Known as the Retrenchment Insurance plan, it is the first policy in the industry that provides a loan of up to 12 months at an interest rate of 5.5 per cent, to tide over the retrenched person while he looks for another job.

This will come in particularly useful as the unemployed often face problems borrowing from banks.

Expected to be launched within the next two months, the scheme is the latest effort by the co-operative to achieve its social mission of providing quality value-for-money insurance policies to meet the needs of the people.

“In this way, the worker does not have to depend on credit cards or loan sharks who charge exorbitant interest rates,” said Income CEO Tan Kin Lian, who mooted the plan.

The scheme is open to all Singaporeans and permanent residents who are Income policyholders, and are retrenched from a permanent full-time job that has been held for at least two years.

For workers to enjoy the loan, which kicks in only if they are retrenched, they need to plan ahead and pay an annual premium of 0.5 to 1.5 per cent (depending on occupation) of the amount that they are able to draw down as a loan in one year, when they get retrenched.

This amount is limited to 10 times of the monthly amount that they pay for an existing life insurance policy taken with Income.

For example, if the monthly premium for an insurance plan with Income is $200, the policyholder can apply for retrenchment insurance of $2,000 a month, or $24,000 a year.  If the premium is 0.5 per cent, the premium he has to pay for the retrenchment insurance is $120 a year.

“We are living in an uncertain world where jobs are not secure anymore. With global competition, jobs may move to cheaper offshore locations at any time. This is why we are introducing this plan to give some protection to retrenched workers,” Mr Tan told NTUC News.

“In this way, the worker does not have to depend on credit cards or loan sharks who charge exorbitant interest rates,” said Income CEO Tan Kin Lian, who mooted the plan.

The scheme is open to all Singaporeans and permanent residents who are Income policyholders, and are retrenched from a permanent full-time job that has been held for at least two years.

For workers to enjoy the loan, which kicks in only if they are retrenched, they need to plan ahead and pay an annual premium of 0.5 to 1.5 per cent (depending on occupation) of the amount that they are able to draw down as a loan in one year, when they get retrenched.

This amount is limited to 10 times of the monthly amount that they pay for an existing life insurance policy taken with Income.

For example, if the monthly premium for an insurance plan with Income is $200, the policyholder can apply for retrenchment insurance of $2,000 a month, or $24,000 a year.  If the premium is 0.5 per cent, the premium he has to pay for the retrenchment insurance is $120 a year.
“We are living in an uncertain world where jobs are not secure anymore. With global competition, jobs may move to cheaper offshore locations at any time. This is why we are introducing this plan to give some protection to retrenched workers,” Mr Tan told NTUC News.

In view of the improving economy, fewer workers were retrenched last year as compared to 2001 and 2002. For the whole of last year, 6,630 workers were retrenched compared to 7,809 in 2002 and 10,565 in 2001. Like the past few years, company restructuring remains the main reason why workers lost their jobs.

Nevertheless, the Retrenchment Insurance plan will act as a safety net that provides assistance to affected workers to tide them over the difficult period, whilst assisting workers in planning and preparing for contingencies in the future.

Income Assistant General Manager Chan Tee Seng told NTUC News that the scheme will be an additional safeguard for workers – on top of retrenchment benefits – and can be tapped to pay their bills.

Although some retrenched workers receive retrenchment benefits, given the trend of shorter tenure of work, the payout will be smaller because it is paid according to the length of service.

With the improving economy and better wages expected, it is a good time to roll out the scheme as workers can take up a regular savings plan to protect against events like retrenchment, he said.

“We cannot assume that good times are here to stay. Therefore, all of us need to plan and prepare for such contingencies,” he added.

The Retrenchment Insurance plan is welcomed by union leaders. Singapore Bank Officers’ Association General Secretary Wee Soon Guan said the scheme will help workers tide over the difficult period, and will act as an extra protection on top of the existing retrenchment benefits.

“I would encourage workers to take up the scheme and make use of part of the loan to upgrade their skills so that they can take up better jobs,” he said.

What is the Retrenchment Insurance plan?

• An insurance loan plan which provides up to $3,000 a month for 12 months at a modest interest rate of 5.5 per cent to help retrenched workers cope while looking for another job or to make other adjustments.

• It is open to all Singaporeans and permanent residents who are Income policyholders, and are retrenched from a permanent full-time job that has been held for at least two years.

• The plan aims to help workers save and plan for future contingencies, and reduce dependency on credit cards or loan sharks who charge exorbitant interest rates.