Get a LIFETIME of Payouts from your CPF

Two months ago, our Prime Minister spoke on how the average Singapore can hope to retire. One of the components mentioned was CPF Life (this is not to be confused with the upcoming "Medishield Life"). In this month's issue, we take a closer look at how CPF Life can be used as one of the components in our retirement plan.

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What is CPF LIFE? 

It is a lifelong income scheme for CPF members. Upon members’ Draw-Down Age (DDA) i.e. of 65 years old, there will be a monthly payout for as long as he or she lives.

How will CPF LIFE start?

When we reach 55 years old, CPF will create our Retirement Account (RA) using the savings in our Ordinary Account (OA) and Special Account (SA). Based on our choice of plan and the savings set aside in our RA, CPF will deduct CPF LIFE premium in instalments from your RA. 

What are the CPF LIFE plans available?

 

A ‘bequest’ is the money that we leave to our beneficiaries when we pass away. 

What if I am not placed on CPF LIFE? 

You will have to stay on the existing Minimum Sum (MS) Scheme and receive monthly payouts for about only 20 years, starting from your DDA. If there is not enough money in your fund to make payouts for 20 years, CPF will let you know. Or, you may choose to join CPF LIFE any time between age 55 and one month before your 80th birthday.

Case Study:

Mr. Tan has $100,000 in his RA and will be placed on CPF LIFE. 

As he chooses the LIFE Standard Plan, CPF will deduct $77,500 (the Minimum Sum Cash Component that applies to him after pledging his HDB flat) from his RA as the first annuity premium for his LIFE Standard Plan. The rest of his RA savings ($22,500) will stay in his RA until his DDA. 

About 1-2 months before Mr. Tan reaches 65 years old, CPF will deduct the rest of his RA savings ($22,500) together with any interest that has built up and any other new money in Mr. Tan’s RA as the second annuity premium for his LIFE Standard Plan. 

When he reaches 65 years old, Mr Tan will receive a monthly payout of between $822 and $908 for as long as he lives.

If we do not have enough in our RA even after pledging our property, we will not be put on CPF Life. Thus, some people choose to grow their CPF money through investments, so that they will have a larger amount at the end of the day for retirement.

Contact your personal Financial Services Consultant for a review to find out more.

Cover for the Critical Years

Through the course of my work, I've increasingly come across two groups of people. One is those who are unable to get insurance protection because of their medical condition. The other group are those concerned that they're unable to get insurance for their parents. This month we introduce a new plan that allows these groups of people to, not only be protected, but at rates the same as healthy people. 

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Medical advances have helped Singaporeans enjoy a longer lifespan. However, we are spending more of our later years in poor health. Every day, 28 people in Singapore are diagnosed with Cancer. 1 in 3 Singaporeans will need to downgrade their standard of living due to critical illness. 69% of Singaporeans have at least 1 health condition. By 2050, Singapore's diabetic population will reach 1 million. These are alarming, but true facts.

Should we experience one of the above; can we be sure that the necessary medical treatment is covered comprehensively by our hospital plan? Furthermore, we may wish to seek pioneering or experimental treatment. This will definitely not be covered under current insurance plans. Illnesses can also prevent us from being able to work or care for family, resulting in loss of income and unanticipated expenses such as childcare support.

​Most of us already understand the need for Critical Illness protection. However, some of us may not be able to get coverage due to existing medical conditions. We may also be concerned about getting coverage for our aged parents who will be our responsibility.

Introducing AIA Prime Critical Cover

This revolutionary plan accepts people with Hypertension, Diabetes Mellitus Type 2, Raised Cholesterol or is Overweight, on standard terms. It also gives you easier access to coverage with higher coverage limits before a medical check-up is required.

Benefits of AIA Prime Critical Cover

• Guaranteed Critical Illness Coverage up to Age 100 (33 Conditions)
• Regular Free Health Screenings
• Receive Early Payouts for 7 Conditions

An Example...

