Annuitants who did not receive a bonus in recent years

22 October 2005

Editor
Forum Page
Straits Times

I refer to the letters "Don't bank on bonuses to boost monthly payout" by Mdm Ng Lee Chin and "Why was no bonus declared?" by Chen Zhide and Chiang Bak Hoi (ST, 20 Oct 2005).

The three writers bought an annuity plan from NTUC Income. They were disappointed that they have did not receive any bonus during the past three years.

From the information gathered, the writers have invested in our earlier series of annuity policies.

NTUC Income started the participating annuity plan in 1993. They offered high guaranteed payout. For example, a male at 55 investing $90,000 was given a monthly payout of $765 per month. The annual payout amounts to 10.2% on the amount invested. This is a very attractive payout, considering the low interest rate environment
in recent years.

For this series, we used a guaranteed interest rate of 5% to compute the guaranteed payout, and pays a bonus if our average investment yield is higher than 5%.

The annuity is payable for a lifetime, which may stretch for 25 years or longer. In the event of early death, the annuity is payable for a minimum of 15 years.

As the average investment yield in recent years was less than 5%, this batch of annuitants did not receive any bonus. But, they did receive an attractive guaranteed payout which is more than can be obtained from other types of low risk investment today.

We introduced two new series for new purchasers. The series introduced in 2002 provided a lower guaranteed payout, computed on an assumed interest rate of 2.5% per annum. They will receive a bonus if the average investment yield is higher than 2.5%. This batch of annuitants have received a bonus of 0%, 2%, 2.5% during the past 3 years, or an average of 1.5% per year.

We have notified our annuitants on several occasions about our system of declaring bonus on their annuity plan.

We invited our annuitants to a dialogue session on 26 February 2005 for them to ask questions and seek clarification. About 100 annuitants attended. At the dialogue, the earlier batch of annuitants realised that they had a better payout than the later batches. The later batches of annuitants asked if they could be placed in the same footing as the earlier batches. We explained that this was not possible.

As an insurance cooperative, NTUC Income aims to act fairly in the interest of all policyholders, including annuitants. We declare most of our surplus to our policyholders, and invest their money prudently to safeguard their long term interest. We distribute the surplus fairly to all policyholders.

Tan Kin Lian
Chief Executive Officer
NTUC Income