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CPF Life vs Retirement Sum Scheme: A Beginner’s Guide

cpf life vs retirement sum scheme
Table of Contents

If you’re young and at the peak of your career, retirement is probably the last thing on your mind. You may think that it’s too early to plan for retirement. But it pays to plan for your golden years as early as possible to have peace of mind.

The first step is determining your immediate needs for the future and how much you need to save up for them. There are three basic needs in retirement – a fully-paid home, insurance and savings for healthcare, and a steady stream of retirement income. Thankfully, all Singaporean Citizens and Singaporean Permanent Residents are eligible to join CPF.

When you turn 55 years old, a Retirement Account, which is a combination of your CPF Special Account and Ordinary Account, will be created for you. Currently, Singaporeans have 2 annuity options to retire with their CPF Funds – the Retirement Sum Scheme (RSS) and CPF Lifelong Income for the Elderly (CPF LIFE).

Am I on the Retirement Sum Scheme or CPF LIFE?

The Retirement Sum Scheme (RSS) and CPF LIFE are two retirement schemes under CPF. Both schemes provide CPF members with monthly payouts starting on your Payout Eligibility Age (PEA) – which is 65 years old.

In a nutshell, RSS draws the payout from your CPF Retirement Account so you can live comfortably during retirement. However, your payouts will stop when your retirement funds run out. 

In 2009, CPF LIFE was introduced and it is designed to provide monthly payouts in retirement for as long as you live.

The key difference between the CPF LIFE and Retirement Sum Scheme is that with CPF LIFE, you don’t have to worry about running out of retirement savings. You can continue receiving a retirement income no matter your age.

But how do you know if you’re on the CPF Retirement Sum Scheme or CPF LIFE?

There are two factors you need to consider:

  • The year you were born
  • The amount of savings in your Retirement Account (RA) before reaching 65

Were you born between 1 January 1958 and 30 April 1961? You will be on CPF LIFE if:

  • You had S$40,000 in your RA when you turned 55 (between 1 January 2013 and 30 April 2016); OR
  • Will have a total of S$60,000 in your RA six months before your Payment Eligibility Age.

That said, most CPF members will be automatically enrolled in CPF LIFE. 

For those members who were born before 1958, you will automatically join the RSS. However, you have the option to switch to CPF LIFE at any time before you turn 80.

At a glance, here are the CPF LIFE auto-inclusion criteria:

You turned 55 between 1 January 2013 and 30 April 2016 You turned 55 on May 2016 and after

You had S$40,000 in your RA when you turned 55.

OR

You have at least S$60,000 in your RA six months before your Payment Eligibility Age.

You have at least S$60,000 in your RA six months before your Payment Eligibility Age.

No matter which retirement scheme you are on, you will receive a letter from the CPF Board a few months before you reach 65 years old with more information.

CPF LIFE vs Retirement Sum Scheme

CPF LIFE scheme replaced the Retirement Sum Scheme (RSS) and has become the default scheme for most of the CPF members. As such, those who were born in 1958 or later, they’ll be automatically enrolled into CPF LIFE when they turn 55.

This scheme guarantees retirement payouts for life – regardless of how much retirement savings you have left in your old age. That said, even if you manage to live past 100 years old, you will still receive monthly payouts.

CPF LIFE is a new and improved version of the old RSS. Take a look at the table below to see the differences between the two schemes.

  Retirement Sum Scheme (RSS) CPF LIFE
Receiving Payouts Payouts are drawn from your RA savings and will be spread out to last up till age 90. Payouts come from CPF LIFE (except for the CPF LIFE Basic Plan which is a hybrid of CPF LIFE and RA savings)
Lifelong Payouts No Yes
Length of Payouts
  • With the new changes in 2020, members who turned 65 from 1 July 2020 will have payouts targeted to end at age 90 instead of 95. This would also mean that payouts will be higher.
  • Members who are already receiving payouts could either get the same payouts as before or higher, because of the new changes.
Receive payouts for life
Amount of Monthly Payouts Depends on how much you have in your RA Depends on how much you have in your RA and what CPF LIFE Plan you choose
Payout Eligibility Age (PEA)
  • 65 
  • You can apply to start receiving monthly payouts at any time after age 65. Payouts will start automatically at 70 if you have not chosen to start earlier 

So if you start receiving monthly payouts only when you turn 65, what happens to your CPF savings when you turn 55?

At Age 55: Retirement Account Is Created

When you turn 55, you will receive a letter from the CPF Board detailing what happens to your CPF Account. For one, your CPF Retirement Account is opened.

