THE CPF Life annuity plan, now open for subscription, is optimally the most sensible way devised to date for a retiree to ration the use of forced savings until death. Some day, the pooled insights of actuaries and demographers could result in a revolutionary scheme that will factor in anticipated breakthroughs in medical science and the ever-rising volatility in purchasing power. Until that day comes, of which Singaporeans can reasonably expect the Central Provident Fund (CPF) Board's planners to keep track, CPF Life recommends itself. As designed, it is an improvement over the monthly payments from the Minimum Sum which last for about 20 years, against which average longevity after retirement is steadily lengthening. The plan is to take automatic effect in 2013 for account holders who attain age 55 in that year and have at least $40,000 in the Retirement Account. The fact that many older members outside the 'launch age' asked whether they could buy in earlier, is an endorsement of the plan and an acknowledgment that they worry about being caught without a dollar in extreme old age.
The board calculates that about 70 per cent of members from the first cohort will be eligible, while those with less than $40,000 in savings can choose to opt in. But how many of those eligible for an opt-in as of this month - some 700,000 members aged 55 years and older this year - will sign on? As many as would take the trouble to learn about the intricacies of the Life plan, obviously. With the attraction of a conditional variable bonus of up to $4,000 thrown in if they sign on by a specified deadline, this is a deal not to be refused.
But the mechanics and rationale of CPF Life can be befuddling to many people old and young, despite the wide publicity given during the consultation process and when the Lim Pin Committee published its proposals. The CPF Board's website also carries comprehensive information and working examples. Still, nothing should be assumed as this is a multi-layer plan with a range of payout choices. The board is to be commended for planning personalised presentations at community development council and town council events, apart from sending information packs to those eligible to sign on in this nominal first phase.
The four plans chosen for implementation, from the original 12 recommended, are meant to cater to all conceivable preferences. How much or how little a member wants for the monthly payout and how much is to be left to living relations upon death, or none at all, are decisions that will be influenced by personal circumstances and living habits. This is where clear explanations would be most appreciated, with no attempt made at being judgmental.
