In thinking aloud (ST, 6 Oct 2007), Jenadas Devan says that he does not understand why people can accept that when they buy a term life or medical insurance, they cannot get back the premiums paid out but when it comes to a longetivity insurance, they cannot accept that premiums paid cannot be fully recovered.
For someone who saves adequately for old age, the difference between a term life / medical insurance and a longetivity insurance is that the former protects against premature end to working life whereas the latter does not. By the time the latter kicks in, the person would have reached the end of his working life and would have no need for protection as far as working is concerned. Furthermore, since adequate savings have been put aside all this while, there is no need for longevity insurance.
Mr Devan is also sure that given two options:
Option A: Payout of $X+ over 20 years, $Y after that infinitely
Option B: Payout of $X- over 30 years and that’s all
People would definitely choose option A (which is the govt’s intended policy) over option B.
I disagree. Again, for someone who has been saving adequately, option B is better because the person knows that he can give himself more than $X- from his savings way beyond 30 years. Furthermore, he knows that if he dies before the end of the 30 year payout period, all remaining money goes to his beloved kin.
On the other hand, option A is less attractive because unless he is sure he can live to 100 years old, part of what he put in will go to someone else instead of his kin.
In any case, Mr Devan trusts Singaporeans to be rational. I agree and believe we should leave them to their rational choices.
Mr Devan also echoes the words of Mr Tharman and MM Lee in saying that investment in the equity market is much more risky than the risk free CPF. However, we cannot talk about risk without mentioning returns. What is important is risk adjusted returns. If CPF members are confined to buying a diversified portfolio of the 30 blue chip companies in SGX’s revamped Straits Times index. Would CPF members be worse off over a period of 30 years? Perhaps not.
October 8, 2007 at 3:07 am |
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October 8, 2007 at 4:01 am |
You mean ST words can be counted? The main issue is why you make the decision for me when it comes to my money that I earn using my blood and sweat. It is like I put MY money in a private bank, the government also have some share of it. Dah!!!