Bonus Declaration 2011 - Frequently Asked Questions

Introduction

2011 marks the first year upon the completion of a series of bonus restructuring exercises undertaken since 2008. To re-cap, the aim of the bonus restructuring exercises is to improve the resilience and financial strength of the Life Participating Fund, which we believe will benefit your policy in the long run.

After a year of strong recovery in 2009, the market experienced a slowdown in 2010 and ended with growth in most economies hovering at a modest pace. Nonetheless, as an organisation that believes in people before profits, NTUC Income is pleased to announce that we will maintain bonus rates on your policy at the same level as those declared last year.

Going forward, with the new bonus structure coupled with a prudent and sound investment management strategy, we are confident that we will be able to continue to deliver the best possible returns for you.

To help you better understand our bonus payout exercise in 2011, we are pleased to provide you with a list of frequently asked questions.

What is a Participating Policy and what are Bonuses?

If you buy a participating policy from NTUC Income, the premiums you pay go into the Life Participating Fund (“the Fund”). The Fund is invested and diversified into different types of assets such as equities, property and fixed income, with the aim to provide you with a stable return in the medium to long term. As a participating policyholder, you get to share in the profits generated from the Fund.

These benefits, which you will enjoy, are split into two parts:
- The Annual Bonus(es), and
- The Special Bonus.

The Annual Bonus(es) are bonuses added to your policy every year. Once it is announced and added to your policy, it will become a permanent part of your policy.

The Special Bonus is an additional bonus added to your policy when money is taken out from your policy. This is usually taken out when the policyholder makes a claim, surrenders the policy or when the policy matures. This type of bonus usually applies to whole life and endowment plans.
What factors affect the bonuses paid on my policy?

Several factors affect the level of bonus paid to your policy. They include investment performance of the Fund, the amount of claims paid, and the cost of managing the fund. Of these factors, investment performance is generally the most significant factor given its volatile nature.
What is my bonus like this year?

Bonus payout for 2011 is to appreciate and reward all participating policyholders for putting their faith and trust in NTUC Income for more than 40 years. As we continue to achieve stable investment performance in the past one year, we are happy to inform that we will continue to maintain the same bonus rates as those declared in year 2010. This is our way of recognising our valued customers and sharing our good performance with them.
Why is there no increase in the bonus rates in light of NTUC Income’s excellent performance for 2 consecutive years?

The main feature of your participating policy is its ability to provide stable returns for your savings. Hence, each year, before we declare the bonus rates for the year, we will apply a smoothing process with the aim of maintaining stable bonus throughout a longer term period. This means that bonuses will be held back in years when the performance of the Fund has been good, so that they can be released to maintain stable bonuses in times when conditions are less favourable.

In addition, when considering suitable bonus rates, we will usually consider the average performance over a period longer than a year so as to minimise the effect of short-term fluctuations.

With the above considerations in mind, we made a decision not to increase the bonus rates despite good investment performance.
What is the future outlook like? Will it affect my bonus?

We anticipate that going into 2011, markets will continue with similar levels of volatility as experienced in the recent years, although global recovery should be stronger than in 2010.

For NTUC Income, 2010 was a year of stable returns. Going into 2011, while future bonuses cannot be guaranteed, we are committed to continue managing our investments prudently so as to provide attractive and stable returns on your policy. We continue to focus our efforts on investing for the long-term, in order to preserve our attractive bonus rates in the future.

Driven by strong fundamentals, and being one of the strongest financial institutions in Singapore, NTUC Income is optimistic that we will be able to grow from strength to strength.
What is a participating annuity?

When you purchase an annuity from NTUC Income, we will pay you a regular income for as long as you live. The payment will start either immediately or upon attaining a certain age (in the case of a deferred annuity).

There are two types of annuities. One is called the participating annuity, while the other is called the non-participating annuity. Under a non-participating annuity, you will receive a fixed income for life. This income is fixed and remains unchanged. It is made known to you at the time of purchase. Depending on your age and gender, the amount received would differ between individuals.

On the other hand, a participating annuity shares in the surpluses of the Fund by the addition of bonuses. Bonuses are added to the annuity income or payment. A participating annuity may start with a lower payment, usually lower than the amount received under a non-participating annuity. However, this payment will increase as bonuses are declared and added.
Why is there no bonus allocated for the Y series annuities?

Each year, during the bonus payout exercise, the appointed actuary will compute the average net investment yield earned on the investment of our annuity fund. This net yield is computed after allowing for investment expenses and mortality adjustments.

If the net yield exceeds the assumed pricing interest rate for the annuity plan, a bonus will be declared. Conversely, if the net yield is lower than the assumed pricing interest rate for the annuity plan, no bonus will be declared for the year. However, the annuitant will continue to receive the guaranteed payment and the bonus declared in past years.

For the Y series annuities, as the assumed pricing interest rate is higher than the net yield for the year, no bonus is being allocated to the Y series annuitants.

A higher assumed pricing interest rate for Y series annuities would also mean that Y series annuities start off with a higher guaranteed payment than the plans under subsequent annuity series. Consequently, Y series annuitants are already receiving a very attractive payment.
When will NTUC Income write to me to inform about the bonus changes to my policy?

NTUC Income will be sending a communication pack to all policyholders who are holding an in-force participating life policy or annuity policy. The communication pack contains detailed information on the bonuses declared on your policies. The communication pack will be sent out to you starting from mid-April 2011, over a period of 2 to 3 weeks.
Who can I contact if I have queries?

You may contact your insurance adviser, our Customer Service officers at 6788 1122 or email us at csquery@income.com.sgand we will be happy to address any queries or concerns you may have. If your policy has been in-force for at least a year, you may also request for an updated benefit illustration.