Albert, a 45-year-old manager with 2 young children, is worried about contracting age-related illnesses and wants to increase his critical illness coverage. He takes up an AIA Prime Critical Cover plan for an insured amount of S$150,000.

Download the Brochure here. Contact Paul for more information.

Financial Capacity in the event of Mental Incapacity

In recent months I have been attending courses and upgrading my knowledge in the area of estate and legacy planning. In the area of preparing for the worst, most people assume that having some insurance is enough planning. However we should ask ourselves if the insurance payout would be easily accessible should we lose our mental capacity. We may lose our mental capacity regardless of age, through accidents, neurological diseases or other causes. This month we look at the how a Lasting Power of Attorney may complement our financial planning. 

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Mr Unlucky meets with an accident and goes into a coma. He has an accident policy that would cover his medical costs. However, as this is not a Death claim, he faces two potential problems. 

Potential Problem 1: He is unable to sign the claim the document in order to receive the insurance payout. 

Potential Problem 2: The insurance cheque will likely be made out to him to be deposited to his bank account. His family will not have any access to the money for his medical bills since they cannot withdraw from his account. 

A person who becomes mentally incapacitated will likely face the same problems. 

Solution: Make a Lasting Power of Attorney (LPA) 

What is an LPA: It is a legal document that a person who is at least 21 years old (donor) can make to voluntarily appoint one or more persons (donee[s]) to make decisions on his behalf should he lose the capacity to make his own decisions. Donee(s) may be appointed to act in two broad areas – personal welfare and/or property & affairs matters. 

How the LPA works: 

How to make an LPA: 

If Mr Unlucky had appointed a Donee using the LPA, his Donee would then be able to make the claim and receive the payout on his behalf, to be used for his medical bills. Making an LPA, allows Mr Unlucky to choose a trusted person to make decisions for him, giving him certainty and peace of mind for himself and his loved ones. 

For more info start a conversation with your Financial Services Consultant or visit www.publicguardian.gov.sg

Juggling Protection & Growing Wealth - A Possible Solution

Through my course of work, I have come across many people who want to have both protection against the hazards of life, as well as growth their wealth. The problem is that they feel that they don't have enough resources to do both. This month we look at a possible solution that marries both Protection and Wealth Accumulation - an arrangement flexible enough to provide money when it's needed.

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In 2011, the Total Protection Needs of Singaporean working adults was estimated to be $1,193 billion.

However, the Total Life Insurance Coverage was only $609 billion. Therefore the Protection Gap was $462 billion.

On another note, 41% of Singaporeans revealed they have never saved for retirement.

Close to 90% of Singaporeans are sure they cannot afford a comfortable retirement.

Perhaps the above apply to us. Maybe we're juggling between having enough protection and wanting to grow our wealth.

As we progress through life, our needs change – Landing our ideal job, marriage, paying for our dream house, children's education, retirement, and even welcoming our first grandchild. What we need is a financial plan that can keep up with us.

Introducing, AIA Family First Secure (FFS) – the perfect plan that keeps up with our ever-evolving needs.

AIA FFS is a regular premium investment-linked plan (ILP) that meets our protection needs in the earlier years, retirement needs in our later years, and various expenses in between. With affordable premiums from as low as S$100 per month, we can get a head start in Protection and Wealth planning.

FFS also comes with optional benefits such as the Early Critical Protector rider that offers protection against up to 89 Medical Conditions and 6 Special Conditions; as well as the Waiver of Premium on CI rider.

An Example...

Christopher Lim, 35-year-old non-smoker, purchases an AIA FFS plan with a sum assured of $100,000 that gives him coverage against Death and TPD. He adds the$100,000 Early Critical Protector rider and Critical Protector Waiver of Premium rider.

At 55, he is diagnosed with early stage Prostate Cancer. He receives a lum sum of S$100,000 under the Early Critical Protector rider and his basic policy continues to provide him with Death and TPD cover for S$100,000 while his savings continue to grow.

The cancer later progresses into an advanced stage and his future premiums for his policy are waived while his policy's investments continue to accumulate. With this, Christopher can focus on his treatment without having to worry about the high costs of medical care.

