Insurers have jumped on the retirement bandwagon in recent years, launching a myriad of plans that provide regular payouts - and giving consumers even more choices. Such products are expected to continue to proliferate, given that the retirement market is a lucrative one and Singapore is among the fastest-ageing societies in the world.
Figures have indicated that by 2030, nearly one million people here will be above the age of 60.
Mr Lance Tay, chief executive officer of Tokio Marine Life Insurance Singapore (TM), says our retirement or Central Provident Fund (CPF) savings should ideally be supplemented with complementary insurance plans. "An income sandwich is our recommended approach to retirement planning. This involves using multiple layers to build up retirement income, including CPF, personal savings and a retirement insurance plan," he says. In such a crowded market, differentiating your product becomes crucial, as some firms are demonstrating.
Generally, these kinds of retirement plans offer a mix of single or regular premium payment periods as well as regular payouts over 10 to 30 years to provide income to supplement your retirement and living expenses.
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Understanding your needs
Retirement planning goes beyond just number-crunching on the size of the nest egg and the estimated number of your golden years.
It requires you to delve deeper into it - planning the lifestyle you would like to engage in - in order to determine how much you really need to spend your sunset years purposefully.
Mr Eddy Cheong, head of DIYInsurance, a Web portal by wealth management firm Providend, strongly advocates consumers should understand their needs first before zooming in.
He notes that there are many retirement-related insurance products and it is an uphill task to compare them since every insurer tries to be different. Here's a checklist recommended by Mr Cheong to help you identify your needs and sieve out the more suitable products.
HOW MUCH YOU WANT AND WHEN
- How much income payout do you need?
- When do you want to begin receiving the income?
- Do you need the income to pay for limited years (for example, for 10, 15 or 20 years) or a lifetime?
- Do you need the annual payout to be fixed (guaranteed), fixed with a variable component, or increasing over time to mitigate inflation?
- Do you need an additional maturity payout at the end of the policy?
- By cash or Supplementary Retirement Scheme (SRS)?
- Premium duration, for example, single (one-time payment) or over a number of years
Mr Daniel Lum, director of product and marketing at Aviva Singapore, notes that most retirees would find it hardest to move from a monthly income to having none after they stop work, so monthly payouts - especially in the initial retirement period - would help with the transition.
Generally, the higher the level of capital protection, the more costly the plan will be.
Mr Cheong says: "If you are risk-averse and desire your income payout to be fully guaranteed, the premium for that plan will generally cost more than that of a variable income plan." One way to lower your premium and still enjoy higher payouts is to delay the payout start age, he adds.
Ms Kwek-Perroy Li Choo, chief marketing officer at AXA Life Insurance Singapore, says a good retirement plan should also guarantee the customers' capital in case they wish to withdraw money at the retirement age. This means that the plan's surrender value should not fall below the total premiums paid.
This article was first published in The Straits Times, April 17, 2016.