CPF Life - More Flexibility, More Options

On 2nd Feb 2015, a government-appointed panel set up last September to study ways to enhance the Central Provident Fund (CPF) system put forward some recommendations to the government which have been accepted. The panel held discussions with more than 400 Singaporeans to gather feedback to arrive at the proposals.

Some of these recommendations include different retirement sums for different needs, an option to withdraw up to 20% of savings in a lump sum and a choice to defer withdrawal in exchange for higher monthly payouts.

The panel sought to ensure that the CPF provides a basic level of lifelong support in retirement while offering additional flexibility to cater to different needs.

The panel said there should be clearer choices over lifelong payouts and the Minimum Sums to be set aside for retirement.

What it is now

Currently, CPF members must meet a Standard Minimum Sum by the time they turn 55. The Minimum Sum increases to $161,000 in July, is locked away until the CPF member turns 65. That is when they will start getting a payout every month.

Members can withdraw up to $5,000 from their CPF accounts from age 55. Anything above half the CPF Minimum Sum and Medisave Minimum Sum can be withdrawn from age 55 with a property pledge.

The New Choices You Have

Under the recommendations set out by the panel, CPF members retiring in 10 years' time should set aside enough CPF savings to provide for a basic monthly payout of about $650 to $700. This amount assumes that the retiree owns a home and does not need to pay rent.

To receive this payout, CPF members turning 55 next year will need to set aside a Basic Retirement Sum of $80,500 as premiums in 2016.

CPF members can withdraw their savings above the Basic Retirement Sum, subject to a CPF charge or pledge on the value of their property. This means that if the member sells his property, the amount of the charge or pledge will be returned to his CPF account to supplement his basic payout.

Members who do not own their homes should set aside twice the Basic Retirement Sum, or $161,000, the panel said.

Those with more than the Basic Retirement Sum and who want higher lifelong payouts be allowed to top up their CPF Life premiums, up to the Enhanced Retirement Sum. 

They should also be given an option to defer receiving their payouts in exchange for a higher amount every month. For every year that the payout start age is deferred, monthly payouts will increase by 6% to 7%.

For those with shorter-term cash needs, the panel said they should be allowed to withdraw up to 20% of their savings in their retirement account at age 64. This goes up to 65 in 2018.

To help those with low savings in their CPF retirement account, the panel said CPF contribution rates for workers aged 50 to 55 should be raised to match those for younger workers.

Below is the Summary of the decisions you have to make based on the new recommendations:

What choices will I need to make at 55?
1. How much you want to receive as payouts in the future and how much money to set aside in your Retirement Account.
2. Whether to withdraw $5,000.
3. If you have savings beyond the Basic Retirement Sum or Full Retirement Sum, whether to withdraw them.
4. Whether to use any savings beyond the Basic Retirement Sum to top up accounts of loved ones.

What choices will I need to make at 65 or the payout eligibility age?
1. Whether to make a lump sum withdrawal of up to 20%.
2. When you want your monthly payouts to start.
3. Which CPF Life Plan to join (before payouts start)
 

A second batch of recommendations will be unveiled later this year.

What do you think of the initial recommendations put forward by the panel? What are your concerns and considerations?