Buying a life annuity for a parent

Dear Mr Tan,
My father is going 58 and has  only $30,000 in his retirement account. I was thinking of helping him to purchase either the NTUC Income Classic Annuity or the Growth Plan.

Since both plans require a SRS account, I thought of buying a Growth Plan for my Dad using his retirement account to earn a get a greater return, by registering with one of the SRS operators and subsequently use this SRS account of $29K to buy Growth Plan.

Can I do that? I am not sure because I understand that there is a so called minimum sum required in RA and RA cannot be used to buy anything except annuity.

REPLY
The money in the CPF Special Account (or Retirement Account) now earns interest at 4% plus a bonus. The return from the Growth plan is likely to be 3% or less. The agent who made this recommendation is probably giving bad advice, either intentionally or by mistake.

Please ask the agent to give you a benefit illustration for the Growth plan and send it to me at kinlian@gmail.com.

It is better for you to help your father by topping up his CPF Special Account. You will enjoy tax savings on the contribution and allow him to earn a higher rate of return of 4%. When he reach age 62, it is better for your father to buy the CPF Life, instead of a life annuity from an insurance company.

You can read a chapter on life annuity and CPF Life from my book, Practical Guide on Financial Planning, which can be ordered here: