longevity insurance scheme was meant as a buffer for the general population, one unintended result might be that it would benefit the well-off more. This group, with the means for better healthcare, comprises those likely to live beyond 85. If that is the case, the scheme will end up covering those who don't need such insurance.
So far, the public does not have information on which groups are most likely to live past 85. I hope that the committee studying this will look at such possible unintended effects.
