People Can Choose From Different Plans in Annuity Scheme

People Can Choose From Different Plans in Annuity Scheme
- Lianhe Zaobao, 09 November 2007

Please refer to the letter "Annuity scheme that sets payout age at 85 unpopular?" by Mr Li Shunfu on 5 Nov, Mon (LHZB).

2.   Mr Li's calculation that only 1 in 4 Singapore residents at age 65 will live beyond 85 is statistically wrong. Life expectancy cannot be derived from deaths among persons aged 85 years and above as a percentage of number of deaths among persons aged 65 years and above in 2007. The correct method should be based on age-specific mortality rates, which are used to compute what proportion among the population aged 65 in a given year, will live beyond 85. Data from the Singapore Department of Statistics shows that about 1 in 2 Singapore residents aged 65 in 2006 is expected to live beyond 85.

3.   We would like to reassure Mr Li and other CPF members that the National Longevity Insurance Scheme will be fair to all participants. The National Longevity Insurance Committee chaired by Professor Lim Pin will consult actuarial experts to work out risks and premiums based on internationally accepted best practices. Members can choose different plans, which will include different starting ages for their longevity insurance as suggested by Mr Li.

Annuity Scheme That Sets Payout Age At 85 Is Unpopular
- Lianhe Zaobao, 05 November 2007

Manpower Minister Ng Eng Hen announced a slew of measures last month to tackle the challenges brought about by an ageing population and a longer life expectancy. The people did not have much of an issue with most of the measures save one - the national longevity insurance. Their reactions were strong which must have been unexpected for the authority. There are two aspects of the proposed scheme that people are questioning the most. First, many felt that setting the payout age at 85 was unreasonable as they did not think they would live beyond 85. Second, most people could not accept that for those who could not live to 85, the premiums put in by them using CPF monies would go to a common pool.

I have spoken to many of my friends about this and all of them were surprised that the authorities would put forward such an unacceptable proposal. A friend who has served in the grassroots for over 20 years was very worked up when he related to me about what transpired during a dialogue session for grassroots leaders chaired by an MP. "All that I can hear were opposing voices," he said. His tone got more serious and he said that the opposition was strong and highly emotive. Even the MP supported their views.

Senior Minister Goh Chok Tong earlier suggested bringing forward the payout age to 80. He felt this would help persuade people to accept the scheme. According to a Zaobao report last month which cited figures from the Registry of Births and Deaths of the Immigration and Checkpoints Authority, of the 8,809 people who died in the first nine months this year at the age of 65 or above, only 27 per cent were aged 85 and above. This means that only one in four Singaporeans will live beyond 85 and thus receive the payouts. This is extremely unfair to the other three persons. What the public hope to see is a policy that takes care of the interests of the majority.

If we want the plan to benefit the majority, then perhaps the payout age should go down to 75. According to the above statistics, those aged 75 and above accounted for 67 per cent of total deaths. This means that two in three would get to enjoy the annuity, which is more reasonable. The authorities may say that Singaporeans would live longer with higher standards of living and better healthcare. I agree that this factor should be taken into consideration. One suggestion is to peg the payout age to the increase in life expectancy. For instance, the average life expectancy was 79.9 in 2006. Every time this figure goes up by a year, the payout age for that particular year must also be correspondingly raised by a year, in this case to 76. The committee led by Professor Lim Pin is currently studying the longevity insurance plan.  I believe the committee will take into consideration all views before making its recommendations.