Hi Temperament
I reckon that you might have not completely understood the scheme.
Although i do not pretend to be au fait with the mechanics of CPF Life, most insurance schemes, e.g. Fire or Motor Vehicle, like that work precisely because of risk pooling. For example, say life expectancy is 80 years old. There will be an equal / similar number of folks who will not live to 80 AND folks who live beyond 80. The "savings" from not paying those who conked out first, will be used to pay those who have a greater stamina and lasts longer, i.e. beyond 80.
If there is a minimum payout, the "savings" from the scheme will be minimised and the "risks" of living beyond 80 would hardly be addressed.
This is also the reason why premiums for term life (no certainty of payout) and whole life (guaranteed payout) policies are way different.
An alternative model used in the Singapore Ministry of Defence that also had its own challenges:
To support this new career structure, MINDEF introduced the SAVER scheme. This scheme offers our officers accelerated career advancement and a very good salary and benefits package. A key feature of SAVER is a generous superannuation scheme to support their transition to a civilian career when they leave the SAF. This is designed such that an SAF officer in his 23-year career would earn close to 75% of what his private sector counterpart would earn in a 40-year career. Since its inception, the SAVER scheme has met its objectives of improved recruitment and retention of officers and timely leadership renewal.
...
Dr Ong has also referred to some complaints by retired officers that they did not get good returns from the SAVER scheme. Now, let me explain. The SAVER fund is no different from other pension funds, it's invested and we have explained to our officers that they should take the long-term view. In fact the returns are slightly higher than the benchmark which the fund compares itself to. SAVER benefits are invested with a view to giving good returns over the long term, based on a strategy of balanced asset allocation. There may however be a few years when the performance of the fund is negative, and there may be a small minority who leave the SAF at that point where the returns are negative. The performance of the fund as I've said so far, have been better than our benchmark, and better than numerous established pension funds in the market. Our officers also have the option. They can move their retirement benefits into a more conservative portfolio two years before their retirement, depending on their risk appetite. But of course if they do that and if the investment makes exceptional gains in those two years, then they will not benefit from those exceptional gains. But those are the risk-return benefits. However, having now run the fund for about six years, MINDEF is reviewing the fund structure to fine-tune it to see whether there are better options, more options, that can be developed to meet the needs of the fund members at the various points of their careers.
Extracted from:
http://www.mindef.gov.sg/imindef/news_an...4_fs3.html
My own conclusion - there is no free lunch and to each his own.
Cheers!
(06-09-2012, 04:22 PM)HitandRun Wrote: [ -> ]Hi Temperament
I reckon that you might have not completely understood the scheme.
Although i do not pretend to be au fait with the mechanics of CPF Life, most insurance schemes, e.g. Fire or Motor Vehicle, like that work precisely because of risk pooling. For example, say life expectancy is 80 years old. There will be an equal / similar number of folks who will not live to 80 AND folks who live beyond 80. The "savings" from not paying those who conked out first, will be used to pay those who have a greater stamina and lasts longer, i.e. beyond 80.
If there is a minimum payout, the "savings" from the scheme will be minimised and the "risks" of living beyond 80 would hardly be addressed.
This is also the reason why premiums for term life (no certainty of payout) and whole life (guaranteed payout) policies are way different.
i think understanding and accepting an idea or concept is 2 different things.
If i can't understand an idea or concept, most probably i won't or dare not accept. In fact, almost 100% i won't accept.
On the other hand, if i understand the idea or concept, it does not follow that i will accept. So it's up to you to read very carefully what i have written, why i don't accept CPF LIFE or any insurance annuity.
Maybe you have misread me. If you don't think so, shall we just let it be?
Cheers!
