Retirement Planning in Singapore
By Desmond Lin
Introduction to Retirement Planning in Singapore
By Desmond Lin
Introduction to Retirement Planning in Singapore
Singapore is a great place to retire because it has a lot to offer retirees. First, the cost of living in Singapore is relatively manageable compared to other developed countries, which makes it affordable to live there. Second, Singapore has a well-developed healthcare system, which means retirees can receive high-quality medical care. Third, Singapore is a safe and stable country, which provides retirees with a sense of security. Finally, Singapore is a culturally diverse country, which means retirees can enjoy a variety of cultural experiences. All of these factors make Singapore an attractive destination for retirees. Whether you are looking for a relaxing retirement or an active retirement, Singapore has something to offer everyone. So why not consider retiring in this vibrant and exciting country?
What retirement is like for you?
Retirement is the point in your life when you stop working and begin enjoying your golden years. It is a time to relax and enjoy your accomplishments. A time to travel and spend time with family and friends. Retirement can be whatever you make of it – a time to explore new hobbies or a time to finally do all those things you’ve always wanted to do. It is a time to enjoy your hard-earned leisure.
There is no one-size-fits-all answer to this question, as retirement looks different for everyone. People want various things when they think of retirement. Some of these include having sufficient savings and income to last until the end, no outstanding debts, having paid for important commitments such as their children's education, the option to work if they want to, good healthcare coverage in old age, and the ability to leave a legacy for their dependents. Ultimately, what matters most when planning for retirement is having a clear vision of how you want to spend your golden years and taking the steps necessary to make that vision a reality.
The major considerations you should have are:
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Monthly income after retirement (e.g., Daily expenses / Bills)
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Savings after retirement for enjoying (e.g., Traveling)
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Healthcare cost (e.g., Hospitalisation / Treatments)
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Unexpected cost (e.g., Accidents / Illness)
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Emergency funds
When to start planning for retirement?
It is crucial that you should start planning for retirement as early as possible. The sooner you start saving, the more time you have to grow your money and take advantage of compound interest. You should start thinking about it a few years after you start working and before you reach mid-career. Read more on why you should start planning for retirement as early as possible. Of course, retirement planning is a complex and multifaceted process, and there are many different factors you need to consider. The key is to start early, stay organised, and be willing to make trade-offs and compromises as you move towards your retirement goals. With the right planning and preparation, you can enjoy a comfortable and happy retirement in Singapore.
Inflation - your greatest enemy to retirement planning
Inflation is one of the biggest enemies of retirement planning. As prices increase over time, the value of your retirement savings will slowly but surely decrease. This means that you'll need to save even more money if you want to maintain your standard of living in retirement.
Inflation can also make it difficult to plan for retirement. It's hard to know how much money you'll need to have saved if you don't know how much prices will increase in the future. This uncertainty can lead to anxiety and even paralysis when it comes to making retirement plans.
The best way to combat inflation is to start saving as early as possible. The sooner you start saving, the more time your money has to grow and the more it will be able to keep up with inflation. You can also think about investing in assets that have the potential to generate returns above inflation.
In order to make sure that you have enough money for retirement, you may also need to make sacrifices along the way. This may involve working a little longer than you had originally planned or foregoing certain luxuries in order to save more money.
With the right planning and preparation, it is possible to overcome the impact of inflation on your retirement plans. By starting early and taking a holistic approach to your finances, you can ensure that you will have a secure and comfortable future in Singapore. You can read more about our guide on dealing with inflation.
Retirement in Singapore
In Singapore, there are a few things to take into account when planning for retirement. The first is the Central Provident Fund (CPF) [1], which is a mandatory social security savings scheme funded by contributions from employers and employees. The scheme allows you to save money for retirement while also receiving tax relief.
Another important consideration is healthcare costs, which can be quite high in Singapore. There are a number of private insurance plans available that can help you offset these costs.
Finally, it is important to consider your retirement savings goals and how much money you will need to live comfortably in retirement. This will vary depending on your lifestyle and other factors, but it is important to have a goal in mind so that you can start saving early and make the most of the CPF scheme.
