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MPF intermediaries
MPFMPF Intermediaries ExaminationMr Chan buys a guaranteed annuity that pays instalments for at least 10 years, and for life if longer. He dies after receiving instalments for 6 years. What happens next?
Answer: instalments continue for the rest of the 10-year period. A guaranteed annuity has a minimum payment period that runs even if the annuitant dies, and pays for life if he outlives it. So the remaining 4 years are still paid.Why not the others:• instalments stop on his death: That would ignore the guaranteed minimum period of 10 years.• the full premium is refunded to his estate: The guarantee is a minimum number of instalments, not a refund of the premium.• instalments continue for the life of his spouse: The guarantee is a minimum number of years, not payments for a spouse's lifetime.Watch out: Treating a guaranteed annuity as a straight life annuity that stops on death.Rule: Guaranteed annuity (life income with period certain): a minimum number of years is paid regardless of death; beyond that, payments last for life.Source: IA Investment-linked Long Term Insurance Examination Study Notes, 2024 Edition (7th ed., Nov 2024; for exams from 17 Feb 2025), 3.8.2(a), p. 3/43
Treating a guaranteed annuity as a straight life annuity that stops on death.
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