Making sure your golden years do not melt down

Retirement insurance plans help ensure your desired lifestyle is not compromised – and there are enough funds on tap

Relying solely on our Central Provident Fund (CPF) savings will not be enough to fund the lifestyle most of us desire when we quit the coalface.

Our longer lifespans mean we face the danger of outliving our resources.

Here is a sobering number: There were about 1,300 Singapore residents who were at least 100 years old as at June 30. If they had quit working at, say, age 65, they would have needed resources to get them through a further 35 years at least. How many of us could do that?

It is also a myth that we can reduce our expenditure significantly after we retire. To better enjoy the years when we are still healthy and physically mobile, we are likely to want to travel more when retired. This is typical in the first 10 to 20 years after stopping work. And with more free time, it is natural to look for activities to occupy us, which could add to expenses.

A recent Manulife Singapore poll found the top three bucket list retirement activities to be travel, spending quality time with friends and family, and pursuing hobbies. Not a lot of that comes cheap.

Besides growing our CPF savings, financial experts say it is prudent to have additional sources of income from investment tools like retirement insurance plans, equity and bond investments and real estate.

Retirement insurance is designed to provide regular payouts to policyholders in their golden years.

“Buying a retirement insurance plan early helps you achieve your retirement goals to ensure that your desired lifestyle is not compromised,” says Mr Brandon Lam, country head of DBS Bank’s financial solutions management group.

Mr Lam adds that income payouts of such plans commence from the desired retirement age, and the coverage spans a specified retirement period.

Mr Tan Kuan Ho, head of product development at Manulife Singapore, says such plans offer “a certainty in uncertain times”.

“Having a retirement plan helps us to ensure a form of certainty in retirement income, as retirement plans offer a percentage of guaranteed income to give additional assurance to your portfolio.

“This is especially important to customers who rely heavily on investments for their retirement, as returns on these investments are often non-guaranteed,” he says. The Sunday Times highlights the advantages of such plans and what to look out for.


CPF Life is a national annuity scheme that converts CPF savings in the Retirement Account into a monthly stream of income for as long as we live.

But the income stream largely depends on how much we have accumulated in our CPF Ordinary Account and Special Account by age 55, notes Mr Lam.

He adds that it is essential to consider a retirement insurance plan should we have insufficient CPF funds to support our desired lifestyle and if we have no passive income to rely on if we choose to retire early. This is because CPF Life payouts begin only at age 65 for most CPF members.

When buying retirement insurance cover, you can decide on the income amount and desired retirement age to commence payments over a chosen period. The premium will vary, depending on your age and the selected options.

For instance, besides the option of lifetime income, Manulife’s RetireReady Plus allows the customer to select other income payout periods, such as five, 10, 15 and 20 years starting from age 55.

“So they can plan to have more retirement income in certain years on top of their CPF Life when they think they might need more for retirement expenses such as travelling,” Mr Tan adds. 

5 pros of retirement insurance plans

1. Funding the 'go-go years'

Mr Tan Kuan Ho, head of product development at Manulife Singapore, refers to the key retirement period between 65 and 75 years old as the "go-go" years: "The period that is the best time to 'go' do the things we've always wanted to do." He says: " Lifestyle expenses are expected to be high during this phase."

2. Providing guaranteed and non-guaranteed income components

Regular payouts from a retirement insurance plan comprise guaranteed and non-guaranteed components. The flow of guaranteed monthly income provides a form of assurance for the policyholder's golden years. The non-guaranteed portion offers a potential upside for a higher payout, depending on the performance of the fund in which the customer's money is invested.

"For professionals who have their own property and investment portfolio, retirement plans also serve as a tool to help diversify their portfolio and, at the same time, provide some form of guaranteed returns which investments and property investments are unable to provide," Mr Tan says.

Mr Tan Kuan Ho, head of product development at Manulife Singapore.

3. Complementing CPF

Life Ms Michelle Ee, wealth management director at Financial Alliance, says an insurance plan focused on retirement income is structured to pay a monthly or yearly income after the policy is in force for a certain number of years. It can complement the national annuity CPF Life - as an additional income source - in three ways:

• Arrange for income to be paid earlier than age 65 (earliest possible income payout age for CPF Life for most CPF members) for those who wish to retire early or semi-retire before 65; or

• Arrange for income to be paid over a specific period during active retirement (usually between age 60 and 75) when more income is needed; or

• Arrange for income to be paid over the lifetime of the policyholder, the result of which is to create a second stream of income on top of CPF Life.

4. Covering long-term care

Mr Brandon Lam, country head of DBS Bank's financial solutions management group, notes that some retirement insurance plans offer additional cover for things like long-term care. For instance, the Manulife RetireReady Plus plan offers an additional income payout if you lose the ability to perform two out of six "activities of daily living" (ADLs) such as washing, feeding, dressing, toileting, mobility and transferring independently.

5. Enforcing savings discipline Ms Ee notes that for those in their late 30s or early 40s, buying a retirement insurance cover is a way of saving in a disciplined manner to prepare for retirement.

"For mature individuals over the age of 50, putting aside a portion of savings in a low-risk financial product to create future retirement income gives the policyholder and his family peace of mind," she says.

Mr Brandon Lam, country head of DBS Bank's financial solutions management group.

Factors to consider in retirement insurance

With insurers actively launching retirement plans in recent years, there is a wide choice to suit each individual, notes Ms Michelle Ee, wealth management director at Financial Alliance.

The Life Insurance Association Singapore says the industry posted a 36 per cent increase in sales of retirement policies by policy count.

There were 24,610 retirement policies bought in the first nine months of this year, amounting to weighted premiums of $226 million, against the 18,054 bought over the same period last year. Here are some questions to ask when shopping for a retirement insurance plan:

• How much payout do you need?

• What are the guaranteed and non-guaranteed income components? Note that the higher the guaranteed amount, the more sustainable is the income payout.

Ms Michelle Ee, wealth management director at Financial Alliance.

• When do you want to start the payout?

• Do you want payouts over a limited number of years or a lifetime?

• Do you want fixed or variable payouts?

• Is there an additional payout (bonus) during and/or at the end of the policy term?

• Is the premium payment over a limited period or is it a single payment?

 • Do you have the flexibility of changing the income payout period if there is a change in your retirement needs? Being able to make changes after you have bought the plan is useful as you can reduce or extend the payout period according to your health or living conditions.

• Is there protection cover and an additional payout in the event of a disability?

• What is the payout upon death?

A version of this article appeared in the print edition of The Sunday Times on November 25, 2018, with the headline 'Making sure your golden years do not melt down'. Subscribe