Why is extra interest used to extend payout duration by up to 5 years after age 85 and not use extra interest to increase payout amount?
Using extra interest to extend payout duration ensures that more members are protected against the risk of outliving their payouts. In 2018, more than half of residents aged 65 were expected to live beyond age 85. This would mean that the majority of members on Retirement Sum Scheme (RSS) would outlive their payouts if the extra interest is not used to extend payouts for up to five years.
With the extension of RSS payouts up to age 90, up to two in three members will have protection against the risk of outliving their payouts.