What is a Retirement Account and How Is It Created?

The Retirement Account will provide you with monthly payouts when you turn 65 to support your retirement needs. This is created from the combined balances of your Ordinary Account (OA) and Special Account (SA)

CPF2

 

(Source: CPF)

Your SA will be transferred first followed by your OA savings, up to your Full Retirement Sum (FRS). These funds are set aside and compounded for the next 10 years.

The amount in your RA will be used to enter CPF LIFE. As such, the more savings you have in your RA, the higher your monthly payouts. You’ll also need to choose how much retirement sum you want to keep.

There are 3 Types of CPF Retirement Sums

Tier Notes

Basic Retirement Sum

This is where your monthly payouts come from. It will cover your basic needs in retirement.

Full Retirement Sum

  • Basic Retirement Sum x 2
  • It can cover your basic living expenses and rent

Enhanced Retirement Sum

  • Basic Retirement Sum x 3
  • The maximum amount you can top-up your RA to after you turn 55

 

Here are the Retirement Sums from 2022 to 2027:

55th birthday
on or after
55th birthday
on or after

Full Retirement Sum (FRS)

Enhanced Retirement Sum (ERS)

2020

$90,500

$181,000

$271,500

2021

$93,000

$186,000

$279,000

2022

$96,000

$192,000

$288,000

2023

$99,400

$198,800

$298,200

2024

$102,900

$205,800

$308,700

2025

$106,500

$213,000

$319,500

2026

$110,200

$220,400

$330,600

2027

$114,100

$228,200

$342,300

(Source: CPF)

The monthly payouts applicable to members turning 65 in 2020 to 2022 are indicated in the illustration below:

CPF3

(Source: CPF)

Your CPF LIFE payouts will automatically start in the month when you reach your PEA – generally, at 65.

But first, the premium will be deducted from your RA around one month before your monthly payouts starts. After paying this premium, you will receive monthly payouts under CPF LIFE.

How Much Can I Withdraw?

If you need extra cash, you can withdraw some CPF savings at 55. In a nutshell, you can withdraw up to S$5,000 from your SA and OA, or any remaining CPF savings after setting them aside in your Retirement Account.

For a more detailed look, take a look at the illustration below:

CPF4

If you have S$5,000 or Lesser in your SA and OA

You can withdraw up to S$5,000. However, you will not receive monthly payouts.

If you have between S$5,000 and the FRS in your SA and OA

You can withdraw up to S$5,000 from your SA and OA. The remaining amount will be transferred to your Retirement Account as your retirement sum.

Tip: If you own a property, you can pledge it and then withdraw the excess above the BRS from your Retirement Account.

If you have more than the FRS in your SA and OA

You can withdraw S$5,000 or the excess savings (whichever is higher) in your SA and OA after setting aside the FRS.

Here’s an example:

In 2022, the FRS is S$192,000 and the BRS is S$96,000.

1. Mr. Kim

Special Account (SA) Ordinary Account (OA) Total Savings

S$186,000

S$60,000

S$246,000

The amount of S$192,000 (FRS) will be set aside in the Retirement Account of Mr. Kim. He can then withdraw S$5,000 or the excess S$54,000 in his Ordinary and Special Accounts.

If he owns an eligible property and pledges it, he can choose to withdraw the excess above the BRS from his Retirement Account savings. In such a case, Mr. Kim can withdraw a total of S$150,000 (S$54,000 + S$96,000).

2. Mr. Park

Special Account (SA) Ordinary Account (OA) Total Savings

S$70,000

S$50,000

S$120,000

Mr. Park can withdraw S$5,000 from his SA and OA. The remaining amount of S$115,000 will be set aside in his Retirement Account.

If he owns an eligible property and pledges it, he can withdraw the excess above BRS from his RA savings. That said, he can withdraw S$5,000 from his SA and OA, as well as S$19,000 (S$115,000 – S$96,000) from his RA savings.

At Age 65: Receive CPF Life Monthly Payouts

When you reach the payout eligibility age of 65, you can use your RA savings to enter into CPF LIFE.

Launched in 2009, CPF Lifelong Income for the Elderly (CPF LIFE) is an annuity scheme that provides you with monthly payouts for as long as you live. This scheme ensures that you will not run out of retirement savings during your golden years.

1. CPF Life Eligibility

You are automatically enrolled into CPF LIFE if you are:

  • A Singaporean Citizen or Permanent Resident
  • Born in 1958 or later
  • Have a minimum of S$60,000 in RA 6 months before you turn 65 years old.

