Good to have a shield for life's rainy days

As the average longevity of Singaporeans increases, the risk of becoming an invalid in old age becomes higher. CareShield Life means future generations of seniors will have aid if they need more help


If you are in your 30s, you probably spend a lot of time thinking about how to excel in your career and make more money so that you and your family can have a better life. The last thing on your mind would be how you would manage when you are old, frail, in a wheelchair and need help to even go to the toilet.


After all, you are in the prime of your adulthood, and the idea of being old and needing help for basic life necessities seems such a remote possibility.


So it is not surprising to find quite a number of folks expressing their indignation in online forums about being made to sign up for the long-term care insurance scheme, CareShield Life, which will become compulsory from Oct 1 for those who are 40 or younger this year.


But the reality is that financial planning is about looking ahead and seeing what we can do to retire well, and not just looking at the present. While CareShield Life covers severe disability often associated with old age, it also provides for younger patients who are unable to take care of themselves as a result of accidents or debilitating illnesses.


To qualify for payouts, a claimant must have an accredited doctor or assessor certify that he is unable to perform at least three of the six activities of daily living on his own. These tasks are the ability to take a bath or shower, put on and take off clothes, eat, use the toilet, walk or move around, and transfer to a chair, bed or wheelchair.


I did not see myself facing such conditions when the non-compulsory ElderShield was launched in 2002, when I was in my 30s. I opted not to sign up then because the thought of being unable to do basic everyday activities such as taking a shower, going to the washroom and walking around on my own seemed very unreal at the time.


ElderShield first provided a $300 monthly payout for five years. The sum was later increased to $400 for six years. I told myself that I should be able to save enough for retirement, and thus would not need that extra payment even if I ended up in that state.


Premiums for those aged 41 to 71

CareShield Life is not compulsory for those aged 41 and older today. But how much do you need to pay if you are keen to join?

As generous subsidies will be given to seniors and those who earn less and do not live in private property, the following simulations are done using the profile of a Singaporean man who lives in an HDB flat and earns about $3,000 a month. (Women are expected to pay higher premiums because statistically, they live longer than men.)

All amounts are only estimates because more details will be announced next year.

AGED 41, NOT ENROLLED IN ELDERSHIELD The starting yearly premium is estimated to be $312 after subsidies. This amount will go up gradually every year. By 2025, it is estimated that the premium will be $338.
AGED 41, ENROLLED IN ELDERSHIELD The starting yearly premium is estimated to be $268 after subsidies. This will go up gradually to an estimated $294 by 2025.
AGED 51, NOT ENROLLED IN ELDERSHIELD The starting yearly premium is estimated to be $669 after subsidies. It will go up gradually each year and be an estimated $709 by 2025.
AGED 51, ENROLLED IN ELDERSHIELD The starting yearly premium is estimated to be $336 after subsidies and $376 by 2025 after gradual annual rises.
AGED 61, NOT ENROLLED IN ELDERSHIELD The starting yearly premium is estimated to be $943 after subsidies. This will rise gradually and be an estimated $993 by 2025.
AGED 61, ENROLLED IN ELDERSHIELD The starting yearly premium is estimated to be $211 after subsidies. By 2025, the estimated premium will be $261.
AGED 71, NOT ENROLLED IN ELDERSHIELD, RETIRED The yearly premium is estimated to be $1,283 after subsidies.
AGED 71, ENROLLED IN ELDERSHIELD, RETIRED The yearly premium is estimated to be only $61 after subsidies.

Now that I am 18 years older, my perspectives on life, healthcare and retirement planning have changed completely. CareShield Life, which replaces the previous scheme, no longer sounds irrelevant to me.

After witnessing the ageing cycle of older relatives, it has become clear to me that needing help in old age is no longer an alien concept; it is not whether, but at what age, you will be in this condition.

That said, being in such a condition does not mean the end of life. You can still enjoy more good years - it is just that you will need someone to help you so that you do not fall over in the bathroom and accelerate your journey to the next world.

This is precisely what CareShield Life seeks to cover you for. Its monthly payout of $600, which will go up gradually through the years to offset inflation, will help to pay for or subsidise the service fees of a live-in caregiver. And unlike the payment under ElderShield, which would end after six years, the payout under the new scheme is for life, once a successful claim is made.


Not the only life planning scheme

Do not be lulled into thinking that just because it is compulsory for future generations of young people when they hit 30 that this scheme will take care of everything for life.

As CareShield Life covers a very specific area of severe disability, it is but one healthcare and retirement planning scheme made available to Singaporeans. It aims to supplement another compulsory scheme, MediShield Life, which covers the basic hospitalisation and medical care needs of all Singaporeans.

Those who want more comprehensive healthcare coverage can choose to sign up for an Integrated Shield Plan offered by a private insurer so that they are covered for treatment in private hospitals and stays in higher-class wards.

But unlike these health insurance policies, which require premium payments annually as long as you need the coverage, premium payments for CareShield Life will cease at 67, or when a successful claim is made earlier.

Then there is the Central Provident Fund (CPF) Life, the main retirement scheme that provides all Singaporeans with lifelong monthly payouts from the age of 65, regardless of their health condition.

