Income annuities and retirement income: immediate and deferred, guaranteed and non-guaranteed payouts, term and life, and how they fit with CPF LIFE and SRS

What is an income annuity

An income annuity (often marketed as a retirement income plan) is an insurance policy that converts a single premium or a series of premiums into a regular stream of cash. MoneySense defines an annuity as something that "is a type of insurance policy that typically guarantees fixed payments at regular intervals", usually bought for retirement income (Understanding annuities, updated 28 Sep 2026). It differs from an endowment in purpose: an endowment is mainly about a lump sum of cash value at maturity or surrender, whereas an annuity is about how much you receive each period and for how long. It differs from an ILP in that at least part of an annuity's payout is guaranteed by contract, rather than moving with fund unit prices.

By length of payout period, MoneySense divides annuities into two types: "Term annuities provide cash flow for a specific period" and "Life annuities provide cash flow for the rest of one's lifetime". By source of benefits, they can also be split into fully guaranteed annuities and participating annuities, the latter carrying "a non-guaranteed component that is dependent on the investment performance". In Singapore, the great majority of residents already have a life annuity through CPF LIFE (see below), and a private annuity is a supplement on top of it.

Structure: accumulation phase, payout phase, immediate and deferred

An annuity can be split into two phases: the accumulation phase (paying premiums and waiting) and the payout phase (receiving payments monthly or yearly). How the two are arranged determines whether it is an immediate or a deferred annuity.

Some products offer more flexible options, such as choosing the age at which payouts start, taking payouts or leaving them with the insurer to accumulate, or having a nominee continue receiving payouts after the life assured dies. Whether these are offered, and whether the accumulation rate is guaranteed, depends on the Product Summary. In most cases the rate on payouts left to accumulate is non-guaranteed and should not be treated as a certain return.

How payouts are made up: guaranteed and non-guaranteed

Annuity marketing materials often quote a "payout rate of X%". The figure only becomes meaningful once you break it down into at least three questions:

You should also check from which policy year payouts start, whether they are paid monthly or yearly, and whether there is any maturity or death benefit once the payout period ends. A sound habit is to model retirement cash flow using the guaranteed payouts alone at first, treating the non-guaranteed portion as upside that may turn out to be zero. For the par fund and bonus mechanics, see how a participating endowment works.

Term or life: the longevity risk perspective

A term annuity pays out over an agreed number of years and suits filling a known gap, such as the years between retirement and the start of CPF LIFE payouts. A life annuity pays out until the life assured dies; what it really addresses is longevity risk, the risk of outliving your savings. Some life annuities include a "guaranteed period" or a refund of unpaid premiums on death to reduce the loss in the event of early death, but such features usually lower each payout.

Longevity risk is a real issue in Singapore: according to the Department of Statistics, life expectancy at birth for Singapore residents was 83.9 years in 2025 (SingStat, 3 Jun 2026). Life expectancy is an average, which means a substantial proportion of people will live longer, and retirement savings planned around "average lifespan" may run out.

CPF LIFE: the first layer of retirement income

CPF LIFE is "a national longevity insurance annuity scheme" offering three plans: Escalating (payouts "grow by 2% a year for life"), Standard and Basic. Payouts can start from age 65 at the earliest and be deferred to age 70 at the latest; citizens and permanent residents born in 1958 or later with at least S$60,000 in retirement savings when payouts start are automatically included (CPF Board, updated 25 Sep 2026). MoneySense notes that CPF LIFE is the only life annuity backed by the Singapore Government.

Figures for 2026 from the CPF website (assumptions: a male member turning 55 in 2026, on the CPF LIFE Standard Plan, with payouts starting at 65; CPF Board, 16 Jun 2026):

For each year payouts are deferred, they "will increase by up to 7%" (same source). As a spending reference: the Household Expenditure Survey 2023 found that resident households made up solely of non-working persons aged 65 and over spent S$2,349 a month on average (SingStat, 28 Nov 2024). According to LKYSPP research, the minimum income standard for a single person aged 65 and over living alone was about S$1,492 a month at 2022 prices (Lee Kuan Yew School of Public Policy, NUS, Sep 2023; academic research, not an official benchmark).

The order of planning is therefore: first estimate what CPF LIFE can provide, then compare it with target spending to find the gap, and only then consider filling it with a private annuity, an endowment or other assets. All of these figures are averages or based on assumptions; individual circumstances vary widely, and they cannot be used to infer how much a month is "enough".

How it fits with SRS and CPFIS

The Supplementary Retirement Scheme (SRS) is a voluntary retirement savings account. On the 2026 basis, the annual contribution cap is S$15,300 for citizens and permanent residents and S$35,700 for foreigners; contributions qualify for personal income tax relief and are subject to the overall personal relief cap of S$80,000 (IRAS, SRS contributions and tax relief). SRS money can be used to buy annuities and endowments, and withdrawals are taxed as follows (IRAS, Tax on SRS withdrawals):

1. Withdrawals made at or after the statutory retirement age are 50% taxable with no 5% penalty; the statutory retirement age is the one applicable when you made your first contribution, and is 64 from 1 Jul 2026.
2. In general, penalty-free withdrawals can be spread over 10 years from the first penalty-free withdrawal.
3. Life annuity exception: "For investments in life annuities, the 10-year withdrawal period does not apply"; for as long as life annuity payouts continue, 50% of each year's payout is taxable.
4. Endowments and term annuities do not need to be surrendered at the end of the 10-year period, but their surrender value is treated as withdrawn together with other assets and is 50% taxable.

Buying an annuity with CPF Investment Scheme (CPFIS) money carries a different set of restrictions: the life assured must be the member, only single premiums or recurrent single premiums are allowed, the investment must be denominated in Singapore dollars, and investments under CPFIS cannot be assigned, pledged or used as collateral (CPF Board, CPFIS Annex A, Feb 2022). For tax details and points for cross-border readers, see tax and reporting for savings insurance.

Risks and limits: loans, surrender, currency and protection caps

An annuity's certainty comes from its guaranteed portion, but it also has several limits you need to accept in advance:

Two pieces of MoneySense advice are worth following: "Buy a plan you can afford in the long-term", and "Review the financial strength and soundness of the insurance company". For readers in mainland China or Hong Kong: how USD annuity payouts are taxed in your jurisdiction, and whether foreign-exchange reporting applies, should be checked with a professional adviser locally. For the structure and risks of combining an annuity with premium financing, see can savings policies and income annuities be premium financed.

Who it may suit, and who it may not

Situations where it may suit:

1. You already know your expected CPF LIFE payouts, still have a clear monthly spending gap, and want to exchange part of your money for a contractually guaranteed cash flow.
2. You are concerned about longevity risk and are willing to give up liquidity for the certainty of payouts until death.
3. You hold an SRS balance, plan to withdraw in instalments after retirement, and want to use the life annuity exemption from the 10-year limit.
4. You have a steady income before retirement, can build up gradually through a deferred annuity, and can commit to completing the premium term.

Situations where it is less likely to suit:

1. You may need this money in the next few years, or need an emergency reserve you can access at any time.
2. You have not yet worked out your CPF LIFE payouts and your own spending, so the gap itself is unclear.
3. You are looking only at the headline "payout rate" without splitting it into guaranteed and non-guaranteed portions.
4. You plan to borrow to buy the annuity but have not assessed scenarios in which interest rates rise or the bank recalls the loan.

For typical retirement income scenarios (for example, a 55-year-old supplementing CPF LIFE), see who savings insurance suits. If you would like to work out your gap based on your own CPF, SRS and spending, you can register your needs through the contact options on this site.