The Government plans to introduce a Longevity insurance that pays $300 a month to a person from age 85 to a life time. Between 65 to 85, they will draw a monthly sum from their retirement account.
Many people do not like the idea of the Longevity insurance, as it pays out only from 85 and the payment is too small (and will be further depleted by inflation).
In my view, it is better for the Government to encourage people to buy a life annuity at 65, using the CPF minimum sum. Here are the advantages:
* The life annuity will give them a steady income payable for a lifetime.
* They do not have to worry about managing their retirement account for 20 years and be subject to a fluctuating interest rate that is pegged to the yield on Government bonds. They will also not suffer a drop in their income when they reach age 85.
If the life annuity is administered by the Central Provident Fund and the annuity payout is calculated using an interest rate of 4%, the payout can be quite attractive. These life annuitants should be exempted from the longevity annuity.
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