The Central Provident Fund (CPF) Board introduced the Lifelong Income For the Elderly (LIFE) scheme to provide monthly payouts during retirement, starting at age 65.
If you need more than the CPF Life payout to maintain your lifestyle, you can supplement it with a low-risk annuity plan. This approach helps secure your retirement income and reduce financial stress.
We will review how much you can expect from CPF Life payouts and explain how an annuity plan can complement your retirement income.
CPF retirement sums and monthly payouts
Singapore Citizens and Permanent Residents born in 1958 or later, with at least S$60,000 in their CPF Retirement Account (RA), are automatically enrolled in CPF Life. The first key milestone occurs at age 55, when your retirement sums are locked in.
You can choose the Basic, Full, or Enhanced Retirement Sum, which determines your CPF Life monthly payout from age 65. For those turning 55 in 2022, the Full Retirement Sum is S$192,000.
You can check the retirement sums applicable from 2022 to 2027 in the table below.
Source: CPF
The retirement sum you set aside will determine your monthly CPF Life payouts. For instance, if you save S$192,000 at age 55, it can earn up to 6% interest. At 65, you could receive S$1,470 to S$1,570 per month.
Pro tip: Try this retirement calculator to find out if your CPF Life payouts are enough, and see how much more you may need to save.
Source: CPF
Read more: When Should You Start Planning for Retirement?
Example: Calculating your retirement shortfall
Consider Mark, age 40, planning to receive a steady retirement income of S$4,000 per month in today’s value by age 65. Assuming CPF Life payouts and retirement sums grow at 3.5% annually (matching inflation), here’s what he will face:
Full Retirement Sum scenario:
| CPF RA savings needed at 55 | CPF Life monthly payout from 65 | Desired monthly payout from 65 | Shortfall to monthly payout from 65 |
| S$321,667 | S$2,463 | S$9,453 | S$6,990 |
Enhanced Retirement Sum scenario:
| CPF RA savings needed at 55 | CPF Life monthly payout from 65 | Desired monthly payout from 65 | Shortfall to monthly payout from 65 |
| S$482,500 | S$3,585 | S$9,453 | S$5,868 |
These calculations show the retirement shortfall Mark must address to meet his desired monthly income.
Read more: Can You Retire on CPF LIFE Payouts Alone?
How an annuity plan can complement CPF Life
An annuity plan provides a steady stream of income from your chosen retirement age, either for a fixed period or for life. Retirement income usually consists of guaranteed and non-guaranteed components, depending on the participating fund’s performance.
Premiums can be paid lump sum or as regular contributions.
With an annuity plan, Mark can significantly reduce his retirement shortfall. If he reaches the Enhanced Retirement Sum, he can even select a lower monthly payout from the annuity plan, still achieving his target income.
Frequently asked questions
Why should I consider an annuity plan if I already have CPF Life?
CPF Life ensures a basic level of retirement income, but it may not fully cover your desired lifestyle expenses. An annuity plan supplements CPF Life payouts, helping you maintain financial independence and meet your income goals.
How does an annuity plan work in Singapore?
An annuity plan is an insurance product that offers regular payouts from a chosen age. It combines guaranteed and non-guaranteed benefits, depending on market performance. You can choose to pay premiums either as a lump sum or through regular instalments.
Can I take up an annuity plan if I already meet the Enhanced Retirement Sum?
Yes. Even if you’ve met the Enhanced Retirement Sum, you can still purchase an annuity plan to further increase your retirement income. This is useful if you wish to maintain a higher standard of living during retirement.
What are the main benefits of an annuity plan?
- Provides steady income after retirement
- Offers low-risk and predictable returns
- Helps manage inflation and longevity risk
- Complements CPF Life payouts for better retirement planning
Is an annuity plan suitable for everyone?
An annuity plan is ideal for those seeking stable, low-risk retirement income. However, your choice should depend on your risk appetite, financial goals, and desired retirement lifestyle.
Final thoughts
In summary, CPF Life provides a stable foundation for your retirement income, but it may not fully cover your desired lifestyle. By complementing your CPF Life payouts with a reliable annuity plan, you can enjoy greater peace of mind and financial security throughout your golden years.
Planning early also allows you to benefit from compound growth and manage potential retirement shortfalls. Whether you choose to supplement your income through an annuity, property investments, or unit trusts, a well-diversified approach ensures your retirement plan in Singapore stays strong and sustainable.
Read more: Changes in CPF Contribution Rates: What You Need to Know
