Asked on 31 Oct 2020
Should I use the Income Payout Option for Aviva MyWholeLife? Will it affect the amount of money that can be compounded further within the policy? Do people usually utilize this option? Thank you!
The Income Payout option is there to give you options in retirement. However in general I have found that it is probably not worth it.
The drop in the values (death benefit, surrender value, etc) is quite drastic for the amount of money you can get from the income payout option. This severely reduces the payout in the event of death/TPD and CI (you should have bought this plan with CI riders). It will also have an impact on the compounding effect of the policy.
I haven't seen anyone use this option yet (largely because most clients who have this policy have not reached the age where they can utilize this, which is 65 ANB). I usually leave this option inside for my clients but I do not anticipate anyone will use it. To provide for income in retirement, I would rather plan for clients to utilize other sources such as CPF, retirement income plans, dividend from stocks and REITs, coupons from bonds and payouts from UTs to achieve a risk-managed, multi asset income portfolio. That will be probably be better than drawing down on the whole life.
In fact, the payout from the whole life in the event of CI prevent retirees from having to liquidate their multi asset income portfolio as it provides the liquidity that is typically needed in the event of a CI.