Posted on February 20, 2009 - by Eng Tiang Chuan

CPF LIFE vs Commercial Annuity

Following the announcement of the changes to CPF LIFE and the release of some indicative numbers for the 4 LIFE schemes, a question quickly came to mind: How does the commercial annuity compare to CPF LIFE? The following is a comparison of CPF LIFE and a leading commercial annuity.

The criteria are as follows:

• Male
• Single premium of $67,000 at age 55
• First payout at age 65

CPF LIFE Plans

Commercial Annuity Plan

CPF LIFE Plan VS Commercial Annuity

Note: Assuming that the commercial annuity plan and the CPF LIFE plans grows at the assumed interest rate

It has to be noted that the commercial annuity has no guaranteed min growth rate after the 2.5% interest rate during the deferred period (ie, the 10 years from age 55 to 65). In CPF LIFE’s case, there is a min interest rate of 3.5% for up to the first $60,000 in the SMRA and 2.5% in excess of that.

Assuming that the schemes perform as projected in their various assumptions, the commercial annuity may be competitive if it grows at 2%/pa. If it grows at 0.5%, it is unlikely to match any of the CPF LIFE plans in monthly payout. The bequest amount at age 70 is lower than the Balanced and Basic plan. However, I am assuming death occurs at the start of age 70. The amount will be lower if death occurs at the end of age 70.

Having said the above, not enough information has been released by CPF Board regarding the min payouts and bequests amount at different ages for the various CPF LIFE plans.

The pros and cons of the leading commercial annuity over CPF LIFE is as follows: Read more…

Related posts:

1. CPF LIFE – How It Works
2. Trading Log: Review of Capital Commercial Retail REIT
3. Who owns what? – Singapore Commercial and Retail Properties