Legal Tips

Nomination of Beneficiaries (NOB) Framework

Document Date: 15 February 2011

When was the framework under the Insurance Act implemented?

A1. 1 September 2009.
What is this NOB framework under the Insurance Act all about?

A2. Prior to 1 Sep 2009, there is no provision in the Insurance Act (IA) to govern the nomination of beneficiaries to insurance proceeds.

Instead, nomination of beneficiaries was governed by Section 73 of the Conveyancing and Law of Property Act (CLPA), and Section 45 of the Co-operative Societies Act (CSA).

With effect from 1 September 2009:
1. the law governing the nomination of beneficiaries is consolidated under the Insurance Act; and
2. no nomination is allowed under the CLPA and Co-operative Societies Act (CSA)
Why is there a need to shift the nominations of beneficiaries framework under the Insurance Act (IA)?

A3. Section 73 of the CLPA has generated much controversy. When a policy owner names his spouse and/or children as beneficiaries of an insurance policy effected on his own life, Section 73 of CLPA will automatically create a statutory trust in favour of the beneficiaries, even though the policy owner may not have intended to create a trust. Once a trust is created, the policy owner will lose all rights and control over the insurance policy.

The CSA provides for nomination of any legal entity (individual, association or corporation). However, for all other insurers in Singapore who are not co-operatives, there was no statutory provision prior to 1 Sept 2009 which govern the nomination of any legal entity. As such, the status of such nominations with other insurers is uncertain.

Parliament thus saw a need to consolidate the law on nominations by amending the IA to provide policy owners and insurers with directions on nominations.
What type of insurance policies will the new NOB be applied to?

A4. The new NOB applies to policies which provide for death benefits eg life policies.

The policy must be effected by the policy owner on his own life. No nomination is allowed for a policy effected by the policy owner on another person’s life.
What types of nominations are allowed under the new NOB?
A5.
1. an irrevocable nomination; or
2. a revocable nomination;
for a policy to decide how the policy proceeds will be distributed.
What is an Irrevocable Nomination?

A6. An Irrevocable (or Trust) Nomination allows a policy owner to create a statutory trust in favour of the beneficiaries. Only the policy owner’s spouse and/or children can be nominated as the beneficiaries.

This is similar to the trust regime created under section 73 of the CLPA. The difference is that under the IA, the policy owner makes a conscious and deliberate choice to effect such a nomination by completing a form prescribed by the IA.

Once a policy owner creates a trust nomination, he will lose all rights and control over the insurance policy including the policy proceeds. However, the advantage is that the policy proceeds enjoy protection against claims from the policy owner’s creditors when this statutory trust is created unless there is an intention to defraud the creditors.
What other implications should a policy owner consider before making an Irrevocable Nomination?

A7. Making an Irrevocable Nomination has many consequences, as listed below, and a policy owner should consider carefully before making such a nomination.
1. Policy owner loses all rights and control over the insurance policy.
2. All payouts from the insurance policy, whether made during the policy owner’s lifetime or after his death, will go to the beneficiaries.
3. Policy owner cannot unilaterally change his trust nomination subsequently. In order to change/revoke a trust nomination, he must obtain the consent of each beneficiary who is at least 18 years of age or a trustee who is not the policy owner. In the case of a beneficiary who is below 18 years of age, the parent or guardian (who is not the policy owner) can consent on the beneficiary’s behalf.
4. Policy owner cannot unilaterally give instructions to vary any part of the policy that may alter the policy benefits. To vary any part of the policy, consent must be obtained from each beneficiary who is at least 18 years of age or a trustee who is not the policy owner. In the case of a beneficiary who is below 18 years of age, the parent or guardian (who is not the policy owner) can consent on the beneficiary’s behalf.
5. The trust is not affected by a divorce. This may be an issue if the spouse is one of the beneficiaries.

What is a Revocable Nomination?

A8. A Revocable Nomination allows a policy owner to unilaterally change his nomination at any time. Any legal entity (individual, association or corporation), can be nominated to be a beneficiary. However, the nomination is only applicable for distribution of the death proceeds. This means that while the policy owner is alive, he continues to retain all rights and control over the insurance policy and any insurance payout will be made to the policy owner.
The new law also touched on wills made in the existence of such nominations. Can you elaborate?

