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CURRENT SITUATION: When you reach 55, a CPF Retirement Account is created for you with savings from your Ordinary and Special accounts.
The Retirement Account earns 4 per cent interest until the end of next year. After that, it will earn a weighted average interest on a portfolio of government bonds.
Under the Minimum Sum Scheme, you get monthly payouts over about 20 years. The initial draw-down age is set to gradually increase from 62 to 65 between 2012 and 2018.
The Minimum Sum was set at $80,000 in 2003 and will be raised gradually until it reaches $120,000 (in 2003 dollars) in 2013.
NEW SCHEME: In February last year, the CPF announced a new retirement scheme called CPF Life where CPF members will get payouts for life instead of 20 years.
CPF Life offers a choice of four plans - Basic Plan, Balanced Plan, Plus Plan and Income Plan.
You are eligible to opt in for CPF Life if you are a Singapore citizen or permanent resident aged between 55 and 80, with savings in your Retirement Account.
Those aged 55 to 79 have up to the time they reach age 80 to sign up for CPF Life. But those aged 80 and above have to do so by December next year.
Your monthly payout depends on your Retirement Account savings used to join CPF Life. There is no minimum amount required, but members with lower balances will get lower monthly payouts.
Other factors that will affect the payout include your gender, the age at which you join the scheme and the plan chosen. Generally, females get lower payouts as they tend to live longer.
If you wish to have a higher payout, you may make cash and/or CPF top-ups to your Retirement Account up to the prevailing Minimum Sum.
The monthly payout is not fixed. It may be adjusted every year to take into account factors such as CPF interest rates and mortality experience. The adjustments will usually be small so that payouts are stable.
If you join before your draw- down age (DDA), you will start to get your monthly payout from your DDA.
If you join after your DDA, you will start to get the monthly payout from the following month after you are included in the scheme.
If you were born in 1943 or earlier, your DDA is 60. For those born between 1944 and 1949, their DDA is 62. If you were born in 1950 or 1951, your DDA is 63 and if you were born in 1952 or 1953, your DDA is 64. For those born in 1954 or later, your DDA is 65.
TOP 5 QUESTIONS members are asking about the CPF Life scheme.
1 How do I calculate the bequest amount?
The bequest amount is the savings used to join CPF Life minus the monthly payouts already received.
2 For the Life Income Plan, why is the remaining amount not returned to my beneficiaries upon my death?
The Life Income Plan is the only plan which does not have a refund or bequest feature. It gives the highest payout, but does not leave anything for your beneficiaries.
If you choose this plan, upon your death, whatever remaining amount you have in your CPF account will go to the CPF Life pool, which will be shared with the existing members under the scheme. Therefore, the Income Plan may be more suitable for members with no beneficiaries.
3 Why aren't payouts inflation-indexed?
CPF Life is a new scheme that improves upon the current Minimum Sum Scheme to provide lifelong income for members in their retirement. It was introduced to address the concern that members are living longer and may outlive their retirement savings.
Inflation-indexation would mean higher premiums or significantly lower payouts in the initial period. The National Longevity Insurance Committee had discussed this extensively and decided against inflation-indexed incomes.
4 Do I need to have a minimum amount to join CPF Life?
No, there is no minimum amount needed to join CPF Life. However, the monthly payout depends on your Retirement Account (RA) savings. Hence, members with lower RA balances will receive correspondingly lower monthly payouts.
5 Can I opt out of CPF Life after joining?
No, once you have joined CPF Life, you will not be allowed to opt out except on the following grounds:
Medical ground of shortened life expectancy
Leaving Singapore and West Malaysia permanently with no intention of returning to either country.
SOURCE: CPF BOARD
This article was first published in The Straits Times.
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