One morning recently, while I was having breakfast at a hawker centre near my office, an insurance agent approached me and asked whether I had planned for my retirement. I told him politely that I was in the wealth management profession, was investment-savvy, and had planned for my retirement. He pressed on regardless. His company, he said, had an annuity plan that was better than CPF LIFE, one that could pay 6% p.a.
When I asked whether it was a traditional insurance annuity or an investment-linked policy (ILP), he admitted it was an ILP. I tried to explain patiently that one cannot fairly compare an ILP retirement plan with the CPF LIFE annuity. Before I could finish, he argued that the government also invests our Retirement Account (RA) monies into the equities market. When I pointed out that CPF monies are actually placed into Special Singapore Government Securities (SSGS), which are not traded in the bond market, he retorted: “Yes, securities, that is stocks and shares.” He then claimed that when I joined CPF LIFE and passed on, my family would receive nothing of the unused balance.
I stood up to leave, but not before telling him firmly that he needed to improve his knowledge and do a fair job for his clients. He has to make an income, but he has to do it right because his advice will impact the lives of many people who believe him.
I share this story because over the past few months, I have been hearing variations of it. It seems that many Singaporeans have been asked not to set aside the Full Retirement Sum (FRS) in their RA at age 55. Instead, they are advised to set aside only the Basic Retirement Sum (BRS), which is half of the FRS, by pledging their property, and to redirect the other half into an ILP.
With the FRS for 2026 at $220,400, this means keeping only $110,200 in the RA at age 55 and channelling the remaining $110,200 into an ILP. According to one illustration I have seen, the CPF LIFE and ILP combination will outperform just having CPF LIFE alone. The adviser showed a slide demonstrating a combined monthly payout from age 65 of around $2,161, roughly 25% higher than the $1,640 from CPF LIFE alone if the FRS were retained. On top of that, the ILP is presented as offering a bequest of about $200,000, branded as “Capital Guaranteed (Upon Death)”, something CPF LIFE does not match once payouts exceed contributions. It is then labelled the “Recommended Option”.
How the Product Works
In the proposal above, the premium structure runs over three years: $36,000 in Year 1 (plus a $9,360 “bonus” from the insurer), $36,000 in Year 2 and in Year 3. This makes a total premium outlay of $108,000.
The premiums are invested into two sub-funds: a Lion Global Investors fund and an Allianz Global Investors fund, illustrated at 12.34% p.a. and 8.19% p.a. respectively, on a 10-year annualised basis. At the end of the 10th year, the policyholder at age 65 may either withdraw a lump sum of approximately $221,947, or switch to receive about $1,271 a month in “dividends for life”.
When this is layered onto the BRS of $110,200 in the RA, the slide arrives at the headline numbers: about $2,161 a month from age 65, comprising $890 from CPF LIFE (BRS) and $1,271 from the ILP, plus a $200,000 bequest. On paper, it looks compelling. That is precisely why it warrants careful scrutiny.
The Concerns
First, the illustrated returns are backward-looking and almost certainly drawn from a particularly strong equity decade. Projecting 12.34% and 8.19% p.a. forward to derive the $221,947 lump sum or the $1,271 monthly figure is misleading. At more realistic net-of-fee returns, the “higher payout” claim can disappear entirely.
Second, ILPs carry multiple layers of fees that the slide does not disclose and they can eat into returns. The $9,360 “welcome bonus” is not free money. Insurers recover it through ongoing charges and lock-in penalties. I have written about this at length in my September 2025 Business Times article, “Insurance-linked investment plans: That welcome bonus could costs more than you expect”.
Third, CPF LIFE is being mischaracterised as just another investment. It is not. CPF LIFE is a government-backed, pooled lifetime annuity. RA monies currently earn 4% p.a. and are invested in non-tradeable SSGS, not equities. Comparing a market-linked ILP against CPF LIFE on a “return” basis misses the point entirely: one is an investment, the other is an insurance annuity.
Fourth, the “Capital Guaranteed (Upon Death)” label deserves a second look. In most 101-type ILPs, what is guaranteed is typically 101% of premiums paid (in this case, just $109,800) or the account value, whichever is higher and not a fixed $200,000. The $200,000 figure is a projection, not a guarantee. Markets fall, and projections fall with them.
Fifth, and most importantly, longevity risk is entirely ignored. CPF LIFE pays for as long as you live. The ILP’s “dividends for life” only last as long as the underlying fund sustains them. Drawing $1,271 a month from a market-linked instrument, especially into a poor sequence of returns in early retirement, can deplete the capital. There is no pooled longevity insurance in an ILP.
Sixth, the +25% headline compares unequal things. $1,640 a month from CPF LIFE is guaranteed for life by the Singapore Government. $2,161 a month from the proposed structure is $890 guaranteed plus $1,271 projected and market-dependent.
Our Stand
For essential retirement expenses such as the food on the table, the utility bills, and basic healthcare, the instrument used to fund them must mitigate both investment risk and longevity risk. The more efficient instrument for this is an annuity, and CPF LIFE is the best annuity available in Singapore.
If CPF LIFE alone is insufficient, or if diversification is desired, private annuities or, where capital permits, investment-grade bonds can supplement it. But the foundation should be at least the FRS in the RA. Only after essential expenses are secured should one consider other investment instruments for discretionary or growth needs but as I have argued before, ILPs are not, in our view, the most suitable vehicle for investing.
The proposed structure takes a guaranteed, government-backed, longevity-pooled lifetime income and partially replaces it with a market-linked, fee-laden, non-guaranteed product illustrated at optimistic historical returns. Then it brands the result as the “recommended option”. To me, this is not ethical.
The damage from getting this wrong only becomes visible years later, when it is too late to undo. The agent at the hawker centre and the broader pattern I am seeing in the industry could quietly erode the retirement adequacy of many Singaporeans. That is a price too high to pay for a sale.
The writer, Christopher Tan, is Chief Executive Officer of Providend Ltd, Southeast Asia’s first fee-only comprehensive wealth advisory firm and author of the book “Money Wisdom: Simple Truths for Financial Wellness“. He is also a Certified Ikigai Tribe Coach.
The edited version of this article was published in The Business Times on 22 May 2026.
For more related resources, check out:
1. Retirees – Live Your Golden Years Peacefully
2. I’m in My 60s—Here’s the Advice I Wish I Knew in My 50s
3. Story of Eleanor: Why She Does Not See Herself Retiring
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