1. I
have just started work. I have to repay a university loan. I find it difficult
to make regular savings. What is your advice?
Your financial should be:
meet your living expenses, but be frugal
repay your loan, by installments
save 10 to 20% of your earnings
After that, you can think of the following:
fashion
entertainment
holidays
car or home
You should avoid loan commitment for non-essential and expensive items.
Give
high priority to regular savings. If you lose or wish to change your job, you
will have some savings to draw down.
Do not borrow on your credit card or other
sources and incur high interest charges. Some credit cards charge up to 24% on
your borrowing.
If you save 10 to 20% of your monthly income, you can invest
this saving to earn you a good rate of return. After a few years, the interest
can accumulate very fast.
If you save $200 a month over 20 years, the total amount could grow to the following:
Average
Return
Total
(estimated)
Risk
(estimated)
Bank
1%
$53,100
0%
Life Insurance Policy
3%
$65,500
10%
Flexible ILP
5%
$81,500
20%
Note:
All figures are for illustration only. They are not guaranteed.
Most people save in a bank account to earn interest. However, as interest
rate is low, the return is unsatisfactory.
You can get a better return from a
life insurance policy, as you are committing to save for many years. The actual
return is not guaranteed and may fluctuate by an estimated 10%, depending on
the bonus that is distributed in the future.
You can get the highest return by
investing in an investment linked plan (ILP), but you have to accept a higher
risk. The actual return may fluctuate by an estimated 20%.
If the actual return
from ILP is 20% lower than estimated, the reduced amount is still better than
the return from the bank. Many people are willing to take the risk to get a higher
return. If the return is too low, they can wait for a few more years for the
investment to appreciate.
These estimates are based on the current condition.
The actual return and fluctuation may change in the future.
If you save in the
bank or ILP, you have the flexibility to stop saving for a short period. We
do not have to incur interest charges or suffer any penalty. You can make additional
adhoc saving, or increase your regular saving.
You can buy a term insurance cover
by paying a small additional premium. This will supplement your regular saving
plan and pay an additional sum in the event of premature death or disability.
3.
Which insurance company offers the best investment-linked plan (ILP)?
You can
compare the front end charges and annual policy fee imposed by the various regular
premium ILPs.
The front end charge is used to pay commission to the sales agent.
It can vary from nil to 2 years of your saving.
You can calculate the front end
charge by looking at the percentage of your premium that is allocated for investment.
E.g. If the plan allocates 250% for investment during the first four years, the
front end charge is actually 150%. If the annual premium is $2,400, the front
end charge costs you $3,600.
Here are the charges for an annual saving of $2,400
made towards ILP:
Front End Charge
Annual
Charge
Total for
20 Years
Company G
160%
$60
$5,040
Company P
185%
$60
$5,640
Company A
190%
$36
$5,280
Company H
196%
$60
$5,940
NTUC Income Ideal Plan (ID2)
45%
$30
$1,680
NTUC Income Ideal Plan (ID5)
Nil
$80
$1,600
Ideal Plan (ID5) from NTUC Income does not have any front end charge. After
deducting a modest policy fee, 100% of your premium is invested from the first
month. This is a very attractive plan for those who wish to save more than $100
per month.
Other plans have a front end charge of between 160% to 196% of the
annual premium. A smaller percentage of the premium is
invested during the initial years. E.g. If the front end charge is 160% in the
first 2 years, only 40% of your saving is invested. If you save $2,400 annually,
only $960 is invested.
If you incur a high front end charge, you will also lose
out on investment gains that can be earned in the future.
The total charge that
you have to pay under our Ideal plan is quite modest, compared to the high returns
that you can earn from investing in an ILP.
There are over 300 investment funds available in the market.
You should choose
a large fund that have low charges and is managed by a good fund manager.
NTUC
Income offers the Combined Fund:
large fund with over $3,500 million in investment
invested in 900 top quality investments (bonds and equity)
managed by 9 top fund managers
well diversifed globally
Here are the charges:
Combined Fund
Others
Initial Spread
3.5%
5%
Annual Charge
<=1%
1% - 2%
Note: Charges of Combined Fund are not guaranteed.