With a little planning, you can ensure a comfortable retirement in Singapore.
In Singapore, the retirement age is 62. This means that you are required to retire from full-time work at 62 years old, although you are allowed to continue working in certain specified occupations. However, this does not mean that you have to stop working altogether at 62 – there are many options available for those who want or need to keep working after retirement age.
One option for those who want to keep working after retirement age is to apply for re-employment. [2] This is a process whereby you can request to continue working past the age of 62, and your employer can agree to this if they are willing. There are a few conditions that must be met in order for you to be eligible for re-employment, such as having at least 3 years of service with your current employer and being medically fit to continue working. If you are approved for re-employment, you will be able to continue working until the age of 67. [3]
The first step in retirement planning is to determine how much money you will need to have saved up in order to live comfortably after retirement. There are many online calculators [4] available that can help you to estimate how much you will need, based on your current salary, lifestyle, and other factors. Once you have an idea of how much money you need, you can start taking steps to save enough to reach your goal.
One of the things that you can do is to diversify your retirement savings by investing in a range of assets and financial instruments. This will help to protect your savings against market fluctuations, while also allowing them to grow over time.
There are a number of government schemes available to help Singaporeans save for retirement, such as the Central Provident Fund (CPF). Employees and employers make monthly contributions to the CPF, which can then be used to pay for retirement expenses. In addition, there are a number of tax reliefs and incentives that can help you save even more for your retirement.
If you are considering working beyond the official retirement age in Singapore, it is essential to plan ahead and start saving early. By following these steps and taking advantage of available resources, you can ensure that you have a comfortable and enjoyable retirement.
Planning for your retirement
When it comes to retirement planning, Singapore is a great place to be. There are a number of incentives and programs available to help you save for retirement, and the country has a strong and stable economy that offers retirees a high level of security.
In Singapore, Examples of two ways to save up for your retirement: the CPF (Central Provident Fund) and personal retirement plans. The CPF is a government-managed program that automatically deducts a percentage of your income each month, with additional contributions made by both employers and employees. The fund is fully managed and backed by the Singapore government.
Personal retirement plans, on the other hand, are managed by private financial institutions. These accounts typically offer a wider range of investment options than CPF, but they also come with more risk.
When planning for retirement in Singapore, it's important to consider both the CPF and personal retirement plans. Each has its own benefits and drawbacks, and the best way to save for retirement will vary depending on your individual circumstances.
Of course, retirement planning is a complex topic. If you're not sure where to start, it's a good idea to speak to a financial consultant about your options. With the right planning and preparation, you can ensure that you have a comfortable and enjoyable retirement in Singapore.
In the next section, we take a look at the broader needs of your retirement life and how government and private schemes can help you ensure a comfortable retirement.
Government Schemes
CPF Life
One of the most important benefits of the CPF is that it provides a retirement income for Singaporeans. The CPF Life [5] scheme is designed to pay out a monthly stream of income that lasts for as long as you live, regardless of how long you live.
In order to qualify for the CPF Life program, you must have a minimum sum of $60,000 in your retirement savings when you reach 65 years old.
(Image source from CPF Board)
Supplementary Retirement Scheme (SRS)
The CPF Supplementary Retirement Scheme (SRS) [6] is a voluntary program that allows Singaporeans to save for retirement in addition to the CPF. The SRS allows you to contribute up to $15,300 per year.
The main benefit of the SRS is that it allows you to save more for retirement while also reducing your tax liability as the contribution is tax-free. When you make contributions to the SRS, you can claim a tax deduction at the time of contribution. This means that you will pay less in taxes each year, allowing you to keep more of your money and put it toward your retirement savings.
You may open an SRS account with any of the local banks. However, the savings in the SRS account do not enjoy the same interest rate as your CPF accounts (~2.5-4%). You can however use them for investment in government-approved funds [7] [8] [9]:
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Unit trusts
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Index funds
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Blue-chip shares
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Endowment insurance plans
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SGD fixed deposits
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Singapore Savings Bonds
You will not be able to make any withdrawal from the SRS account before the statutory retirement age (62 currently, 63 in July 2022) without any penalties. The exception is if you need to withdraw from the account due to medical grounds or bankruptcy.