If you don’t have a minimum of S$60,000, you can still choose to join CPF LIFE any time before you turn 80. However, the monthly payouts will be lower.

Those who are potentially not included in this scheme include:

  • Housewives
  • Self-employed individuals
  • Business owners

Or individuals who don’t regularly contribute to their CPF.

2. Will I automatically get a CPF Payout at 65?

For existing CPF LIFE members born before 1957 and reached 65 before 2022:

  • To start payout: You don’t need to apply to start your CPF LIFE payouts. Payouts will be automatically paid to you from the month you turn 65.
  • To defer payout:
  • Login to my cpf digital services using your Singpass
  • Click on My Requests > CPF LIFE > Apply to Defer CPF LIFE Payout

For existing CPF LIFE members born in 1957 and after, and reached 65 in 2022 and after:

But before you can enjoy CPF LIFE payouts, it’s important to decide what type of retirement income you need.

3. Three Types of CPF LIFE Plans

CPF6
(Source: CPF)

  • Standard Plan (default): This type of plan provides stable and level payouts. This is a good option if you’re planning a modest lifestyle and willing to cope with rising prices over the years.
  • Escalating Plan: The monthly payouts start lower than the Standard Plan but will increase by 2% yearly to accommodate possible inflation. This is a good option if you want to maintain a certain lifestyle even as prices rise over the years.
  • Basic Plan: This plan provides lower monthly payouts, but has a higher inheritance to beneficiaries (when you pass away). Compared to the Standard Plan, Basic Plan has lower payouts that get progressively lower when your combined CPF balances eventually fall below S$60,000.

This is CPF LIFE’s legacy plan which works slightly more complicated. As such, most members prefer the Standard Plan and Escalating Plan since it suits their needs more.

In all three plans, you will receive monthly payouts for the rest of your life. Any remaining CPF LIFE premium balance will be given to your beneficiaries, along with the remaining CPF savings, upon death.

4. How Much and How Long Can I Receive Monthly Payout?

As previously mentioned, CPF LIFE will provide monthly payouts for as long as you live. Your monthly payout will depend on how much you have in your RA savings. For instance, if you meet the Basic Retirement Sum, your monthly payout will cover your basic living expenses.

If you want higher payouts, you can set aside the Full Retirement Sum (FRS) or Enhanced Retirement Sum (ERS).

Take a look at the illustration below to understand how much monthly payouts you’ll receive if you’re turning 55 from 2023 to 2027.

CPF1
(source: MOF)

5. Will I Get Payouts Under CPF LIFE if I Have Not Saved Up the BRS?

While there are no penalties for not meeting the Basic Retirement Sum, your situation will be a little different.

If you fail to meet the BRS, you’ll only be able to withdraw S$5,000 from CPF at the age of 55. Your retirement payouts will not be affected. The current CPF LIFE scheme is pro-rated based on how much you have in your account.

That said, whether you meet the BRS or not, your CPF LIFE payouts will be calculated fairly.

CPF Illustration Number 5

(Source: CPF Board)

Is CPF Sufficient for Retirement?

It depends on your expected expenses based on your planned retirement lifestyle. That said, it’s best to determine whether your expected CPF payout and other forms of income can cover the said lifestyle.

You can use this CPF LIFE Estimator to estimate your CPF payout.

If you believe your CPF payouts are not enough, you may need to save more, invest more, or supplement your CPF LIFE payouts with other retirement income plans.

See Also: CPF Investment

What Happens When You Pass Away?

Your CPF LIFE premium balance – the unused portion of your annuity premium, will be refunded back into your CPF account. This amount, along with any RA savings left over, will be given to your nominees/beneficiaries.

If you haven’t made any CPF nomination before death, the money will go to your next of kin according to Singapore’s intestate law or Muslim law.

Closing

The CPF system is a complicated matter and it’s completely understandable if you need time to take it all in. However, it is important to be well-prepared so you can retire with peace of mind. Thankfully, if you regularly contribute to CPF, you’re one step closer to being financially ready for retirement.

Key Takeaways

  • When you turn 55 years old, a Retirement Account, which is a combination of your CPF Special Account and Ordinary Account, will be created for you.
  • The Retirement Sum Scheme (RSS) and CPF LIFE are two retirement schemes under CPF.
  • RSS and CPF LIFE provides monthly payouts when you reach the payout eligibility age of 65.
  • CPF LIFE scheme replaced the Retirement Sum Scheme (RSS) and it guarantees retirement payout for life.

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