Investing in a fund with low charges like the Combined Fund will benefit you
in the long run. Over 20 years, the Combined Fund could offer 10% - 20% more
than other funds, assuming that all funds earn the same average rate of return.
We pay more, due to our low charges.
The modest charges are more than compensated
by the higher return that you can earn from a ILP.
You have the choice of three investment options:
Equity
Bond
Return *
Growth
70%
30%
6.0%
Balanced
50%
50%
5.5%
Conservative
30%
70%
5.0%
* Estimated return over 10 years or more (not guaranteed).
If you are willing to take moderate to higher risk, you can choose Growth.
If you prefer to take low to medium risk, you can invest in Balanced or Conservative.
Ideal Plan gives you insurance protection equivalent to 5 years of your annual
regular saving, free of charge. E.g. If you save $2,400 annually, the insurance
protection is $12,000.
You can get additional insurance by buying a decreasing
term assurance (DTA) rider.
For DTA, we recommend a sum assured that is equal to your total future saving.
If you save $3,000 a year, we recommend a sum assured of $60,000 over 20 years.
Under DTA, the sum assured of $60,000 will decrease by $3,000 each year. This
is compensated by the additional saving that you make each year. In the event
of death or disability, we will pay the DTA sum assured and your cash value in
Ideal Plan as a benefit. The total amount payable will usually be more than $60,000.
The following table shows the benefit payout, for an annual saving of $2,400
in Ideal Plan with a $60,000 DTA cover for 20 years. Assume that your saving
grow by a net return of 5% per year.
Annual Saving of $2,400
DTA Sum Assured of $60,000 over 20 years
Total Benefit Payable is the sum of DTA Sum Assured and Cash Value
Year
DTA
Sum Assured
Cash Value
in Ideal Plan
Total
Benefit
1
$ 60,000
$ 3,150
$ 63,150
10
$ 33,000
$ 39,600
$ 72,600
20
$ 3,000
$104,200
$107,200
Note:
Cash Value figures are based on a net return of 5% p.a. i.e. net of all charges.
The figures are for illustration only. They are not guaranteed.
The annual premium payable for a 20 year DTA insuring $60,000 is quite modest.
Entry Age
Male
Female
25
$ 30
$ 20
35
$ 62
$ 41
45
$209
$137
Note: Premium Rates are not guaranteed.
Depending on your financial needs, you can choose a higher sum assured under
DTA.
The Combined Fund could earn a return of 5-6% per annum over a long term, say 10 to 20 years.
Based on the benchmark, the average return over the past 10 years is 6.5% per annum. This is quite attractive, considering that the global economic situation had been quite difficult.
The Combined Fund has moderately high risk. But risk is to your advantage.
If you invest $100,000 for 10 years in the CPF to earn 2.5% per annum, you will get $128,000. If you invest in a
moderately high risk fund to earn 6% per annum, you get $179,100.
Risk can work both ways. You can get more or less than $179,100. If you get more than $179,100, you can realise your investment. If you get less than $179,100, wait for 1, 2, or 3 years for the investment to recover.
Risk is to your advantage because you can wait for the right time to get a better return.
7. If some investments turn bad, will I make a loss?
The Combined Fund is invested in 900 quality investments. They are selected from among the best
bond and equity investments all over the world.
If a few investments turn bad, the impact is small. Each bad investment will have less than 0.1% impact on the
return.
The bad investments will be more than offset by the good investments. This is the advantage of diversification. It is important to invest in a large and well diversified fund.
The Combined Fund is managed by 9 top fund managers, who are selected from a large database of fund managers. They are considered to be among the top tier fund managers in the world.
8. I am recently married. How much insurance do I need?
You need insurance to take care of your family needs, in the event of your premature death or disability.
Most people like to have insurance coverage equivalent to 5 years of annual income. If your annual income is $50,000, you should be insured for $250,000.
If you have existing insurance coverage, you only need to take up the additional sum to make this target sum.