If you do wish to withdraw them before the retirement age, you will need to pay tax on the full withdrawn amount and also a 0.5% penalty. If you withdraw them after the retirement age, there will be no penalty and only 50% of the withdrawn amount is taxable.
As the first $20,000 is not taxable, you can withdraw $40,000 from the SRS after the retirement age and pay no penalties or tax (assuming you have no other sources of income)
SRS is a great tool for those who have already maximized their use of the CPF system and are looking for other avenues to save for retirement.
Healthcare
One of the most important aspects of retirement planning is ensuring that you have enough money to cover your healthcare costs. Healthcare can be expensive, and many retirees find themselves struggling to pay for medical treatments and procedures.
Healthcare insurance can be a great way to protect yourself from unexpected healthcare costs. By having insurance, you know that you will be able to get the care you need without having to worry about how you will pay for it.
It's also important to remember that your healthcare needs may change as you get older. Be sure to review your insurance coverage regularly to make sure that it still meets your needs.
MediShield Life
MediShield Life [10] is an upgraded version of MediShield that covers a wider range of treatments, including those that are not currently covered by MediShield. It also provides higher coverage limits and premium subsidies for lower-income Singaporeans. This makes it an important part of retirement planning, as it can help you to cover the costs of unexpected healthcare expenses.
(Image source from MOH)
Some of the benefits of MediShield Life include:
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Wider coverage for a range of treatments, including those not currently covered by MediShield
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Higher coverage limits for hospitalisation and selected outpatient treatments
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Premium subsidies for lower-income Singaporeans
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A lifetime coverage, so you don't have to worry about your coverage running out
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This makes MediShield Life an important part of retirement planning, as it can help you to cover the costs of unexpected healthcare expenses.
Integrated Shield Plans (IPs) [11] are private healthcare insurance plans that offer additional coverage beyond what is provided by MediShield Life. There are a variety of different IPs available, so it's important to choose one that meets your needs.
Some of the things to consider when choosing an IP include:
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The coverage that is offered
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The premium cost
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The exclusions and limitations
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The claims process
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The network of hospitals and providers
Choosing an IP is an important decision, as it can have a big impact on your ability to pay for healthcare costs. Be sure to do your research and compare different plans before making a decision. We will discuss more on the integrated shield plans later in the article.
Careshield Life
CareShield Life [12] is an insurance scheme that helps to cover the cost of long-term care. It replaces the previous ElderShield [13] insurance scheme, which was introduced in 2002. According to the Ministry of Health (MOH), intermediate and long-term care (ILTC) services are typically required for persons who need further care after being discharged from an acute hospital as well as community-dwelling seniors who may be frail and need someone to watch over them or to help them with their daily needs.
An example of long-term care is caregiving services which involve a care aide or trained nurse attending to a patient and assisting them with their daily activities. With the introduction of CareShield Life, all Singaporeans aged 30 and above will be automatically enrolled in the scheme
CareShield Life pays out a monthly cash benefit of at least $600 to policyholders who are unable to perform at least 3 Activities of Daily Living (ADLs). These ADLs are eating, dressing, washing, toileting, and moving around.
Private Retirement Plans
Through the various government schemes, most people will have basic coverage for their retirement in terms of income and healthcare. However, this may not be sufficient for people with different lifestyle needs. Having private retirement plans will help to supplement and increase your retirement income and coverage against any unexpected costs.
When planning for retirement, it's important to consider all of your options. In addition to the government schemes available, there are a number of private retirement plans, annuity schemes, and insurance plans that can help you save and protect your retirement nest.
Private retirement plans can be a great way to supplement your CPF savings and ensure that you have enough income to support yourself in retirement. However, it's important to remember that these plans are not without risk. Before investing in a private retirement plan, be sure to understand the risks involved and consult with a financial consultant to ensure that it is the right choice for you.
