Financial commentator and former banker Chris Kuan recently wrote on his Facebook page: "Enough of the PAP, on the cybernutocracy." Top alt media financial blogger asked: "Do you know that CPF Life eats all your accrued interest if you die early?" Geronimo, what a strange revelation! "
For those who are not aware, Chris refers to the position of Leong Sze Hian, which points to the differences in attitude of the Central Provident Fund's management with regard to CPF Life payments.
The post noted that "isyouready.sg" writes: "The interest on annuity premiums does not form part of the individual member's legacy because it is paid into the Lifetime Income Fund to provide lifelong monthly payments to all members under CPF LIFE. " while on the official CPF website, it writes: "You and your loved ones will always receive at least the amount that you have put into CPF LIFE, in the form of payouts and legacies, regardless of the age at which you live."
Noting that the explanations in the official CPF website can be somewhat misleading, because this may give the impression that someone is getting more than what you put into CPF Life if you die prematurely, while it is actually that "the interest is earned on annuity premiums is not part of the legacy of the individual member ".
Chris goes on to explain,
Of course it is, annuity is risk pooling, which does 2 things – 1) to reduce the financial risk of a long life by means of those who die early and those who die later, but you never know if you are the first or the last 2) to generate a higher income, that is to say that the yield of the annuity income is always higher than the return that is used to calculate the uptake. Okay, do not expect the man on the street to know this, but a financial blogger? The article is political polemic.
Legates make CPF LIFE payouts lower than they can be. But I do not know whether this fixation with legacies is due to the wishes of the Singaporeans or a shady conspiracy from the government to limit the old age subsidies by generating mutual financial flows of two generations, for example children who support parents, in return parents are condemned when they die. Probably both. I also believe that the minimum amount and the CPF term relate to the fact that CPF is partly shifting from an outlier to the main stream of state-mandated pensions, more on this the next time.
Chris gave his answer to Chris's remarks, explains Leong,
The problem as I see it is that most Singaporeans may not know this and perhaps have a false impression of the plan. It can also be demonstrably misleading because the answers to the same question: "What happens if I die early?" are very different.
One gives the impression that you receive at least your premium in advance, while the other says that you will receive nothing more than your premium.
I also understand that when CPF Life was first implemented, the CPF Life plan had to be chosen at the age of 55 and was then changed to & # 39; & # 39 ;, before the age of 65 years.
Does this mean that those who had to choose 55 on the basis of the old rules have now eaten their accumulated interest from the age of 55 or from the age of 65 according to the rules?
If the actuarial report for CPF Life was made public – which many have asked for over the years – we can see what the assumptions and methodology are.
Leong goes on to remind people that when someone buys an annuity from an insurance company, he or she will normally ask whether the customer wants a premium refund type or a 15-year warranty, which guarantees a payout of at least 15 years to the beneficiaries if one would die prematurely.
In the case of CPF Life, the plan offered is a premium refund type with the following choices:
- CPF standard – higher payouts but a lower legacy
- CPF Life Basic – lower payout but higher legacy
- CPF Extended – starts low payout but pays 2% more per year
He noted that most people probably choose the 15-year-old when they see the year-on-year table in terms of payout.