You can buy a term insurance rider to provide the additional sum payable on death or permanent disability, as follows:
Annual premium to insure $100,000 - Term Assurance (TA) rider
Entry Age
For 20 Years
Expire at Age 65
Male
Female
Male
Female
25
$100
$ 66
$290
$193
35
$254
$167
$480
$320
45
$823
$546
$823
$546
Note: Premium rates are not guaranteed.
You can buy a decreasing term insurance rider to provide an additional sum payable on death or permanent disability.
The sum assured can be equal to your total future saving. The decrease in the sum assured each year
will be compensated by additional saving that you make each year.
Annual premium to insure $100,000 - Decreasing Term Assurance (DTA) rider
Entry Age
For 20 Years
Expire at Age 65
Male
Female
Male
Female
25
$ 51
$ 33
$ 99
$ 66
35
$103
$ 68
$172
$113
45
$348
$228
$348
$228
Note: Premium rates are not guaranteed.
You can buy a living insurance rider to pay an additional sum on death, disability or diagnosis of 30 dread disease, as follows:
Annual premium to insure $50,000 - Living Assurance
(LA) rider
Entry Age
For 20 Years
Expire at Age 65
Male
Female
Male
Female
25
$102
$ 92
$260
$238
35
$256
$246
$430
$389
45
$722
$652
$722
$652
Note: Premium rates are not guaranteed.
You can choose a combination of riders. For example, you can insure $100,000 of term insurance rider and $50,000 of living benefit rider.
You can buy the riders under our Family Insurance plan. You can also insure several members of your family under one policy. This will save you on the annual policy fee.
There are other riders that can be taken under this plan:
Monthly income benefit payable on death or permanent disability
You can buy an Ideal plan to save for your child. You should have a separate policy for each child.
You can save $100 or more each month in Ideal plan and invest the saving in Combined Fund.
The advantages of Ideal plan are:
flexibility
allows adhoc saving
can stop saving for a short period
an attractive return
flexible maturity date
The tuition fees payable for a university education is estimated to be:
Local University
$6,000 to $20,000 per year (with government subsidy)
Foreign University
$20,000 to $60,000 per year (full fees)
The total saving (excluding interest) is:
Monthly Saving
Total for 15 Years
$100
$18,000
$150
$27,000
$200
$36,000
We suggest that you should save enough to meet the expected tuition fees for a 3 year course.
The interest that you can earn on your saving (say, 6% per annum) can meet the inflation in tuition fees. If there is an excess, it can be used to pay for an additional year in university or meet the living
expenses.
You can buy a DTA to supplement the saving, in the event of premature death or disability. This ensures that the planned saving
will remain intact.
The premium payable for a 20 year DTA of $25,000 is:
10. Can I invest my savings in the CPF to get a better return?
You can invest your CPF savings in our Combined Fund.
Based on a return of 6% per annum, your savings could grow as follows:
Single premium: $100,000
Duration
CPF
Combined Fund
Difference
2.5% p.a.
6% p.a.
10
$128,000
$179,100
$ 51,100
15
$144,800
$239,700
$ 94,900
20
$163,900
$320,700
$156,800
25
$185,400
$429,200
$243,800
30
$209,800
$574,300
$364,500
Note:
Figures are for illustration
only. They are not guaranteed. Assume investment return is
net of policy and fund charges.
The investment in the Combined Fund is subject to moderately high risk. The actual return may fluctuate by an estimated 20%.
Risk can be to your advantage. If you get more than the projected savings, you can withdraw your investment.
If you get less, you can wait for 1, 2 or 3 years for the investment to recover. This will allow you to get the projected savings, or more.
When you retire, you are required to keep a minimum sum in the CPF to be invested according to its rules.
The minimum sum is $90,000 for a person retiring in 2005. This sum will increase by $4000 per
year, until it reaches $122,000 for a person retiring in 2013.
You have the following choices to invest your minimum sum:
keep it in CPF to earn interest at 4% per annum
transfer it to a bank account to earn interest at the current rate
use the minimum sum to buy a life annuity
If you keep the money in the CPF, you are allowed to withdraw a monthly sum of $711 from age 62. Your minimum
sum is expected to run out in 20 years time. Nothing is payable after it runs out.
As the bank offers a lower return than the CPF, few people choose this option now.