Let's take a look at some of the private retirement plans that can help increase your monthly payouts on top of CPF Life.
PRUActive Retirement II
(Image source from PRUActive Retirement II)
PRUActive Retirement II [14] is a unique retirement plan that provides you with flexibility and financial security, giving you the freedom to retire the way you want. It is designed to weather market volatility, providing you with a steady retirement income stream.
This plan is best suited for those who:
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want to retire flexibly and on their own terms
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are seeking financial security in retirement and want to protect their retirement income from market volatility
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are looking for a retirement plan that will provide them with a steady retirement income stream throughout their retirement years
Key benefits include:
Once retirement income payout begins, you will receive a guaranteed monthly income, plus a non-guaranteed portion that can potentially increase in value year-on-year[15]. With this plan, you will never have to worry about your income decreasing.
Start your payouts as early as age 50 and receive them for up to 30 years. You also have the flexibility to adjust your payout period[16] based on your changing needs. This flexibility allows you to tailor the plan to your specific needs.
Premium terms are flexible to suit your unique financial circumstances. Pay a lump sum in the first year or spread it over a longer period. This flexibility allows you to choose a premium payment schedule that works for you.
In case of disability[17] caused by an accident, you will receive additional monthly income aid, and all future premiums will be waived. This benefit provides you with peace of mind in knowing that you and your family are taken care of in the event of an accident.
In the event of death, your appointed spouse, who is also a joint owner, will succeed your policy. This ensures that your loved ones are taken care of in the event of your death.
If you do not need the monthly retirement income yet, you can choose to grow them instead.
For plans purchased on a single premium, you can choose to pay using your SRS funds. This allows you to use your SRS funds to purchase a policy that will provide you with income during retirement.
PRUVantage RetireCare
(Image source from PRUVantage RetireCare)
PruVantage RetireCare [18] is an innovative investment-linked plan that empowers you to supplement your medical needs while investing to grow your retirement nest. Its first-in-market Care Fund provides coverage for selected medical expenses from your chosen retirement age, up to a period of 10 or 20 years, enabling you to protect your retirement nest from unexpected medical costs.
Key benefits include:
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Secure your retirement nest from being diminished by medical exigencies and out-of-pocket expenses with rising medical costs and potential loss of employer health cover
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Stay protected and provide coverage in the event of death and terminal illness
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Receive target retirement monthly income from your chosen retirement age, with the option to increase it by up to 5% per annum[19] to keep pace with inflation.
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Make your investments work hard by jumpstarting your investment journey with simplified administrative charges[20], investing 100% of premiums from day 1, and receiving additional units throughout the policy term as bonuses[21]
With PRUVantage RetireCare, you can be empowered to protect and grow your retirement nest, allowing you enjoy your golden years uninterrupted.
Insurance Savings Plan
When it comes to planning for retirement, it is important to have a solid savings plan in place. This means setting aside money each month to save for your golden years.
One great way to save for retirement is through an insurance savings plan. This allows you to contribute money to an account that will grow over time. You can then use this money to cover living expenses in retirement.
There are many different types of private insurance savings plans available, so it is important to do some research to find the one that best suits your needs. Be sure to consider factors such as fees, investment options, and risk tolerance when choosing a plan.
If you don't already have a private insurance savings plan in place, now is the time to start one. It is never too early or too late (it's better to start early to take advantage of the power of compounding) to begin saving for retirement.[26] [27]
Healthcare
There are a variety of different private healthcare insurance plans available, so it's important to do your research to find the one that's right for you. Be sure to consider your budget, needs, and preferences when choosing a plan.
Integrated Shield Plans (IP)
Integrated Shield Plans [22], also known as IPs, are a type of healthcare insurance plan that offers comprehensive coverage for both inpatient and outpatient care. They are designed to provide coverage for a wide range of medical expenses, including hospitalisations, doctor's visits, and prescription drugs.