A9. A valid will executed after a Revocable Nomination has been made and made known to the insurer will supercede the Revocable Nomination. However, the will must satisfy specific requirements under the Wills Act. For example, the will must provide for the disposition of all death benefits under the policy and it must specify the particulars of the policy. For the full set of requirements, refer to A10.

However, Irrevocable Nominations cannot be superseded by the contents of a will of the policy owner, even if the will had been executed later (refer to A7(c) on how an Irrevocable Nomination can be revoked).
What are the exact requirements necessary for a Will to be able to supercede an earlier Revocable Nomination?

A10. The Will must be made in accordance with the Wills Act (Cap. 352) which:
1. Provides for the disposition of all death benefits under the relevant policy; and
2. Specifies the particulars of the relevant policy as set out in Regulation 5(3) of the Insurance (NOB) Regulations 2009.
Regulation 5(3) of the Insurance (NOB) Regulations 2009 lists the following particulars:
1. the name of the registered insurer that issued the relevant policy;
2. the policy number;
3. the name of each beneficiary to whom any portion (including the whole) of the death benefits under the relevant policy is bequeathed;
4. where a beneficiary referred to in sub-paragraph (c) is an individual, the following particulars of the beneficiary: NRIC/BC/Foreign passport number, address, date of birth.
5. where a beneficiary referred to in sub-paragraph (c) is not an individual, the following particulars of the beneficiary:
  1. the Singapore unique entity number of the beneficiary or, if the beneficiary does not have such a number, any other official registration number which identifies and is unique to the entity; and
  2. the address of the beneficiary;
6. the portion of the death benefits under the relevant policy which is bequeathed to each beneficiary.
I have a NTUC Income policy which I have made a nomination under CSA. Can this nomination be superseded by a subsequent will?

A11. No, this is because the amendment to the IA does not have any retrospective effect. This means that your existing nomination will still be valid even if you make a subsequent will.

If policy owner would like to revoke the existing CSA nominations, he is advised to submit a specific form to revoke it. Alternatively, if the policy owner wishes to make a new nomination, he can submit a Revocable or Irrevocable nomination under the IA and the CSA nomination will be deemed as revoked.

Similarly, if a section 73 trust nomination has been made for a policy, it will still be valid, unless revoked. A section 73 trust can be revoked with consent from trustee and beneficiaries or trustee only, if beneficiaries are below 21 years old.
For Irrevocable Nomination, does the Policy owner need to name a trustee? Can the Policy owner name himself to be the trustee?

A12. Yes. The Policy owner must name at least one trustee for the Irrevocable Nomination to be valid. The policy owner, witness or a beneficiary may be named as trustee.

However, in a situation whereby the trustee is also the policy owner, he cannot:
(a) consent to the revocation of the trust;
(b) consent to variation of any term of the policy
(c) give a valid discharge to the insurer for monies received under the policy.
Why is the restriction as mentioned in Q12 imposed on a policy owner who is also a trustee under an Irrevocable Nomination? There is no such restriction under the S73 of the, CLPA.

A13. This is to preserve the protection accorded to beneficiaries under the trust. In certain circumstances, it could be detrimental to the interest of the beneficiaries if the policy owner is allowed to access the proceeds of the policy by virtue of his role as trustee.
How can an Irrevocable Nomination be revoked?

A14. To revoke, consent has to be obtained from:
(a) A trustee who is not the policy owner; or
(b) Each beneficiary who is at least 18 years of age or, in the case of a beneficiary

who is below 18 years of age, consent from the parent/legal guardian who is not the policy owner .
Are there any age requirements on policy owners, trustees, witnesses?

A15. Yes. A policy owner must be at least 18 years of age to make a Revocable or Irrevocable Nomination. A trustee appointed under an Irrevocable Nomination must also be at least 18 years of age. However, witnesses to these nominations are required to be at least 21 years of age.
Is there any cap on the death proceeds an insurer can pay out in the presence of a nomination?

A16. No. There is no cap if a nomination has been made. However, in the absence of any nomination, the insurer can only pay up to $150,000 in total for all relevant policies to a proper claimant. A proper claimant is defined in the Insurance Act (IA) to mean a person who claims to be entitled to the death proceeds as the executor, spouse, parent, child, sibling, nephew or niece of the deceased.

