Where do you see this?

In newspaper articles and on the website of the Central Provident Fund (CPF).

What does it mean?

The CPF Minimum Sum (MS) is the amount you have to set aside, in your Retirement Account (RA), for retirement needs. It need not be all in cash. Up to 50 per cent of this sum can be a property pledge.

Your RA is set up when you reach 55 and it comprises savings from your Ordinary and Special accounts.

Why is it important?

People are living longer and so need enough savings to see them through a longer retirement period.

The CPF Minimum Sum Scheme provides members with monthly payouts to support a modest standard of living in their old age.

Currently, older CPF members may participate in the CPF Life annuity scheme or buy approved life annuities with their MS to give them a guaranteed life income.

Alternatively, they may place their savings with approved banks or continue to keep the money with the CPF Board.

The MS left with the Board earns a 4 per cent annual interest rate till December next year.

The sum was set at $80,000 in 2003 and will be raised gradually until it reaches $120,000 (in 2003 dollars) in 2013.

These amounts will be adjusted yearly for inflation. The prevailing MS is $117,000.

So you want to use the term. Just say...

'My financial adviser says I should top up my CPF Minimum Sum if I have a shortfall.'

Lorna Tan

This article was first published in The Straits Times.