If Christopher passes away at age 65, his family receives a Death Benefit of S$100,000 plus the investment value. If he retires, he’s able to withdraw the entire investment.

To find out more about AIA Family First Secure, or to seek advice on any other possible solutions, contact your Financial Services Consultant today.

The Future of Medishield - What to Expect

Part of the recent Budget 2014 announcement involves the healthcare needs of Singaporeans. Part of the solution to combat increasing healthcare cost is the highly anticipated revamp to the basic CPF Medishield insurance. In this issue, we take a sneak peek at what is to come with the new Medishield Life.

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Why Improve Medishield?

One concern is that Singaporeans have is the cost of Healthcare. In a recent survey conducted by GfK, 65% of respondents said that inflation and high prices are among their top concerns., followed by recession and unemployment (43%), and cost of Healthcare (42%). 

Another major concern is the expiry of Medishield when one reaches age 90. This leaves older Singaporeans vulnerable to high healthcare costs. Medishield also excludes people who are medically un-insurable. Unfortunately, these Singaporeans are the ones that need the most care. 

Medishield Life - The Proposed Changes

To address the above concerns, Medishield Life will replace Medishield. Changes include:

1. Better coverage through higher payouts. This will ensure large bills become more affordable. 

2. Lifetime coverage. This will give peace of mind to the elderly especially those above 90.

3. Coverage for all, even those with pre-existing illnesses. Good news for those who cannot be insured otherwise.

Medishield Life - The Trade Offs 

Premiums are expected to rise. The increase might be significant as the enhancements will result in both a wider scope of coverage and higher payout. 

To ensure the affordability of Medishield Life during old age, there will be adjustments to the premium structure. This means paying more while we are still working to off-set our premiums when we are older. 

The change is confirmed, but the minute details are still open to speculation. One important question is how private Shield plans would be integrated into the new Medishield Life. Would we still require private Shield plans to have enough coverage? Keep your eyes peeled. We will bring you the latest news once it is out.

ACTing FAIR - What it means to us

In March 2012, MAS launched the Financial Advisory Industry Review (FAIR), to raise standards in the financial advisory (FA) industry and improve efficiency in distributing life insurance and investment products in Singapore. After a year of consultation with consumers and practitioners, the FAIR recommendations were announced. In this issue we look at what this means to us, the consumer.

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The 3 Main Thrusts of the FAIR are as follows:

1) Making financial advising a dedicated service

Financial Advisors must focus on providing quality financial advice. They cannot engage in any other businesses that 

a) conflicts with their financial advisory service,

b) tarnishes the image of the FA industry, or

c) leads to them to neglect their FA role.

How this affects us

We will have a better chance of receiving professional advice and followup services. Our Financial Advisors will not be distracted into trying to market other products; from “land banking”, multi-level health products or even lending money.

2) Lowering distribution cost by enhancing market efficiency

Distribution cost is incurred when buying insurance. This includes commissions, company overheads and costs paid to the distribution channels.

How this affects us

A 'web aggregator' would be set up to allow comparison of the benefits and pricing of basic products. This results in greater transparency and competitive pricing, benefiting consumers.

Do note that this tool is limited to basic products and will not be suitable for those who want specialized advice, tailored solutions or ongoing personalised services.

3) Promoting a culture of fair dealing.

A balanced scorecard framework will be set up to assess Financial Advisors, using non-sales indicators such as: 

A) Quality of Advisory and Sales Process;

B) Suitability of Product Recommendations;

C) Adequacy of Information Disclosure; and

D) Customer Complaints

How this affects us

Advisors who violate the above risk losing the income connected to the violations. This means Financial Advisors would be more advisory driven rather than sales driven, giving us a better chance of receiving quality advice.

In Summary

The FA industry is becoming more advisory based and less sales focused. This FAIR act would up the quality of advice and service for consumers like us. For more information, please refer to the full FAIR Dealing Response by MAS. You may also wish to approach your Personal Financial Services Consultant.