Unlike the CareShield Life payout, which is determined by the scheme's independent council, the monthly payout for CPF Life is decided by the recipient, based on the total retirement sum set aside at 55.

So if you set aside only the Basic Retirement Sum, which is $90,500 this year, you will receive about $800 a month. But if you set aside the Enhanced Retirement Sum of $271,500, you can receive almost $2,200 a month.


More money in old age is better

This begs the question: Does someone in his 30s who plans to save for the maximum retirement sum for CPF Life, which will provide more than $2,200 a month from 65, still need the CareShield Life payout, which is considerably lower?

The reality is that no person who becomes an invalid and is unable to take care of himself will complain about receiving another fixed monthly payment. So the CareShield Life payout can be used to pay for a caregiver while the CPF Life payout can be used for other living expenses such as food and utilities.

This is probably why the Government has made it compulsory for future generations of Singaporeans to start contributing to CareShield Life from 30. As the average longevity of Singaporeans increases, the risk of becoming an invalid in old age becomes higher. Thus, having a caregiver may become a necessity and is no longer a luxury.

No one buys such insurance with the hope of being involved in a plane crash or being hit by a lorry during a holiday. But should calamity strike overseas, it is good to know you have the option of being flown back home in a special air ambulance.


Peace of mind

As with all insurance policies, the benefit of starting early is that the premiums payable are usually lower at the beginning. The full amount can be paid using funds from the CPF Medisave account.

For instance, premiums for 30-year-olds start at $206 a year for men and $253 for women. Those who are older can check how much they need to pay by using the premium calculator at careshieldlife.gov.sg

For those who have been diligent in contributing to their Medisave, chances are that the yearly interest of 4 per cent that they receive for their Medisave funds should be sufficient to pay for the CareShield Life premium. Those in lower income groups can expect to get generous subsidies as well as support to pay for their premiums. Finally, for those who are still unconvinced of the need for CareShield Life, try to look at this as if you are buying travel insurance, since most Singaporeans like to travel.

No one buys such insurance with the hope of being involved in a plane crash or being hit by a lorry during a holiday. But should calamity strike overseas, it is good to know you have the option of being flown back home in a special air ambulance.

The rationale is the same for CareShield Life as you journey through life. Be happy if you can avoid making a claim even when you reach the end of your journey. But if you need to, at least you know that you will be cared for up to the end.


Prudent to join if you have sufficient Medisave funds

If you are 41 and older this year and not severely disabled, you have a choice on whether to sign up for CareShield Life. More details on how to sign up will be announced next year, but, to make it easier, if you are between 41 and 50 and on the older ElderShield 400 scheme, you will be automatically enrolled into the new scheme unless you opt out.

Those who sign up will have to pay annual premiums until they are 67. If you join CareShield Life at age 59 or older, you will pay premiums for 10 years. Premium payments will stop once a successful claim is made due to severe disability. If your decision is dependent on how much premium you will be paying, you can use the premium calculator on the CareShield Life website to get an estimate of the amount that is applicable to you.

The new scheme provides an opportunity for those who did not enrol in ElderShield to consider doing so when the application opens next year. But these folks are likely to pay a higher premium compared with those on the ElderShield scheme, who will be able to switch over without losing their benefits.


Ultimately, is CareShield Life a worthwhile option?


For those who have built up healthy balances in their Medisave accounts, the answer must be an unequivocal "yes", because the yearly interest alone should be able to cover the premium. Consider this: If you do not sign up for CareShield Life now, you may not be able to withdraw as much as you like from Medisave for your needs in later years.

And, just like any bank account, the funds in your Medisave may also not last very long if you use them often. For instance, the yearly Medisave withdrawal limit for rehabilitative care in community hospitals is only $5,000, or about $416 a month, which is significantly lower than the monthly payouts from CareShield Life.

If you do a simple calculation, using the estimated premium and the number of years you need to pay for it, you will realise that the total sum is likely to be less than $15,000, even for those who have never joined ElderShield.


So how do you make plans with these numbers?


Let's take John, a professional in his early 50s who eats healthily and exercises daily because he is keen to have a healthy retirement.

As he is conscious of his health, he has invested in a comprehensive Integrated Shield Plan that will pay for all his medical bills in the event he falls sick. So far he has not needed to use his Medisave funds except for the annual payment for the basic MediShield Life policy as well as the additional $600 withdrawal to subsidise his private healthcare insurance, which is mostly paid with cash.

John did not sign up for ElderShield, but plans to join CareShield Life next year because he has ample funds in his Medisave to do so. As his balance earns 4 per cent interest annually, the interest earned is more than enough to pay the annual premium of about $700.

While he hopes to be healthy in his later years and avoid becoming severely disabled, this is prudent financial planning because he has prepared for the worst-case scenario. If he becomes an invalid in old age, he can take comfort that the combined monthly payouts from CPF Life and CareShield Life can help to pay for his own needs - without imposing a great burden on his children - even if he has depleted his own savings.

This is what prudent planning is all about - you plan when you are healthy so that you do not face financial stress when you are unwell.


Source: The Sunday Times © Singapore Press Holdings Limited. Permission required for reproduction.

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