Why are parents of disabled encouraged to put money in Trust which has low annual interest payout?

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picture credit: neovain, Flickr

By: Leong Sze Hian

Few set up trust fund to care for kin

I refer to the article “Few set up trust fund to care for kin with disabilities” (Straits Times, Mar 29).

It states that “Although many parents of those with disabilities worry about what will happen to their children after they die, few have taken action by opening trust accounts to look after them.

SNTC, a non-profit fund, was started in 2009 to allow family members to park monies and assets away to support their loved ones with special needs. The accounts can also be opened by children whose parents have acquired disabilities in old age or through accidents.

Only 447 accounts after 7 years?

As of this month, 447 SNTC accounts have been opened. Two years ago, there were 300 accounts.

117,000 people with disabilities?

There is no official central registry of people with disabilities, but the Ministry of Social and Family Development estimates that 3 per cent of the resident population of 3.9 million have disabilities. That works out to 117,000 people thought to have disabilities.

Earlier this month, in the Committee of Supply debate, Social and Family Development Minister Tan Chuan-Jin said SNTC will step up on outreach efforts to address caregivers’ “major concern” about how their children with disabilities will be cared for after they die.

A trust fund requires just $5,000 to be started, and caregivers are encouraged to pledge the proceeds from the future sale of their homes to it. They can also make a minimum top-up of $500 at any time and the Government subsidises the set-up and activation fees.

SNTC will partner grassroots leaders to reach out to Pioneer Generation Singaporeans with special needs dependants. It will also collaborate with hospitals, senior activity centres and family service centres”.

According to SNTC’s web site – “Trust funds under the SNTC Trusteeship Scheme are held by the Public Trustee in a Common Fund and invested in low-risk income earning investments. The principal value of your committed funds is guaranteed by the Government. For more information on the Public Trustee’s practices, please visit www.ipto.gov.sg“.

Only 3%? 

According to the article (‘Special-needs kids plan: 98 sign up’; May 4, 2012) – “the Special Needs Trust Company, ‘which entrusts the funds with the Public Trustee’s Office, has made an average interest payout of about 3 per cent over the last four years”.

% last 5 years?

So, what was the annual interest payout for the last five years?

Real % -0.8%?

Since inflation for the corresponding four years from 2007 (CPI 79.65) to 2011 (CPI 92.458) was about 3.8 per cent annum – does it mean that the real “average interest payout” was negative, at about -0.8 per cent?

Even if we look at the historical inflation rate of about 2.6 per cent per annum from 1961 (CPI 24.524) to 2016 (CPI 98.932) – does it mean that the real “average interest payout” was only about 0.4 per cent?

Reason for low take-up?

Could this be one of the contributory reasons as to why the take-up rate has been so low?

Temasek 15%, GIC 5.7% vs 3%?

Since GIC had an annualised return of 5.7% (US$) over the 20 years that ended 31 March 2016 and Temasek had a Total shareholder return of 15% since inception – why can’t we pay a higher annual interest for these persons with disabilities, whom I understand are mostly children?