The Life Insurance Association (LIA) Singapore announced industry results last Tuesday (12 February 2019) for the year 2018. According to them, Singapore’s life insurance industry recorded growth of 3% in weighted new business premiums, bringing the total weighted premium to $4.2 billion.
Sales of single premium plans saw a significant drop in the second half of 2018, largely due to the volatility and negative market sentiments. Regulatory changes to the CPF Investment Scheme (CPFIS) where sales charges are reduced, have also impacted the uptake of CPFIS-included single premium plans. Maintaining the growth of the industry is the sales of annual premium products, which continue to show stable growth.
The total sum assured for new business has increased by a healthy 7% from $130.5 billion in 2017 to $139.9 billion in 2018.
Demand for protection products and health coverage has also been consistent. By the end of 2018, there were an additional 64,000 Singaporeans and Permanent Residents who are covered by Integrated Shield Plans (IP). This brought the total to 2.73 million lives (approximately 68% of Singapore residents) with IP coverage to complement coverage provided under MediShield Life.
An Increase In Retirement Policies Purchased
The industry has a notable 48% increase in the uptake of retirement products by policy count.
- 2017: 25,775 retirement policies purchased
- 2018: 38,120 retirement policies purchased( an increase in 12,345 policies)
Although the uptake has increased, this number is still relatively low. In terms of weighted premiums, retirement policies accounted for 8% of total weight premiums for 2018, an increase from 5% in 2017.
The increase in retirement policies purchased indicates that Singaporeans are putting more attention into preparing for their golden years. Here are a few reasons for this increase in focus on retirement products:
#1 People Are Living Longer
The average life expectancy in Singapore is more than 80 years old. With advancements in healthcare and technology, life expectancy is only set to increase.
With people living longer, this also represents a longer time frame dedicated to your retirement years. While many people would like to retire early, early retirement hardly comes without years of good financial planning.
Understanding that our retirement funds now need to last longer, Singaporeans are taking steps to be better prepared for longer retirement.
#2 Preference For Annuities Over Lump-Sum Payments
Lump-sum payments have both pros and cons. While you get the sum of money to use immediately, you still need to make sure this lump-sum will last you through your entire retirement.
An annuity on the other hand, provides a steady stream of payouts across a certain period of time. Some annuities allow you to choose how frequently you would like these payouts, for example monthly, quarterly, half-yearly or yearly basis. This provides a greater sense of security in your old age as you continue to have regular payouts over a longer period of time.
Many companies have taken note of this and now offer innovative products that cater to these changing needs.
#3 Improvement In Financial Awareness And Knowledge
Over the past few years, there has been greater awareness and knowledge with regards to financial planning and retirement. Besides having access to financial content, readers today can easily find information about various policies and retirement plans available online.
Singaporeans understand the need to be financially independent in their later years; to be able to enjoy the same standard of living without having to work. This requires prudent saving and investing in your early years.
#4 Supplementing CPF LIFE
Being well prepared for retirement comes with financial planning many years before your actual retirement. In Singapore, there is CPF LIFE, a life annuity scheme that provides all Singaporeans and Singapore Permanent Residents with monthly payouts for your retirement.It also enables the person to leave a bequest to their loved ones.
Unlike some annuities that provide payouts for a certain period of time, CPF LIFE provides payouts for as long as you live. This ensures that you have a steady stream of income, providing a safety net for your later years. CPF LIFE is also a safe product, being the only life annuity backed by the Singapore Government.
There is also some flexibility provided in CPF LIFE. There are 3 CPF LIFE plans Singaporeans can choose from: Standard Plan, Basic Plan and Escalating Plan.
While the CPF LIFE provides a basic retirement plan for all Singaporeans, there are still other ways Singaporeans can supplement their CPF LIFE, especially when this payment is not enough to meet your lifestyle needs.
With greater awareness, education and sharing of knowledge, Singaporeans can be better prepared and more resilient when it comes to retirement.
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