What does the word “retirement” mean to you? For most of us Singaporeans, we picture relaxing at home, doing whatever we feel like without being tied down to work because we need to earn money. That also means we should have a comfortable sum of money which we put aside throughout our working lives that gives us a passive or draw down income.
Many Singaporeans think: “What about the government? Shouldn’t they take care of the workforce that used to slog away to bring our country to greater heights?”
The idea of the Central Provident Fund’s (CPF) CPF Life does just that. CPF LIFE is short for CPF Lifelong Income For the Elderly. Administered by the government, CPF LIFE is a life annuity scheme providing Singapore Citizens and Permanent Residents (PRs) the security of a monthly payout for their lifetime. Awesome! It’s like our Grandparents Pension
CPF LIFE is the current incarnation of the CPF’s retirement scheme. Previously it was called the CPF Minimum Sum Scheme and later renamed as the CPF Retirement Sum Scheme (RSS). With the older CPF Minimum / Retirement Sum Scheme, you get monthly retirement payouts drawn from your RA, essentially treating it as a retirement fund. Trouble is that the payouts will stop when your RA balance dwindles to $0 (expected to be when we’re 85 to 95 years old)… and we top the world in terms of life expectancy in 2017 at an average of 84.8 years!
Source: Straits Times
The CPF Retirement Account (RA) is what every Singaporean gets when they turn 55 years old when the balance in your CPF Ordinary Account (OA) and Special Account (SA) are combined to form the RA.
If your total balance exceeds the Full Retirement Sum (currently $176,000 in 2019), the excess will be left in your OA.
- If you were born before Jan 1, 1958, you will be on the RSS unless you have opted to join CPF Life.
- If you were born between Jan 1, 1958 and April 30, 1961 and have at least $40,000 in your RA when you reach 55 years old; or at least $60,000 in your RA six months before you reach your PEA, you will be on CPF Life.
- If you were born from May 1, 1961 onwards, and have at least $60,000 in your RA six months before you reach your payout eligibility age, you will be on CPF Life.
- If you are on the RSS and would like to receive lifelong monthly payouts, you can join CPF Life any time before age 80.
Against the backdrop of rising longevity, and the difficulty of predicting exactly how long we will live, we face some uncertainty on planning for our retirement. There is a real possibility that we may not be adequately prepared for a longer retirement, and risk outliving our retirement savings.
Peace of mind is important for retirement, in order to fully enjoy the type of retirement lifestyle we want in our golden years.
CPF LIFE is a life annuity which can help us achieve peace of mind during our retirement as we will receive a regular stream of income for as long as you live without the worry of outliving our savings.
Source: CPF Website
CPF LIFE provides the assurance of a payout stream for as long as you live and is able to do so via risk-pooling. This means that the interest earned on the annuity premium is pooled among the surviving members, ensuring that no CPF LIFE member will run out of retirement payouts in old age.
When the we pass away, CPF will refund any remaining Retirement Account savings along with all our unused CPF LIFE annuity premiums. This means that our loved ones will always get back at least the amount that we have put into CPF LIFE, in the form of payouts and/or bequest, no matter what age we live to.
Source: CPF Website
So is CPF Life good? Yes! I wholeheartedly believe so. I used to envy my grandfather and his pension and think why don’t we have pensions anymore? Well CPF Life is my pension when I retire! Time to ensure that I have enough to get a good CPF Life payout and supplement my retirement income with other schemes like the Supplementary Retirement Scheme (SRS).