You can use the minimum sum to buy a life annuity payable from age 62. NTUC Income offers the monthly payment shown in the next
table.
Each year, an estimated 10% of the retirees will use their CPF savings to buy an annuity. The other 90% keep
the money in the CPF.
In the market, about 65% of life annuities are bought from NTUC Income. The remaining 35% are bought from other life insurers.
Annuity from NTUC Income
Minimum Sum at 55: $90,000
Estimated monthly annuity payable at age 62:
Guaranteed
Estimated Bonus
Total
Male
$473
$99
$572
Female
$443
$93
$536
Note:
This is a participating annuity. The monthly payout increases
when bonus is declared. Bonus is not guaranteed.
The bonus is not guaranteed and it depends on the investment return earned on our insurance fund. The bonus shown above is the estimated amount declared during the 7 years (deferred period) up to 62, assuming an average bonus of 2.75% each year.
The annuity will continue to receive a bonus in each subsequent year. If the bonus continues to be declared at 2.75% per year
(not guaranteed), the monthly payment will increase as follows:
Age
Male
Female
62
$572
$536
67
$655
$613
72
$750
$703
77
$859
$805
82
$984
$922
Note: Figures are for illustration only. They are not guaranteed.
In the event of death during the earlier years, the capital sum less total annuity payments will be refunded to the estate.
12. How should I invest my savings after my retirement?
We offer the following options:
buy a life annuity
invest in the Combined Fund
Some people will use part of the savings to buy a life annuity and another part to invest in the Combined Fund.
Annuity
If you invest $100,000 in a life annuity at age 60, you will get a monthly payment:
Male
$429 (or 5.1% p.a.)
Female
$401 (or 4.8% p.a.)
In calculating the payout, we use an interest rate of 2.5% and add a further component (2.6% for male, 2.3% for female) to represent the consumption of capital over the expected life expectancy.
Each year, we will look at the average return earned on the investments in recent years. If it is more than 2.5%, we will pay most of the difference in the form of a bonus that is added to the monthly annuity payment. The bonus is payable on a cumulative
basis for the remaining lifetime of the annuitant.
If the annuitant dies at an early age and he has received annuity payments that is less than the capital sum, the balance is refunded to the estate.
If the annuitant lives longer, he will continue to receive annuity payments for his entire lifetime.
Combined Fund
You can invest your savings in the Combined Fund to earn an average return (not guaranteed) of 6% per annum over a long term.
You can request for a fixed sum to be encashed monthly from the Combined Fund to meet your living expenses. We will credit this sum to your bank account every month.
E.g. If you invest $200,000 in the Combined Fund and earn an average of 6% per annum, you can ask for $1,000 a month to be transferred to your bank account. Your capital is likely to be kept intact. If you transfer more than the yield (or return), the capital will diminish gradually. If you take out less than the yield, the capital will grow.
You can buy our Incomeshield Policy. We offer the following plans:
Plan
A
B
($)
($)
Daily Benefit
800
500
Surgical Benefit
9,400
8,200
Deductible
3,000
2,000
Co-insurance
10%
10%
Annual Limit
130,000
100,000
Lifetime Limit
1,500,000
800,000
Annual Premium
Age
30
84
50
40
126
76
50
252
151
60
420
252
70
924
554
80
2,016
1,218
Premium rates are subject to adjustment, based on claim experience. The premium will increase according to the age in each year. It can also increase due to inflation in medical expenses.
The premium can be paid out of your CPF Medisave account, subject to a limit of $660. Any difference will
be paid by cash.
We have a rider (Incomeshield Plus) to cover the deductible and co-insurance. If you are insured under the basic plan and the rider, the full amount of the hospital bill will be covered, provided that you are treated in the appropriate ward in a restructured hospital.
You can call our Health Hotline to get advice on the appropriate hospital and ward to be treated.
You can buy similar plans from other insurers. They provide higher coverage and charge a premium that is 15% to 80%
higher than Incomeshield.
14. What is the advantage of insuring with NTUC Income?
NTUC Income is a co-operative society.
Our aim is to serve our policyholders. We provide insurance at an affordable cost and distribute most of our surplus to our policyholders. Our shareholders receive less than 2% of our surplus.
