About Us

Doing the Right Thing... in Extraordinary Times

Introduction

Last year we restructured the bonuses for a group of policyholders. One year on, we are witnessing the most unexpected and severe financial crisis of our life time. The measures we put in place last year have helped us to weather the financial storm we are experiencing today.

Our actions last year have enabled us to maintain the same level of payout for all life insurance policies this year. This means that, in spite of the financial crisis, policyholders who make a claim or whose policy matures in 2009, will find that their payout will be the same or even higher than under the old bonus structure.

This year, we will extend the restructure of our bonus to all our other life insurance policies. The uncertain financial markets have proven that the new bonus structure is more sustainable. By making these changes, we would be better able to continue to deliver the best possible returns to you.

We are pleased to set out a list of frequently asked questions in relation to our bonus restructuring exercise.

Frequently Asked Questions

What is a Participating Policy and what are Bonuses?

If you buy a participating policy from NTUC Income, the premiums you pay go into the Life Participating Fund (“the Fund”). The Fund is invested into diversified assets such as equities, property and fixed income, to give you a stable return in the medium to long term. As a participating policyholder, you get to share in the profits from the Fund.

The benefits which you will enjoy are split into two parts: the Annual Bonus and the Special Bonus.

The Annual Bonuses are bonuses added to your policy every year. Once it is announced and added to your policy, it becomes a permanent part of your policy.

The Special Bonus is a separate bonus which NTUC Income will pay when a claim is made, or when the policy matures or is surrendered.
What is Bonus Restructuring? What are the changes made to my bonuses?

In 2008, bonuses for certain types of policies were restructured and this will be extended to all participating policies in 2009 and 2010.

In bonus restructuring, we reduce the annual bonus on your policy to a sustainable level, to keep it stable. This reduction is matched with an increase in the special bonus, so that the total bonus (annual and special) expected on your policy should be the same or higher under the new bonus structure. The restructuring is not intended to reduce your policy’s benefits and returns. It introduces more flexibility and resilience to the Fund, which we expect to benefit your policy.
Do the changes benefit the policyholder now and in the future?

Yes, the new bonus structure will benefit policyholders. This is because it improves investment flexibility and resilience. This will increase the likelihood of meeting or exceeding projected yields. It also means that annual bonuses will be more stable and we can avoid repeating the sharp bonus cuts of 1997, 2001 and 2002, which reduced the total benefits received by policyholders.

There is no change to the total amount you will receive if you surrender or make a claim now. In fact, you may even get slightly more.

In reaching this decision to change the bonus structure, we have given considerable thought to what is good for our customers now, in the short term, and in the long run.
L series policies had bonuses restructured in 2008. You promised to maintain the special bonus scale. However, the market was really bad in 2008. Are you going to cut the special bonus for L series?

The good news is that we are maintaining the special bonus scale for the L series policies which underwent restructuring last year. There will be no change in your projected policy values (assuming that your policy has no alterations in 2009 and beyond).

The reason we are able to maintain your bonuses is because of the flexibility of the new bonus structure, which allows us to manage our bonuses more actively amid the financial crisis. In so doing, we can continue to offer stable and the best returns to our policyholders.

You say that after the bonus restructuring, policyholders who make a claim or whose policy matures in 2009 will find that their payout will be the same or even higher than under the old bonus structure. Can you provide some actual examples?

Example 1:

John bought a 15 year endowment policy in 1994, when he was 25 years old . He saves about $100 monthly into his policy and enjoys a sum assured of about $16,800. His policy matures in 2009. While the annual bonus is less under the new bonus structure, he is compensated by a special bonus and his total maturity benefit is higher than under the old bonus structure.

	(1) Total Annual Bonuses in 2009	(2) Special Bonus in 2009	(3)=(1)+(2) Total bonus in 2009	Total Maturity Benefit in 2009
Old Bonus Structure (assume no restructure)	$6,840	*$1,710*	$8,550	*$25,350*
New Bonus Structure	$6,520	*$2,340*	$8,860	*$25,660*

Example 2:

Mr Lim bought a Living Policy (participating whole life with critical illness cover) with a sum assured of $50,000. He bought the policy in 1999, when he was 30 years old. The total death or critical illness benefit comprises his sum assured and total bonus. His total benefits are not reduced as a result of the new bonus structure.

	(1) Total Annual Bonuses in 2009	(2) Special Bonus in 2009	(3)=(1)+(2) Total bonus in 2009	Total Death Benefit in 2009
Old Bonus Structure (assume no restructure)	$11,720	*$2,930*	$14,650	*$64,650*
New Bonus Structure	$10,520	*$4,950*	$15,470	*$65,470*

What factors impact the bonuses paid on my policy?

The amount of bonus depends on the actual experience or performance of the Fund. When we decide on the bonuses for your policy, we have to consider all the factors that impact the experience of the Fund, both in the past and going forward (future outlook). Some of the more important factors are:
- Past investment performance of the Fund and how it is likely to do in the future
- The amount of claims arising from death claims and policy surrenders
- The costs of managing the Fund
Of these factors, investment performance has the biggest impact on bonus declaration.
How do you declare bonuses in a way that is in line with the investment performance of the Fund? What was the investment return in 2008 and how does it impact my bonuses?

