CPF life is one of the tools one should use from 65 to death. Accumulation of the monies towards the retirement sum is best done by voluntary contribution into the SA(Special Account) either through voluntary cash contribution(tax deductible) or OA transfer into SA.
1. What is CPF LIFE and why it is introduced? Singaporeans are living longer. This is a good thing. At the same time, it also means that you need to save for a longer retirement or you may end up outliving your savings. Having an income for as long as you live has therefore become even more important. CPF LIFE helps ensure that you have a lifelong monthly income stream for greater peace of mind in retirement.
CPF LIFE is a life annuity that provides you with a monthly payout from age 65 (the current payout eligibility age) for as long as you live. You will be placed on CPF LIFE using the retirement sum you have set aside in your Retirement Account.
2. How does CPF LIFE works and what happens when I join CPF LIFE?
On your 55th birthday, a Retirement Account (RA) will be created for you and savings from your Special Account (SA) and Ordinary Account (OA) will be transferred to your RA to form your retirement sum.
Your retirement sum will be used to buy CPF LIFE that provides you with lifelong monthly payouts from your payout eligibility age which is currently at age 65. The exact amount of retirement sum that will be deducted as annuity premium will depend on the plan type you have chosen and will be made known to you when your CPF LIFE Plan is issued. The interest earned on the annuity premium you pay into the Lifelong Income Fund is then pooled, i.e. is used to pay the monthly payout to all surviving members in the scheme.
3. What happens to the premium if I pass away?
A bequest is the amount of money that you leave for your beneficiaries when you pass on. If you are on CPF LIFE, the bequest refers to the unused annuity premium and Retirement Account savings, if any, after death. This will be paid to your beneficiaries along with your remaining CPF savings.
However, the interest earned on annuity premiums does not form part of the individual member’s bequest as it is paid into the Lifelong Income Fund to provide lifelong monthly payouts to all members under CPF LIFE.
As with all annuity products, CPF LIFE works based on the concept of risk pooling. In order to provide lifelong monthly payout to all CPF LIFE members, the interest earned on the annuity premium has to be pooled. The pooled interest will then be used to pay the monthly payout to all surviving members in the scheme. Therefore, the interest earned on the CPF LIFE annuity premium will not form part of the individual member’s bequest upon death.
4. Can I opt out of CPF LIFE?
You will be automatically placed on CPF LIFE if you are a Singapore Citizen or Permanent Resident and have the following Retirement Account balances:
| You turn 55 from1 January 2013 to 30 April 2016 |
You turn 55 on 1 May 2016 or after |
| $40,000 in your Retirement Account when you reach 55 years old; or $60,000 in your Retirement Account when you are near your payout eligibility age. |
$60,000 in your Retirement Account when you are near your payout eligibility age. |
Nearer to your payout eligibility age, you will be invited to choose between the CPF LIFE Standard Plan and CPF LIFE Basic Plan.
If you are not placed on CPF LIFE, you can apply to join anytime between your payout eligibility age and before you turn 80 years old or remain on the Retirement Sum Scheme.
However, if you meet the Retirement Account balances to be auto-included in CPF LIFE, you may still apply to be exempted from CPF LIFE under the following conditions:
i) You are fully exempted from setting aside the retirement sum in your Retirement Account because you
are receiving a monthly pension / annuity payout, or
ii) You are exempted under medical grounds.
5. What is the difference between the LIFE Standard and LIFE Basic Plan?
The two plans give you the option to choose between getting higher monthly payouts and correspondingly, leaving lower bequest to your beneficiaries or conversely, getting lower payouts and leaving more to your beneficiaries.
6. How much payouts will I get under CPF LIFE?
The payouts you will receive depends on your retirement sum and the choice of LIFE plan. The table below shows how much you will receive should you set aside the BRS, FRS or the Enhanced Retirement Sum (ERS). This is on the assumption that you start your payouts at age 65 under the LIFE Standard Plan in 2016.
You can choose from a range of monthly payout options that will best suit your needs in retirement.
| | Your monthly payout* for life from 65 | Retirement Account savings required at 55 |
| If you own a property and choose to pledge your property. | $660 – $720 | Basic Retirement Sum (BRS)$80,500 |
| If you do not own a property or choose not to pledge your property. | $1,220 – $1,320 | Full Retirement Sum (FRS)$161,000The FRS is 2 x BRS. |
| If you wish to put more savings in CPF LIFE. | $1,770 – $1,920 | Enhanced Retirement Sum (ERS)#$241,500The ERS is 3 x BRS. |
*Payouts are estimates based on CPF LIFE Standard Plan parameters in 2016.
#Available from January 2016
If you have a low balance in your RA at 55, you can build it up by transferring your SA and OA savings to RA or by making a cash top up to increase your monthly payout. You can also choose to defer your payout start age up until 70 for higher monthly payouts. Monthly payouts increase by up to 7% for each year that you defer.
7. Will the monthly payout be adjusted to cope with inflation?
Currently, CPF LIFE monthly payouts are not adjusted for inflation. The CPF Advisory Panel is looking into how to provide an option for members who prefer CPF payouts that are initially lower but rise with time to help with the increase in cost of living. Their recommendations will be made in the second half of 2015.
Glossary
Life Annuity: An financial product which provides you with a monthly payout for as long as you live.
Lifelong Income Fund (Annuity Fund): The Lifelong Income Fund consists of the annuity premium, the interest earned on the annuity premium and the extra interest earned by members on the CPF LIFE Standard Plan.
Annuity Premium: The annuity premium is the amount of Retirement Account savings that is paid into the Lifelong Income Fund to join CPF LIFE.
Payout eligibility age: The age a CPF member can start his monthly retirement payouts. It is currently set as 65 for members who are born in 1954 or later. It was previously known as the drawdown age.
Payout start age: The age that a CPF member chooses to start his payouts. For members under CPF LIFE, it can be anytime between age 65 and 70. For each year the payout start age is deferred, monthly payouts will increase by up to 7%.
Here is a video to show you how much CPF life payout you can get.: