For those who’ve just started working, you would realise that for the average Singaporean, a portion of our monthly salary goes to the Central Provident Fund (CPF) Scheme. This money is meant to be accumulated for your retirement, so that you can live through your golden years, worry-free.
But… ever wondered how much you would get from your CPF during retirement? Are the monthly payouts enough? Is CPF LIFE truly for life?
Here’s everything you need to know about the CPF LIFE scheme!
- What is CPF LIFE?
- Retirement Sum Scheme VS CPF Life
- Am I eligible for CPF LIFE?
- Which CPF LIFE plan is better? Basic, Standard or Escalating Plan?
- Hitting the Basic, Full or Enhanced Retirement Sum
- How much will I get from CPF LIFE?
- How Do I Increase My CPF Payouts?
What is CPF LIFE?
For the uninitiated, CPF LIFE (Lifelong Income For the Elderly) is a lifelong annuity scheme that provides monthly payouts from your retirement age, for as long as you live. This applies to all Singaporeans and Permanent Residents.
Based on how much you’ve saved throughout the years, CPF LIFE will provide you with a monthly retirement income from your CPF Retirement Account.
The CPF LIFE scheme is known to be the improved version of the old Retirement Sum Scheme, due to changing times and an increase in the average Singaporean’s life expectancy. Here are some of the key differences between the two:
Retirement Sum Scheme VS CPF LIFE
|Retirement Sum Scheme||CPF LIFE|
|Amount of Monthly Payouts||Amount of monthly payouts depends on how much you have in the Retirement Account|
|Interest Rate Returns||Interest paid into accounts|
Interest paid into Lifelong Income Fund
The Retirement Sum Scheme (RSS) will still apply to those who were already making withdrawals from the scheme in 2009 and earlier, before CPF LIFE was introduced. They can choose to switch to the CPF LIFE scheme if they want to.Also, those born before 1958 but who have not begun their RSS withdrawals can choose to remain on the RSS scheme or switch to CPF LIFE.Read more: When Should You Start Planning for Retirement?
Am I Eligible for CPF LIFE?
For Singaporeans and Permanent Residents, you will be automatically included in the CPF LIFE scheme if you’ve met the following conditions:
- You are a Singaporean Citizen or Permanent Resident born in 1958 or after; and
- Have at least S$60,000 in your Retirement Account six months before you reach your payout eligibility age (PEA)
For self-employed individuals who don’t contribute regularly to their CPF, they may not be automatically included in the scheme. However, for self-employed persons, you can still opt into the scheme.
Once you’re included in the CPF LIFE scheme, you will be able to choose the type of plan you’d like to embark on!
Choosing Your Plan: CPF LIFE Basic, Standard and Escalating Plans
According to the CPF Board, you can choose your preferred LIFE plan to receive your monthly payouts anytime between age 65 and 70. Members who don’t choose their LIFE plan by age 70 will automatically be placed on the default plan — the CPF LIFE Standard Plan.
If you’re confused, here’s a quick guide on the different plans:
Source: CPF Board
|CPF LIFE BASIC PLAN||CPF LIFE STANDARD PLAN|
CPF LIFE ESCALATING PLAN
|What Is It?||Gives you progressively lower monthly payouts. As a result, you will have more savings for your beneficiaries.||Default plan. Payouts are higher and remain at the same amount.|
Lower initial payouts. The payouts increase by 2% yearly to cope with inflation.
|You should opt for this if…||You’d want to leave more money to your loved ones||You’d like a more comfortable retirement for yourself|
You prioritise coping with future increases in prices
|Upon Death||Any unused annuity premium (without interest) and Retirement Account savings, will be paid to your beneficiaries upon your death|
Which CPF LIFE retirement sum is better? Basic Retirement Sum (BRS), Full Retirement Sum(FRS), or Enhanced Retirement Sum (ERS)?
On top of the different types of plans, how much money you will get out of your CPF every month is largely dependent on whether you’ve hit the Basic Retirement Sum, Full Retirement Sum, or Enhanced Retirement Sum.
Here’s how much money you need to have in your Retirement Account – into which savings from your Special Account, then your Ordinary Account, are transferred – by 55 to hit the following retirement sums:
CPF LIFE tiers
|YEAR OF YOUR 55TH BIRTHDAY||BASIC RETIREMENT SUM (MINIMUM)||FULL RETIREMENT SUM (MINIMUM)|
ENHANCED RETIREMENT SUM (MINIMUM)
So, how does it work? From the time you turn 65, your payouts will vary depending on whether you’ve hit any of the above sums in each of the categories. If you don’t hit any of the above tiers, your monthly payouts will instead be prorated. If you’ve managed to unlock your full retirement sum, however, you’ll be entitled to withdraw the excess.
Now, this may be confusing, but to put it simply: the Retirement Sums will increase yearly by about ~2% to cope with inflation. As such, the Basic, Full and Enhanced Retirement Sums will increase for each cohort.
How much will I get from CPF LIFE?
As most Singaporeans are enrolled in the CPF LIFE Standard Plan, we will be using that as the basis of our assumption on how much your monthly payouts will be. If you turned 55 in 2020, you can see your projected monthly payouts depending on whether you’ve hit the BRS, FRS, or ERS, in the table below.
SAVINGS AT 55
|MONTHLY PAYOUTS FOR LIFE FROM AGE 65|
|Standard Plan (Default)||Escalating Plan||Basic Plan|
|Basic Retirement Sum (BRS)|
|S$750 – S$810||S$580 – S$640 (initial amount)|
Payouts increase by 2% every year
S$710 – S$740
|Full Retirement Sum (FRS)|
|S$1,390 – S$1,490||S$1,070 – S$1,180 (initial amount)|
Payouts increase by 2% every year
S$1,310 – S$1,360
|Enhanced Retirement Sum (ERS)|
|S$2,030 – S$2,180||S$1,560 – S$1,720 (initial amount)|
Payouts increase by 2% every year
S$1,920 – S$1,980
Of course, this amount is calculated for those automatically enrolled into the CPF LIFE scheme. For those under the Retirement Sum Scheme, you can calculate your payouts using CPF’s Payout Estimator.
Read more: How to Prepare for Retirement
How Do I Increase My CPF Payouts?
With the rising cost of living, it is natural to worry that your CPF monies may not be enough to tide you through retirement.
If that’s the case, you can opt to make cash top-ups or CPF transfers (or both) into your Retirement Account!
Read more: 5 Reasons To Top Up Your CPF
By planning for your retirement, you will be able to supplement your CPF payouts with other sources of income and investments to supplement your retirement income. If you need help planning for your golden years, Planner Bee’s retirement calculator can help you figure out how much you will need to retire comfortably and worry-free!
Should you be keen to find out more about supplementing CPF LIFE’s retirement payouts, check out our articles on annuity plans and other sources of passive income.