The investment markets in 2008 were extremely challenging. Since the start of 2008, global markets have been continuously weakening, driven by negative news and outlook. Stock markets remain turbulent and are sharply lower from the highs seen in 2007. Against this background, the Fund achieved returns of -11.1% in 2008.

When we determine bonuses for each year, we do not only focus on annual returns achieved by the Fund, as these could fluctuate significantly from year to year. Our approach is to focus on the long term average return of the Fund. We look at actual long term returns earned by the Fund, as well as our future expectation of these returns. We will evaluate if our actual and expected long term returns are able to support our current level of bonuses.

This is part of the bonus smoothing process as described in the answer to Question 8.

While returns in 2008 were poorer than expected, the long term return up to 2008 was roughly in line with expectation. We expect the Fund to earn 5% to 6% over the long term, to support our current level of bonuses.
Will bonuses vary from year to year? What is bonus smoothing?

We aim to give you stable returns on your policies. To help us to do this, we use the principle of “smoothing”.

Like the stock markets, the value of the investments in the Fund changes daily, sometimes rising and sometimes falling. These values may change a lot over a short period of time. What smoothing means is that when the investments in the Fund perform well, a part of investment returns is not declared immediately as bonuses. It is held back, so that in times of relatively poor investment performance, there are funds available to declare a higher bonus than would otherwise have been the case. It is important to note that any funds held back during smoothing are kept entirely for the future benefit of policies invested in the Fund.

As a policyholder, you benefit by seeing that your policy is protected from the ups and downs of the stock market. It also allows returns on your policy to increase steadily, in a way that is in line with the long term return of the investments in the Fund. This is a unique and valuable feature of the participating life insurance plan.
What is the future outlook like? Is it bad? Will you cut my bonus?

In the short term, the outlook remains uncertain. However, major initiatives have been undertaken by many governments to stimulate their economies. Over time, we do expect confidence to be rebuilt and markets to recover.

On our part, we remain focused on staying the course of our prudent investment approach. Our bonus philosophy and investment strategy are anchored on taking a long term perspective. While the current economic environment is difficult, we are confident in delivering the best returns on your policy over the long term.

We remain financially strong. Our AA rating was re-affirmed by Standard and Poor’s in October 2008, making NTUC Income one of the strongest financial institutions in both Singapore and the region. We are driven by strong fundamentals, and will continue to remain prudent and well diversified in our investments.
What is a participating annuity?

When you purchase an annuity from NTUC Income, we will pay you a regular income for as long as you live. The payment will start either immediately or, in the case of a deferred annuity, upon attaining a specified age.

There are two types of annuities. One is the participating annuity, while the other is the non-participating annuity. A participating annuity shares in the surpluses of the Fund by the addition of bonuses. Bonuses are added to the annuity income or payment. A participating annuity may start with a lower payment, usually lower than the amount received under a non-participating annuity. However, this payment will increase as bonuses are declared and added.

Under a non-participating annuity, you receive a fixed income for life. This income is fixed and is unchanged. It will be made known to you at the time of purchase. The amount you receive will depend on your age and gender.
What do you mean by moderating the bonuses for annuity policies?

NTUC Income’s annuity policies pay a regular income to policyholders for the rest of their lives. Participating annuities are those that share in the surpluses of the Fund by the addition of bonuses.

Bonuses are added to participating annuities every year. The bonus rates vary across different series of annuity policies sold at different times.

For example, the bonus rate for a type of annuity policy (“H” series) declared for 2008 is 1.0%, which is 0.5% lower than the bonus declaration of 2007 and 2006.

Typically, an annuitant receives a monthly payment of $400. After adding the 2008 bonus, his payment will increase to $408 per month. The 0.5% reduction represents a difference of $2 from the $410 he would have received a month if the bonus rate had been maintained at 2007’s level.
Why are bonus rates on annuities moderated?

2008 has been a difficult year for global financial markets. Going forward, we expect financial markets to remain uncertain. In addition, life expectancies have been increasing. Internal studies have shown that the life expectancies of our annuitants are higher than what we had expected at pricing.

As such, we expect the net yield for determining annuity bonus to be moderated to about 4% - 5% over the long term. The net yield reflects the Fund’s long term investment return going forward, as well as the improvement in life expectancies of annuitants.
What is the “Income Cares Fund”?

In recognition of the impact of the crisis on your financial well being, we are introducing a $1 million “Income Cares Fund”. Under this Fund, all annuitants owning a participating annuity and who are currently receiving payouts will receive a one-time payment of $60. Your cheques will be mailed out over a period of 3 weeks starting from end May 2009,. We hope this small gesture will be of help during these extraordinary times.
When will NTUC Income write to me to inform about the bonus changes to my policy?

NTUC Income will be sending a communication pack to all policyholders, who are holding an in-force participating policy. The pack contains detailed information on the bonus changes, and will be sent out from end April 2009, over a period of 4 to 6 weeks.

Annuitants will receive a separate communication pack.
Who can I contact if I have concerns?

You may contact your insurance adviser, our Customer Service hotline at 6477 7798 or email us at csquery@income.com.sg and we will be happy to address any queries or concerns you may have. If your policy has been in-force for at least a year, you may also request for an updated benefit illustration.