THE Central Provident Fund (CPF) Board has distributed informative pamphlets to senior citizens such as A Guide To CPF Life and CPF Life Monthly Payout For Life, which describe annuity options for CPF members.

While seemingly attractive, the fine print states that the payout range is based on the CPF interest rate of between 3.75 and 4.25 per cent and does not represent the lower and upper limits of the payout.

The monthly payout may be adjusted every year to take into account factors such as CPF interest rate and mortality experience, the CPF Board explains.

These points are often overlooked by senior citizens, and mean the lowest payment could sink to as low as $10 for the Life Income Plan, which advertises in bold a range of between $408 and $444 for $40,000.

This may be unfair, especially for the Life Income Plan, as one does not leave a cent behind to any beneficiary with this policy, should one die soon after taking it up.

The CPF Board should therefore state for each annuitant who signs up for its CPF Life plan, the assured minimum sum per month, although the maximum amount could indeed vary.

Previous annuity schemes have always stated their assured minimum sum.

Not to do so, and to bury these facts in fine print, is not being transparent and upfront.

If more people live longer, your monthly payout may be lower, and vice versa. The CPF Board should also state if this mortality factor will apply jointly to all four CPF Life annuity schemes, or individually to the four schemes.

If it is not applied jointly for all policies, a situation could arise in which the highest yielding policy scheme could go lower than the lowest yielding policy scheme, depending on the mortality factor of these separate policies.

This is despite the fact that one naturally expects the highest yielding policy to yield a higher annuity, as that policy leaves nothing behind for any beneficiaries.

Manuel Nathan

This article was first published in The Straits Times.