atans1

CPF Life: False alarm that Std is now better than Basic

In CPF, Financial competency, Financial planning on 08/05/2017 at 5:19 am

Here I reported that a far cat rentier (once a doctor) says that the Standard could now be better given “tweaks” over the yrs that were not made public

I said I’d asked an expert to check.

He hasn’t responded but Chris Kuan while no financial planner but a now an ex-capital markets guy who I quoted here a few yrs ago as saying that punters should opt for the Basic not the Standard plan did some calculations.

Juz spreadsheet up the present MS of 166k compounding at 4% with 1st 60k extra 1% and 1st 30k additional 1%. Then use the 1.28k per month payout from 65 onwards on a ror of 4.25%. The Standard Plan break even age remains at 89 where it was when I did the same calc a couple of years back. So I was wrong – nothing has changed. The difficulty in assessing the Basic and Standard Plan is while we know that at age 85 there is no more bequest under the Standard Plan and there is under the Basic Plan but what we don’t know is at what age does the bequest actually cease under both plans.

So “Basic good, Standard bad” still stands.

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  1. I think a more meaningful comparison would be whether any private annuity when bought with the basic plan is able to exceed the payout from the standard plan.

    • How to buy private annuity when basic $ not released in one lump sum?

      • You can make arrangements with insurance company to liaise with CPF regarding RA monies & annuity. Most life annuities sold by insurance companies here are acceptable to CPF, and will exempt the person from CPF Life (after all it’s another annuity).

        But I suspect with CPF Life, most annuity business have dried up in SG as CPF’s payouts are still better (at least in the initial 20 years). Even with CPF Life’s shitty policies e.g. no guarantee of solvency (too big NOT to fail even for SDIC to cover?!?) and non-transparent inner workings.

      • Learn something everyday. Thanks.

      • OK abc told me how to get hold of $

  2. Ok, my bad. Looks like Basic plan still better for total returns.

    TC: So far private annuity e.g. NTUC Income gives lower payouts. Although they have built-in annual increase, but you need to survive for a long time before the payouts reach a similar level to CPF Life, at least to 85 +/-. For private insurance companies, they have to ensure solvency of annuity fund, and sufficient profits. CPF mainly just need to ensure solvency and enjoys huge economies of scale.

  3. Many thanks. My mistake in muddling up these plans with basic, full or enhanced retirement sum! Silly me, barking up the wrong tree.

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