Reduced Plans with reduced benefits

TWO of the existing Central Provident Fund (CPF) plans for seniors, Life Plus and Life Income, project similar and higher monthly annuity payouts than those of the current CPF Minimum Sum Scheme (‘CPF Life plans to be simplified from 4 to 2′; Tuesday).
In fact, the most popular plan so far for those who voluntarily opted for CPF Life was Life Plus, probably because the payouts were higher than those for the Minimum Sum Scheme (MSS).
I believe most Singaporeans were persuaded to buy in, in order to support the CPF Life scheme, because of the higher payouts offered by these two plans.
So it may be a disappointment that both the new plans have reduced payouts compared to the MSS’.
The most popular plan gave higher payouts than the MSS, so how is it possible that feedback from CPF members led to the crafting of just two plans, both of which pay less than the MSS?
As the bequest drops rapidly to zero at around age 77 and 83 for Life Plus and Life Balanced, respectively, does combining the two into the new Standard (default) plan mean that the bequest will drop to zero at an earlier age than 83?
This may have implications for lower-income widows as their life expectancies are longer than those of their husbands on CPF Life plans, given that a third are expected to live beyond 90.
Instead of relying merely on the feedback of those who opted in so far to decide on the new plans, the actuarial report on the CPF Life scheme should be made public. In this way, all stakeholders can help to analyse and offer feedback or suggestions on the scheme, including the design, life expectancy and return, as well as the assumptions and computations.
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Leong Sze Hian
Leong Sze Hian is the Past President of the Society of Financial Service Professionals, an alumnus of Harvard University, Wharton Fellow, SEACeM Fellow and an author of 4 books. He is frequently quoted in the media. He has also been invited to speak more than 100 times in 25 countries on 5 continents. He has served as Honorary Consul of Jamaica, Chairman of the Institute of Administrative Management, and founding advisor to the Financial Planning Associations of Brunei and Indonesia. He has 3 Masters, 2 Bachelors degrees and 13 professional qualifications. He blogs at http://www.leongszehian.com.
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I do not need to be an actuary to determine the reduced payout compared to MSS, but I understand the fact you need to increase your pool of policyholders instead of offering four choices which will dilute the risks and caused premiums to be more expensive. I for one would recommend a co-op model instead of a for profit model to lower the costs as this is a national health insurance policy, as the returns suggest it is definitely a for profit model that will help the insurer make money, not pass the benefits to the policyholder, the government has an obligation to co-sponsor such a policy, to make costs more affordable to every rightful citizen, instead of putting money into the pockets of the insurer, yes there are risks involved, but it can be properly managed to give nominal returns, not a sure win scenerio.


– Contributed by Oogle.

Author: Gilbert Tan TS

IT expert with more than 20 years experience in Multiple OS, Security, Data & Internet , Interests include AI and Big Data, Internet and multimedia. An experienced Real Estate agent, Insurance agent, and a Futures trader. I am capable of finding any answers in the world you want as long as there are reports available online for me to do my own research to bring you closest to all the unsolved mysteries in this world, because I can find all the paths to the Truth, and what the Future holds. All I need is to observe, test and probe to research on anything I want, what you need to do will take months to achieve, all I need is a few hours.​

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