Features In Private Annuities You Don’t Find In CPF Life
Just like owning a private car can bring many benefits that public transport don’t, a private annuity plan can provide many benefits that CPF Life can’t. Understanding these benefits can help you understand when and how to add on private annuities to complement and supplement CPF Life.
Here are 21 Things Private Annuities can do that CPF Life can’t:
1. Allows you to start income payout earlier before age 65 so that you can slow down to enjoy your “Go-Go” years.
2. Allows you to start income payout later after age 70 so that you can create additional income streams to provide for other retirement needs such as inflation or potential long term care
3. Allows you to invest for potentially higher returns so that your private annuity plan can complement the more conservative nature of CPF Life
4. Provides Insurance benefit upon death so that your capital is preserved for your family as part of legacy planning
5. Provides insurance protection upon disability so that you will receive more income should disability happens to cover the additional money needs that a disability will bring
6. Provides insurance upon Long Term Care (LTC) so that you will receive more income should LTC be needed when you are unable to perform a certain number of activities of daily living and on-going caregiving is required
7. Allows you to change your mind so that should you decided to forgo the initial choice to receive an income and instead prefer to receive a lump sum in retirement, you can do so by surrendering the policy for a lump sum payout
8. Allows you to partially cash out (through policy loan options) from the private annuity policy to cover for temporary and unexpected cash need and having this flexibility can increase the liquidity quotient of your retirement portfolio
9. Allows you to change the life insured so that you can share or pass on the annuity income to a loved one as a form of financial help or legacy gift
10. Allows you to nominate a secondary life insured so that the income stream will continue to benefit a loved one after you pass away
11. Allows for lock-in of investment returns to provide for an increased income payout that is protected even when the market subsequently falls so that you benefit from the upside of investing while being protected from the downside
12. Diversify your annuity returns and risks away from the national longevity pool in which Singapore has one of the world’s highest life expectancy in the world
13. Allows for a shorter payout period when you do not want to plan for lifetime
14. Allows for a small minimum premium allocation of less than $60,000 which is the minimum amount required for CPF Life
15. Allows for a high allocation limit which is much higher than the Enhanced Retirement Sum and this which allows you to allocate as much of your funds as you prefer or need to depending on your overall retirement portfolio needs
16. Allows you to decide exactly how much premium to allocate so that you can customise more intently the most appropriate amount to set aside which can be higher or lower than the limits set for CPF Life
17. Allows you to decide exactly which age you want the payout to start which allows for better customisation to your retirement preferences and needs
18. Allows you to split your premiums into multiple policies which creates even more flexibility without affecting returns
19. Provides a lump sum maturity or surrender benefit so that you can have an additional lump sum to spend in the later part of retirement should you plan to do so
20. Allows for multiple currency options such as USD so that you don’t have to convert your savings from other currencies back to SGD which will help you to minimise any foreign exchange risks and costs
21. Allows you to customise a plan to your unique preference, wants, needs and situation. All the features’ mentioned cannot be found in a single annuity plan or product but rather in over 20 private annuities plans across 5 insurers that I’ve researched into for this read.
This last point is not a feature but a reason and to me, the most important reason why private annuities have a place in almost every retirement portfolio. Just like white rice is the most cost-effective way to fill our stomachs, we seldom (unless circumstances leave us with no choice) have a meal with only white rice and nothing else. Private annuities are not here to replace or compete with CPF Life but rather, to add on customisation to make our retirement meal complete.