Uncategorized
Annual fees too high in Special Needs Trust Fund
An inexpensive alternative exists. Leong Sze Hian
Leong Sze Hian
Starting September 2009, parents of intellectually disabled children can set up a trust for their children, with the newly formed Special Needs Trust Company.
The projected return on trust funds is three plus per cent per annum, as the funds would be put in low risk income producing investments.
The up-front fees payable for investing the trust funds are 6 per cent for the first $5,000, 4.75 per cent for the next $2,000, 3.75 per cent for the next $3,000, 2.5 per cent for the next $10,000, and 2 per cent for subsequent amounts.
The fees charged on the interest earned is 5 per cent for the first $1,000, 4 per cent for the next $1,000, 3 per cent for the next $1,000, and 2 per cent for subsequent amounts.
In addition to the above fees, there is also a set-up fee of $1,500, annual pre-activation fee of $250, one-time activation fee of $400, and annual post activation fee of $400.
Parents have been informed that the minimum amount to start is $10,000.
For $10,000, the up-front fees payable for investing is $507.50, annual fee on interest earned (assuming 3.5 per cent interest) is $17.50, set-up fee is $1,500, and annual pre-activation fee is $250.
Does this mean that it may take more than 12 years for the compound rate of return of 3.5 per cent to re-cover the total fees of $5,217.50? ($1,500 set-up + $250 x 12 years pre-activation + $507.50 up-front + $17.50 x 12 years interest fee)
Similarly, for an amount of $50,000, it may take more than two years to re-cover the total fees of $3,517.50.
Once the trust is activated, the annual fees will be $480 ($400 post-activation and $80 fee on interest earned).
This means that about 27 per cent of the annual interest earned of $1,750 (3.5 per cent of $50,000) may go to paying the annual fees.
After paying the various fees from the projected annual interest of three plus per cent, the net return may hardly be able to beat inflation.
This scheme is also meant for lower and middle-income parents who may not be able to afford or have access to private trust services.
With the amendment of the insurance act this year, parents may also like to consider an alternative, primarily from a costs perspectively, that is from September 2009, parents can set-up or possibly use an existing investing-linked account, an irrevocable trust naming the children as beneficiaries and appointing trustees.
Such a trust arrangement is free, and does not incur any set-up, activation or pre/post activation fees.
In view of the above, I would like to suggest that the scheme and its charges be reviewed, as I understand that this new scheme is the outcome of years of proposals, deliberations, and calls from parents, to help address their concerns of pre-deceasing their intellectually disabled children.

- Comments5 days ago
Tan See Leng’s call for grads to ‘keep open mind’ draws public pushback amid job market worries
- Civil Society6 days ago
Camira: Email to MP Rahayu Mahzam unanswered; hand-delivered letters to PMO more impactful for Palestine
- Politics6 days ago
Trump’s nominee for Singapore ambassador, Anjani Sinha, faces tough Senate grilling over knowledge gaps
- Food5 days ago
Jollibean workers claim unpaid wages as multiple outlets close across Singapore
- Malaysia6 days ago
Former Malaysian prime minister Mahathir Mohamad turns 100
- Comments5 days ago
Commuters report EWL delays near Jurong East on 10 July evening, but no SMRT official announcement
- Defense5 days ago
Leopard 2SG tank hit traffic light: MINDEF says first technical fault in Singapore Army’s L2SG fleet
- Crime6 days ago
27-year-old man charged over suspected role in money mule activities