Some of the features of IPs that you may want to consider include [23]:
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Inpatient coverage for a wide range of medical services, including hospitalisation, surgery, and cancer treatment
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Outpatient coverage for doctor's visits, laboratory tests, and prescription drugs
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Coverage for pre-existing conditions
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Coverage for preventive care, such as vaccinations and screenings
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A wide network of doctors and hospitals that are covered by the plan
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Prescription drug coverage that is included in the plan[30]
(Image source from MOH)
If you are considering an IP, be sure to compare different plans to find the one that best meets your needs. Be sure to consider the features of each plan, as well as the costs, before making a decision.
Critical Illness / Disabilities
When you retire, one of your main concerns is likely to be how you will support yourself financially. This can be especially difficult if you are diagnosed with critical illness or become severely disabled. If you are unable to work because of your illness/disability, your retirement savings may quickly disappear. Additionally, you may have to pay for expensive medical treatments and care.
There are a few things you can do to help protect your retirement savings if you become ill. First, you may want to consider purchasing a long-term care insurance policy. This type of policy can help cover the costs of your care if you are unable to care for yourself. Additionally, you can make sure to have an emergency fund that can cover your expenses if you are unable to work. Finally, you may want to consider working with a financial consultant to create a retirement plan that takes into account the possibility of critical illness and disabilities. By preparing for the worst, you can help ensure that your retirement is as comfortable and secure as possible.
Personal Accident Plans
Personal Accident plans are equally important to retirement planning because they can provide you with extra income in the event of an accident/infectious diseases. This extra income can be helpful in covering medical costs and other expenses associated with an accident.
In addition, Personal Accident plans can help you maintain your lifestyle if you are unable to work after an accident. The income from a Personal Accident plan can help you pay your bills and maintain your standard of living while you recover from your injuries.
While no one likes to think about the possibility of becoming ill or being in an accident, it is important to be prepared for anything that might happen. By purchasing long-term care insurance and a Personal Accident plan, you can help protect your retirement savings and maintain your standard of living if something unexpected happens.
Re-employment
If you have reached the statutory retirement age but would still like to continue working, you may do so under the re-employment laws in Singapore.
On 1 July 2017, the Singapore government recently introduced a new regulation that requires employers to offer re-employment to eligible employees who turn 62 [24], up to the age of 67 [25]. This provides opportunities for older workers to continue contributing to society and earning an income. The regulation applies to all Singapore citizens and permanent residents who have been with their current employer for at least three years, have satisfactory work performance and are medically fit to continue working.
If you are eligible for re-employment but your employer is unable to offer you a position, then your employer must either transfer the re-employment obligation to another employer, with your agreement or offer you a one-off Employment Assistance Payment (EAP). Your re-employment contract should be for at least one year and renewable every year up to age 67. The first initial contract of re-employment should start on the same day you turn 62 years. Your salary may be adjusted based on reasonable factors such as new duties or responsibilities. You should negotiate these changes with your employer when you finalise your new contract. A good reference is the Tripartite Guidelines on Re-employment of Older of Employees. [26]
The regulation provides greater security and peace of mind for older workers, who may otherwise be reluctant to continue working due to age discrimination. It also incentivises employers to retain experienced and skilled employees, who can contribute value to the organization. Ultimately, this benefits society as a whole by ensuring that the knowledge and experience of older workers are not wasted and that they can continue to contribute actively to the workforce.
Employment Assistance Payment (EAP)
The Employment Assistance Payment (EAP) [27] is a one-off payment that employers can offer to employees who have been re-employed for at least 30 months since they turned 62 years old. The EAP is meant to help employees tide over a period of time while they seek alternative employment. The payment is equivalent to 3.5 months’ salary, subject to a minimum of $5,500 and a maximum of $13,000.
In addition to the EAP, employers are encouraged to provide outplacement assistance to help employees find alternative employment. Outplacement assistance can include resume writing help, interview coaching, and job search assistance. It is important to note that the EAP is offered only after a thorough review of all available re-employment options within the organization and is meant as a last resort. If you are offered an EAP, be sure to take advantage of all the resources your employer offers to help you find new employment.