Are there any restrictions on nomination types for policies bought with CPF funds?

A17. Yes. Below table summarises what type of nominations can be made.

Policy Type	Irrevocable	Revocable
Minimum Sum Scheme (MSS) Annuities	No	No
Minimum Sum Plus Scheme (MSPS) Annuities	Yes	Yes
Dependent Protection Scheme (DPS)	No	Yes
CPFIS OA (Ordinary Account) or SA (Special Account)	No	Yes
SRS (Special Retirement Scheme)	No	Yes

Why can’t a policy owner make an Irrevocable Nomination for DPS, CPFIS, SRS policies?

A17. An Irrevocable Nomination will cause the policy owner (CPF member) to lose control over any insurance proceeds paid out during his lifetime, which would not be in line with CPF Board’s policy that members must retain complete ownership of their funds as long as they are alive.
Why can’t a policy owner make any nomination at all for Minimum Sum Scheme (MSS) annuities?

A19. This is to enable CPF Board to retain full control over the disbursement of proceeds from such annuities. On the other hand, annuities purchased under the Minimum Sum Plus Scheme (MSPS) will be deemed no different as any other insurance policy as they are paid for with cash.
What happens if the beneficiary predeceases the policy owner under a Revocable Nomination?

A20. The deceased beneficiary’s share will be proportionately distributed among the surviving beneficiaries. If there is no other beneficiary, the nomination will be deemed as revoked.
What happens if the beneficiary predeceases the policy owner under a Irrevocable Nomination?

A21. The deceased beneficiary’s share will NOT be proportionately distributed among the surviving beneficiaries. The deceased beneficiary’s share will go to form part of his estate.
When will the nomination take effect?

A22. A nomination, if valid, will take effect from the date the nomination form is lodged with the registered insurer that issued the relevant policy.

Can I find a table summarising the changes, as well as the similarities and differences between Revocable and Irrevocable Nominations under NOB?

A23. For policy owners who have made CSA nominations under their NTUC Income policies prior to 1 Sep 2009, Table 1 shows the comparisons between the law governing revocable nomination prior and after 1 Sep 2009.

Table 2 shows the comparisons between the law governing irrevocable/trust nomination prior and after 1 Sep 2009.

Table 3 shows the comparisons between the 2 different types of nominations provided for under the NOB.

The Life Insurance Association (LIA) has also issued a consumer guide on the new nomination law. This guide is available at the LIA website (www.lia.org.sg).

TABLE 1: COMPARISON OF KEY CHANGES FOR REVOCABLE NOMINATIONS

Practice under Co-operative Societies Act (CSA) prior to 1 Sep 2009	New Nomination of Beneficiaries (NOB) under Insurance Act (IA) from 1 Sep 2009
Revocable Nomination governed under s45 of CSA	Revocable Nomination under s 49M(2) of IA
Use of NTUC Income’s prescribed form to nominate	Use of Form 4 of Insurance (NOB) Regulations to nominate
1 nomination form for 1 or more policies	1 nomination form per policy
Muslims can nominate anyone but are usually advised to nominate in accordance with the school of Muslim law professed by him	From 1 Sept 09, the Administration of Muslim Law Act (“AMLA”) requires a Revocable Nomination by a Muslim to be in accordance with the school of Muslim law professed by the Muslim. As NTUC Income is not in a position to ascertain whether a Revocable Nomination by a Muslim policy owner is in accordance with AMLA, NTUC Income is unable to accept the nomination (unless the nomination is made for a policy under the DPS – Dependents’ Protection Scheme*).
Nomination form allows for appointment of Trustee to receive the death proceeds under the policy on behalf of any nominee below 21 years old at time of payout	Nomination form does not allow for appointment of Trustee. If nominee is below 18 years old, parent/guardian (who is not a policy owner) can receive insurance proceeds on behalf of such nominee.
Nomination not revoked by a subsequent Will	Nomination may be revoked by a subsequent will (made known to insurer) that was made in accordance with the Wills Act which provides for disposition of all death benefits under the relevant policy and specifies such particulars of the relevant policy as referred to in regulation 5(3) of the Insurance (NOB) Regulations 2009.
Nomination revoked by: - another nomination - use of Income’s revocation form - creation of a s73 CLPA trust - an Assignment/Notice of assignment, encumbrance	Nomination revoked by: - another revocable nomination (Form 4) - express revocation (From 5) - Irrevocable/Trust Nomination (Form 1) - Notice of assignment, encumbrance, or will with prescribed particulars using Form 6

* DPS is a national scheme that is administered by Great Eastern and NTUC Income. It is administered separately from the individual life policies.