Other insurers aim to make the most profits for their shareholders. The profits have to be earned from their insurance business. Their policyholders have to pay a higher premium to increase their profits.
NTUC Income operates at lower expenses. We pay less commision to agents and modest salary to our employees. This allow us to charge a lower premium.
NTUC Income is financially strong. We are rated "AA" by Standard and Poor's, a world renowed rating agency. This is the highest rating awarded among all insurers in Asia. Our financial strength gives the best security to our policyholders.
Table 1 - Lump sum savings
Total savings at end of each year, if you make a lump sum saving of $10,000.
Annual Rate of Return
Year
1%
CPF OA 2.5%**
3%
4%
5%
6%
7%
8%
1
9,747
10,250
9,940
10,036
10,133
10,229
10,326
10,422
2
9,844
10,506
10,238
10,437
10,639
10,843
11,048
11,256
3
9,942
10,769
10,545
10,855
11,171
11,493
11,822
12,156
4
10,042
11,038
10,861
11,289
11,730
12,183
12,649
13,129
5
10,142
11,314
11,187
11,741
12,316
12,914
13,535
14,179
6
10,244
11,597
11,523
12,210
12,932
13,689
14,482
15,313
7
10,346
11,887
11,868
12,699
13,579
14,510
15,496
16,538
8
10,450
12,184
12,224
13,207
14,257
15,381
16,580
17,861
9
10,554
12,489
12,591
13,735
14,970
16,303
17,741
19,290
10
10,660
12,801
12,969
14,284
15,719
17,282
18,983
20,834
11
10,766
13,121
13,358
14,856
16,505
18,319
20,312
22,500
12
10,874
13,449
13,759
15,450
17,330
19,418
21,734
24,300
13
10,983
13,785
14,171
16,068
18,197
20,583
23,255
26,244
14
11,092
14,130
14,596
16,711
19,106
21,818
24,883
28,344
15
11,203
14,483
15,034
17,379
20,062
23,127
26,625
30,611
Up to Year
20
11,775
16,386
17,429
21,144
25,604
30,949
37,342
44,978
25
12,375
18,539
20,205
25,725
32,678
41,417
52,375
66,088
30
13,007
20,976
23,423
31,299
41,707
55,425
73,458
97,105
35
13,670
23,732
27,154
38,080
53,230
74,171
103,029
142,679
40
14,368
26,851
31,479
46,330
67,936
99,257
144,504
209,642
45
15,100
30,379
36,492
56,367
86,705
132,828
202,674
308,032
** - $10,000 accumulated at the CPF OA interest rate of 2.5% p.a. No bid offer deducted.
Table 1 shows how a lump sum saving of $10,000 would grow at different time horizon and rate of return.
The projected saving is accumulated after deducting for 3.5% bid offer spread.
The third column shows how your saving (of $10,000) would grow if it is left to accumulate at 2.5% p.a. in your CPF
Ordinary Account.
The annual rate of return refers to net return after deducting for annual charges of Ideal Plan.
All figures are not guaranteed.