Conclusion
Singapore is an excellent place to retire, with a high standard of living and plenty of opportunities for leisure and recreation. However, there are some things you should keep in mind when planning your retirement in Singapore. In this article, we’ve outlined the basics of retirement planning in Singapore and what you need to do to make the most of your golden years.
Retirement planning is important for everyone, but it’s especially crucial if you’re looking to retire in Singapore. The high cost of living in Singapore means that you’ll need to have a good retirement plan in place to make sure you can maintain your lifestyle after you stop working. There are a few things to consider when planning your retirement in Singapore, including your financial situation, your health, and your housing options.
If you’re still working, start saving for retirement as early as possible. The earlier you start saving, the more time your money has to grow. You should also make sure that you have a diversified investment portfolio to help reduce your risk.
Healthcare is another important consideration for retirees in Singapore. Singapore has high-quality healthcare, but it can be expensive. Make sure you have a good health insurance plan in place to cover your medical expenses in retirement.
Singapore is a great place to retire, but it’s important to do your research and plan carefully. As there are many government and private plans when it comes to retirement planning and different people have different needs/situations, it will be difficult to navigate them yourself. It would be best to speak to a Financial Consultant to draw up your retirement plans specific to your needs and situation.
References:
[1] https://www.cpf.gov.sg/member/cpf-overview
[2] https://www.mom.gov.sg/employment-practices/re-employment#employment-assistance-payment-eap
[3] https://www.mom.gov.sg/employment-practices/retirement
[4] https://www.cpf.gov.sg/eSvc/Web/Schemes/RetirementCalculator/RetirementNeeds
[5] https://www.cpf.gov.sg/member/retirement-income/monthly-payouts/cpf-life
[7] https://www.ocbc.com/personal-banking/articles/investing-with-srs
[9] https://dollarsandsense.sg/10-investments-can-make-srs-account/
[10] https://www.cpf.gov.sg/member/healthcare-financing/medishield-life
[12] https://www.cpf.gov.sg/member/healthcare-financing/careshield-life
[13] https://www.careshieldlife.gov.sg/eldershield/about-eldershield.html
[14] https://www.prudential.com.sg/products/wealth-accumulation/retirement/pruactive-retirement-ii
[15] Subject to the performance of the participating fund. The Step-up Income is guaranteed to be the same or
more than the previous year.
[16] Choice of Payout Period from 10, 15, 20, 25 or 30 years.
[17] PRUActive Retirement II provides coverage against Total and Permanent Disability by accident during the term of the policy, or before the policy anniversary prior to the life assured attaining age 70, whichever is earlier
[18] https://www.prudential.com.sg/products/wealth-accumulation/investments/pruvantage-retirecare
[19] Drawdown from Initial Investment Account, payable until the account value falls to zero. It is non-guaranteed and will depend on the underlying PRULink(s) performance. If the account value falls to zero, the policy will lapse and the accompanying benefits such as Care Fund, Death and Terminal illness will be terminated.
[20] Charged monthly on latest Initial Investment Account value. Payment period varies between 8 – 15 years and is dependent on the chosen premium term.
[21] Welcome bonus, loyalty bonus and retirement bonus are paid in the form of units as a percentage of first year premium, Initial Investment Account Value and Sum Assured respectively.
[23] https://www.cpf.gov.sg/member/infohub/educational-resources/read-this-before-buying-ip
[24] https://www.mom.gov.sg/employment-practices/retirement
[27] https://www.mom.gov.sg/employment-practices/re-employment#employment-assistance-payment-eap
By Desmond Lin
Representing Prudential Assurance Company Singapore (Pte) Ltd Reg. No. 199002477Z
Disclaimer:
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Please refer to the list of disclaimers at: https://www.prudential.com.sg/FC-info
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Figures (CPF interest, contribution rates, etc.) are based on the prevailing rate and subjected to change. These figures are accurate at the time of the writing
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Approval code: 579/06Dec22