TABLE 2: COMPARISON OF KEY CHANGES FOR TRUST NOMINATIONS

Practice under s73 CLPA prior to 1 Sep 2009	New Nomination of Beneficiaries (NOB) under Insurance Act (IA) from 1 Sep 2009
Trust created under s73 CLPA	Trust (Irrevocable) Nomination under s49L(2) of IA
Use of NTUC Income’s prescribed form to nominate	Use of Form 1 of Insurance (NOB) Regulations to nominate
1 nomination form for 1 or more policies	1 nomination form per policy
Spouse and children (excluding illegitimate children)	Spouse and children (including illegitimate children)
Trustee appointed using NTUC Income’s prescribed form or policy owner is default trustee	Trustee appointed using Form 1 but no default trustee. Policy owner must appoint at least 1 trustee
Consent of Trustee not required before appointment	Consent of Trustee is required before appointment
Trustee must be 21 years old and above	Trustee must be 18 years old and above
Discharge for receipt of policy money is given by Trustee(s)	Discharge for receipt of policy money by any Trustee who is not the policy owner, OR all nominees who are 18 years old and above and parent/legal guardian’s (who is not the policy owner) consent for nominees below 18 years old.
Revocation of trust – consent to be obtained from Trustee(s) and beneficiaries. Where beneficiaries are below 21 years old, only trustee’s consent is required. Use of NTUC Income’s prescribed form to revoke.	Revocation of trust – consent to be obtained from Trustee who is not the policy owner OR all nominees who are 18 years old and above and parent/legal guardian’s (who is not the policy owner) consent for nominees below 18 years old. Use of Form 2 of Insurance (NOB) Regulations to revoke

TABLE 3: COMPARISON BETWEEN REVOCABLE & IRREVOCABLE UNDER New Nomination of Beneficiaries (NOB) from 1 Sep 2009

	Irrevocable s49L(2)	Revocable s49M(2)
Policy Type	Policies with death benefits eg life policies, and are effected on own life.	Policies with death eg life policies, and are effected on own life.
Minimum Age of Policy owner	18 years old	18 years old
Making the nomination	Anytime during policy period	Anytime during policy period
Annuities under MSS	No	No
Annuities under MSPS	Yes	Yes
DPS/CPFIS/SRS policies	No	Yes
Beneficiary	Only spouse/child (legitimate/illegitimate, stepchild, adopted child)	Any legal entity (individual, association or corporation).
Revocation by Policy owner	With consent of a trustee who is not the policy owner or consent of all beneficiaries who have attained 18 years of age (or their parent/legal guardian who is not the policy owner for beneficiaries below 18 years of age)	Yes. Anytime.
Automatic Revocation	No	Automatically revoked if: (a) policy is assigned (b) another nomination (irrevocable or revocable) is subsequently made (c) policy is covered by a subsequent Will and will is made known to insurer
Will made subsequent to nomination and will is made known to insurer	No impact	Nomination revoked if Will was made in accordance with the Wills Act which provides for disposition of all death benefits under the relevant policy and specifies such particulars of the relevant policy as referred to in regulation 5(3) of the Insurance (NOB) Regulations 2009
Death of nominee before Policy owner	Policy proceeds form part of the deceased nominee’s estate	If sole nominee dies, nomination is revoked. Otherwise, the deceased nominee’s share will be proportionately distributed among the surviving nominees.
Nomination applicable to living and death benefits?	Both applicable	Only applicable to death benefits
Appointment of trustee(s)	Yes. And there is no prohibition on the appointment of beneficiaries or witnesses as trustees.	No
Nomination by Muslims	Yes	No (except for nomination for a policy under the Dependents’ Protection Scheme).