Table 2 - Regular savings
Total at end of each year, if you make annual saving of $10,000
Annual Rate of Return
Year
Bank 1% ^
CPF OA 2.5% **
3%
4%
5%
6%
7%
8%
1
10,100
10,250
9,940
10,036
10,133
10,229
10,326
10,422
2
20,301
20,756
20,177
20,473
20,772
21,072
21,374
21,678
3
30,604
31,525
30,722
31,328
31,943
32,565
33,195
33,834
4
41,010
42,563
41,583
42,618
43,672
44,748
45,845
46,963
5
51,520
53,877
52,770
54,358
55,988
57,662
59,379
61,142
6
62,135
65,474
64,293
66,569
68,920
71,351
73,861
76,455
7
72,857
77,361
76,161
79,267
82,499
85,861
89,357
92,993
8
83,685
89,545
88,385
92,474
96,756
101,241
105,938
110,855
9
94,622
102,034
100,976
106,209
111,727
117,545
123,679
130,145
10
105,668
114,835
113,945
120,493
127,445
134,826
142,662
150,979
11
116,825
127,956
127,303
135,349
143,950
153,145
162,974
173,479
12
128,093
141,404
141,062
150,799
161,280
172,563
184,707
197,780
13
139,474
155,190
155,233
166,867
179,477
193,145
207,962
224,024
14
150,969
169,319
169,830
183,578
198,583
214,963
232,845
252,368
15
162,579
183,802
184,864
200,957
218,645
238,090
259,470
282,979
Up to Year
20
222,392
261,833
267,078
298,853
335,041
376,280
423,299
476,931
25
285,256
350,117
362,387
417,958
483,595
561,209
653,078
761,910
30
351,327
450,003
472,876
562,868
673,192
808,686
975,355
1,180,638
35
420,769
563,014
600,963
739,174
915,171
1,139,866
1,427,365
1,795,886
40
493,752
690,876
749,451
953,676
1,224,004
1,583,060
2,061,332
2,699,887
45
570,459
835,540
921,589
1,214,651
1,618,162
2,176,153
2,950,505
4,028,162
^- Annual Saving accumulated at bank interest rate of 1% p.a. No bid offer deducted.
** - Annual Saving accumulated at the CPF OA interest rate of 2.5% p.a. No bid offer deducted.
Table 2 shows how annual saving of $10,000 would grow at different time horizon and rate of return.
The projected saving is accumulated after deducting for 3.5% bid offer spread.
The first column shows how your total savings would grow if it is accumulated in the bank, earning an average interest of 1% p.a. The second column shows how your total savings would grow if it is accumulated at 2.5% p.a. in your CPF Ordinary Account.
The annual rate of return refers to net return after deducting for annual charges of Ideal Plan.
All figures are not guaranteed.
Table 3 - Annual Premium (Cost of Insurance) for Male
LTA
-
Level Term Assurance; pays the sum assured on death during the term.
DTA
-
Decreasing Term Assurance; pays the decreasing sum assured on death during the term.
DDA
-
Dread Disease Assurance; pays the sum assured on death or incidence of dread disease during the term.
Entry
LTA $100,000
DTA $100,000
DDA $100,000
Age
10 yr
20 yr
Up to
Age 64
10 yr
20 yr
Up to Age 64
10 yr
20 yr
Up to
Age 64
20
80
83
240
46
48
85
122
147
423
25
80
100
290
46
51
99
147
203
520
30
88
149
377
48
65
128
186
316
677
35
133
254
480
65
103
172
291
512
860
40
246
470
625
119
189
242
523
872
1,113
45
448
823
823
220
348
348
869
1,443
1,443
50
830
1,380
1,085
403
613
500
1,450
2,315
1,856
55
1,443
2,270
1,443
742
1,060
742
2,438
3,704
2,438
59
2,121
3,255
1,697
1,109
1,581
999
3,574
5,224
2,881
Premium Rates may be subject to change. Please approach our advisers if you wish to find
out more.
Table 4 - Annual Premium (Cost of Insurance) for Female
LTA
-
Level
Term Assurance; pays the sum assured on death during the term.
DTA
-
Decreasing
Term Assurance; pays the decreasing sum assured on death during the term.
DDA
-
Dread Disease Assurance; pays the sum assured on death or incidence of dread disease during the term.
Entry
LTA $100,000
DTA $100,000
DDA $100,000
Age
10 yr
20 yr
Up to
Age 64
10 yr
20 yr
Up to
Age 64
10 yr
20 yr
Up to
Age 64
20
52
54
160
31
31
57
117
136
389
25
52
66
193
31
33
66
135
183
475
30
58
98
252
32
43
84
168
290
614
35
87
167
320
43
68
113
261
493
778
40
162
310
415
78
125
159
482
833
1,006
45
294
546
546
145
228
228
867
1,305
1,305
50
546
918
717
264
403
328
1,413
1,998
1,664
55
951
1,522
951
486
695
486
2,062
3,038
2,062
59
1,400
2,201
1,116
725
1,034
655
2,800
4,184
2,272
Premium Rates may be subject to change. Please approach our advisers if you wish to find
out more.
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