Income Insurance Limited has responded to the Singapore government’s decision to halt its proposed transaction with Allianz Europe B.V., a deal that would have seen Allianz acquire a 51% stake in the insurer for S$2.2 billion (approximately US$1.6 billion).

On 14 October 2024, the company stated it “respects the Government’s direction” and appreciates the recognition of its strategic efforts, noting that it will work closely with stakeholders to evaluate its next steps in light of forthcoming changes to the Insurance Act.

In its statement, Income Insurance said, “Income Insurance notes and respects the Government’s direction. Income Insurance appreciates the Government’s understanding of the strategic purpose behind Income Insurance’s corporatisation exercise in 2022 and acknowledgement that the partnership with Allianz was to strengthen Income Insurance’s position for the long run.”

The company acknowledged the government’s concerns about the structure of the transaction and the need for legislative amendments to provide a clear statutory basis for reviewing similar applications in the future.

The company further recognised the conditional nature of Allianz’s voluntary cash offer, noting that it is “pre-conditional and subject to regulatory approval.”

Following the latest developments, Income Insurance committed to reviewing the proposed amendments to the Insurance Act and stated, “Income Insurance will review and take into consideration the forthcoming amendments to the Insurance Act and work closely with relevant stakeholders to study and decide on the next course of action.”

Government’s Concerns

The government’s decision to block the deal was relayed by Edwin Tong, Singapore’s Minister for Culture, Community, and Youth, who cited concerns over how the transaction might affect Income Insurance’s ability to fulfil its social mission.

While the government acknowledged the strategic importance of Income’s corporatisation in 2022, it expressed concerns about the proposed capital extraction that would follow Allianz’s acquisition.

This capital reduction could significantly reduce Income Insurance’s capacity to continue providing affordable insurance to low-income Singaporeans.

Mr Tong highlighted that Income’s corporatisation in 2022 was enabled by an exemption from Section 88 of the Co-operative Societies Act, which allowed the company to retain an S$2 billion surplus for financial strengthening.

However, the proposed Allianz deal’s capital reduction seemed to contradict this intention. Without a clear, legally binding plan to safeguard this surplus for Income’s social mission, the government was unwilling to approve the deal.

Despite blocking the current transaction, the Singapore government has left the door open for future partnerships involving Income Insurance and potential external investors. Mr Tong clarified that the government’s objection was not to Allianz itself but to the terms and structure of the proposed deal, particularly its impact on Income’s ability to fulfil its social mission.

“The government’s view is not that NTUC Income should not seek partnerships or external capital; rather, we must ensure that any deal preserves NTUC Income’s ability to fulfil its social mission and does not undermine the cooperative movement as a whole,” Mr Tong stated.

Public Response and Opposition

The public and several prominent figures had voiced concerns following the announcement of the deal in July 2024. The proposal for Allianz to acquire a majority stake in Income Insurance raised fears that the insurer’s social objectives could be undermined by profit-driven motives typical of large multinational corporations.

The public outcry centred on concerns that Allianz, as a global insurer, might not share the same commitment to affordable insurance as Income Insurance, which had been serving Singapore’s working-class population for decades.

Critics were particularly worried that Allianz’s ownership could lead to increased insurance premiums, which might put essential services out of reach for Income’s lower-income clients.

Former NTUC Income CEO Tan Kin Lian expressed concerns about the potential shift in NTUC Income’s priorities, stating that the proposed deal could undermine its original purpose.

Similarly, ambassador-at-large Tommy Koh and former Group CEO of NTUC Enterprise Tan Suee Chieh voiced their opposition.

Mr Tan Suee Chieh went as far as to call the deal a “breach of good faith” and urged government regulators to intervene.

NTUC Income, Singapore’s one and only insurance co-operative, was corporatised in 2022 into Income Insurance Limited “to achieve operational flexibility and gain access to strategic growth options to compete on an equal footing with other insurers locally and regionally”.

Shareholders were assured at the 2022 annual general meeting that NTUC Enterprise will continue to be the majority shareholder of the new company post-corporatisation.

On 14 October 2024, Singapore’s Parliament passed the Central Provident Fund (Amendment) Bill, which will bring significant changes to CPF schemes.

One of the major changes is the closure of CPF Special Accounts (SA) for members aged 55 and older from January 2025. This change, announced earlier during Budget 2024 in February, has been a subject of public debate, particularly due to its impact on retirement savings.

Changes to CPF Special Accounts and Retirement Accounts

Starting January 2025, members aged 55 and older will see their Special Accounts closed, and any funds remaining in the SA will be transferred to their Retirement Account (RA).

The RA and SA currently offer the same annual interest rate of 4.14 per cent. However, if members’ RA funds exceed the Full Retirement Sum, excess funds will be moved to their Ordinary Account (OA), which only earns 2.5 per cent interest annually.

Dr Tan See Leng, Singapore’s Minister for Manpower, explained that the aim of this change is to better “right-site” CPF savings, ensuring that only funds allocated for long-term retirement earn the higher interest rate.

The option remains for CPF members to voluntarily transfer OA funds to their RA up to the Enhanced Retirement Sum (ERS) starting in 2025. The ERS will be raised from three times the Basic Retirement Sum to four times the amount beginning in January 2025.

Dr Tan emphasised that more than 99 per cent of CPF members over the age of 55 will be able to transfer their SA funds to their RA.

While this will allow most members to continue benefiting from the higher interest rates, those who wish to maintain access to their savings for withdrawal purposes can keep their funds in the OA, albeit at the lower interest rate.

Concerns raised in Parliament

During the parliamentary debate, some Members of Parliament (MPs) raised concerns over the impact of these changes.

Associate Professor Jamus LimWorkers’ Party MP for Sengkang GRC  highlighted that a small group of CPF members—around one per cent, or about 8,400 people—will be unable to transfer all their SA funds to their RA due to caps imposed by the Enhanced Retirement Sum. These individuals, often higher-income earners, would be left with funds earning lower interest in their OA.

Dr Tan acknowledged this but stressed that these individuals still have other options for growing their financial assets, such as through commercial investments outside the CPF system.

Expansion of the Home Protection Scheme

In addition to changes to the CPF accounts, the CPF Amendment Bill also introduced updates to the Home Protection Scheme (HPS). The HPS is an insurance plan that safeguards CPF members and their families from losing their Housing and Development Board (HDB) flats in the event of death, terminal illness, or total permanent disability.

From mid-2025, the HPS will expand its coverage to include individuals with pre-existing health conditions that are not considered severe, such as some forms of heart disease or strokes.

This change is expected to benefit approximately 100 members annually. However, premiums for these members will be higher due to their increased likelihood of making insurance claims, a common practice in the insurance industry.

While these changes will allow broader access to HPS coverage, there will still be limitations for those with more severe medical conditions, such as ongoing cancer treatment. Such individuals will continue to be excluded from the scheme in order to maintain its sustainability.

Premium fairness

MP Yip Hong Weng, People’s Action Party MP for Yio Chu Kang SMC, voiced concerns regarding the higher premiums for those with pre-existing conditions, arguing that these members may feel penalised for their health status.

Mr Yip questioned whether premium loading based solely on health risks was fair.

In response, Dr Tan clarified that premium loading is necessary to maintain the sustainability of the HPS without imposing undue financial burden on other members. Without premium adjustments based on health risks, premiums for all members, including those from lower-income groups, could rise, which would not be equitable, said the minister.

Dr Tan also noted that, despite the premium loading for those with higher health risks, the HPS remains one of the most affordable insurance schemes in Singapore.

This approach, he argued, ensures fairness across the board while maintaining the financial sustainability of the scheme.