A CPF LIFE Plan will provide you with retirement income in the form of monthly payouts for life, allowing you to fund your desired retirement lifestyle. As such, opting to join the scheme is essential if you wish to benefit from lifelong monthly payouts and have enough savings to see you through once your working life has drawn to a close.
CPF Life or “CPF Lifelong Income for the Elderly” is essentially a standardized retirement plan available to every Singapore citizen and permanent resident which enables you to put RA savings toward funding your retirement. You’ll receive monthly payouts for however long your retirement lifestyle lasts – though it’s worth noting that for most Singaporeans, these payouts for life are only likely to cover the basics, and further post-retirement planning may be required.
In this article, Loan Advisor explores how the CPF LIFE scheme works, the amount of CPF you can expect when you receive monthly payouts, the minimum sums and terms and conditions you’ll need to be aware of, and various ways in which you can maximize your overall retirement savings.
What is a CPF LIFE Plan and How Does it Work?
CPF LIFE or CPF Lifelong Income for the Elderly is the default retirement plan offered by Singapore’s Central Provident Fund. To join CPF Life, you’ll need to pay a lump sum premium from your CPF Retirement Account RA. From here, you’ll be eligible to receive “lifelong” retirement payouts from your RA for the remainder of your life.
Previously, CPF LIFE has been known as both the CPF Minimum Sum Scheme and the CPF Retirement Scheme, respectively. These older, now-defunct schemes functioned in a very similar way to modern-day CPF, though retirement payments would stop once your RA balance was depleted to $0. Conversely, the new and improved CPF LIFE scheme promises retirement payouts that never stop for as long as you live.
CPF LIFE Plan Automatic Inclusion
CPF LIFE is available to almost everyone in Singapore. If you’re deemed eligible, you’ll be automatically enrolled into the CPF retirement sum scheme and be able to start your payouts as soon as you retire. The current criteria to be automatically enrolled into CPF’s annuity scheme is as follows:
|
Eligible Citizens |
Age Requirement |
CPF Savings Requirement to be Automatically Enrolled |
|
Singapore citizen |
Must have been born on 1 January 1958 or afterwards |
$60,000 or more |
|
Singapore Permanent Resident |
Must have been born on 1 January 1958 or afterwards |
$60,000 or more |
In addition to the above, anyone who has not been automatically enrolled is free to join the scheme manually even if they have already begun receiving retirement sum scheme monthly payouts. This can be achieved by visiting the CPF website here and following the appropriate steps via My CPF Online Services at least one month before you turn 80.
Opting Out of CPF LIFE Via an Alternative Retirement Plan
While the vast majority of Singaporeans will be automatically enrolled onto CPF’s standard retirement sum scheme, each of us is free to opt out if we decide that a CPF LIFE premium is simply not for us – for example, if you’ve purchased a private annuity scheme or retirement plan elsewhere.
That said, in order to opt out, you’ll need to apply for an exemption – which means proving that you are age 55 and above and actively receiving lifelong monthly payouts from another source, among other things. On top of this, you’ll need to ensure that:
Each monthly payout included with your alternative retirement package exceeds the benchmarks set by CPF here.
Your annuity can be paid or contributed to using either cash or the CPF Investment Scheme
Ultimately, the level of monthly payouts anytime you are receiving will determine whether you can be either “fully” or “partially” exempted from a CPF life package.
Other Methods of Opting Out of CPF Life
In addition to opting out via an alternative retirement plan, you are also free to choose to leave CPF life for any of the following reasons:
If you are leaving Singapore and/or West Malaysia without planning on coming back (or have already left with no intention of returning)
If you are suffering from any medical complications such as terminal illnesses or mental/physical incapacities
Once an opt out has been officially registered, you’ll receive any unused lump sum premium from CPF minus any pay outs you may have already received at the point of opting out.
Is There a CPF LIFE Minimum Sum Required?
You might be wondering how much you need in CPF savings to join CPF LIFE. If so, the answer is zero – there is no minimum sum required in order to join the scheme.
That said, if you join CPF LIFE with a low level of CPF savings, you will get lower monthly payments than someone who’s amassed a higher level of savings – who, by way of comparison, would receive higher monthly payouts as a result of this. The table below taken from CPF’s own website explores the estimated level payouts for Singaporeans in different circumstances. Remember, it’s important to ensure the full retirement sum you receive will cover your ideal retirement lifestyle.
|
Desired Monthly Payout from Age 65 |
CPF Life Premium at Age 65 |
CPF Savings Required at Age 55 |
CPF Savings Required at Age 60 |
|
$350 to $370 |
$60,000 |
$36,000 |
$45,000 |
|
$530 to $560 |
$95,000 |
$60,000 |
$75,000 |
|
$770 to $830 |
$145,000 |
$96,000 |
$115,000 |
|
$940 to $1,010 |
$180,000 |
$120,000 |
$145,000 |
|
$1,450 to $1,550 |
$285,000 |
$192,000 |
$230,000 |
|
$1,520 to $1,630 |
$300,000 |
$200,000 |
$240,000 |
|
$2,120 to $2,280 |
$425,000 |
$288,000 |
$345,000 |
As you can see, you’ll most likely need to stash away higher savings or even supplement your retirement income with an additional retirement package if you wish to secure higher monthly payouts. It’s worth noting that the CPF website offers a helpful CPF LIFE Estimator tool as part of My CPF Online Services, where you can calculate how much CPF savings you’ll need to fund the higher monthly payments you desire post-retirement.
How Much Can You Withdraw from CPF LIFE?
It’s important to note that once you hit age 55, there is a minimum sum imposed by CPF that you are not allowed to withdraw. This means that, unfortunately, you are not 100% free to draw down your CPF savings to make elaborate purchases with however you please.
That “minimum sum” you can see displayed in your CPF accounts which can’t physically be used to pay for anything is sometimes referred to as your CPF retirement sum scheme. There are three separate retirement sums you need to be aware of, which are:
- CPF Life Basic Sum
- CPF Life Full Plan Sum (Basic x2)
- CPF Life Enhanced Plan Sum (Basic x3)
Each of the above retirement sums will increase year-on-year. The table below demonstrates roughly how this will work for Singaporeans on the year of your 55th birthday:
|
Saver’s 55th Birthday Year |
Basic Plan Retirement Sum |
Full Plan Retirement Sum |
Enhanced Plan Retirement Account Sum |
|
2018 |
$85,500 |
$171,000 |
$256,500 |
|
2019 |
$88,000 |
$176,000 |
$264,000 |
|
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 |
Your basic retirement sum will ultimately affect how much you can and can’t withdraw under different circumstances. Let’s look at a few examples:
Homeowners in Singapore
If you own a home, you can potentially withdraw any CPF savings that rest above your basic retirement sum, so long as the property’s lease will last you up to age 95 and you are prepared to “top up” your retirement account (i.e., to match the full retirement sum) in the event of selling your home. For example, if you turn 55 this year and have $200,000 in RA savings, you are eligible to withdraw $104,000 (because $104,000 = $200,000 minus your $96,000 basic retirement sum for 2022).
Non-Homeowners in Singapore
If you don’t own a home, you are eligible to withdraw RA savings above your full retirement sum. This rule applies also to any homeowners who do not wish to top up their CPF retirement account or CPF accounts after selling their home.
CPF LIFE Monthly Payouts – What is the Maximum?
CPF Life pay outs are dependent on a number of factors, including:
- Your age
- Your gender
- The level of RA savings you have used to join CPF Life
- Your preferred CPF LIFE plan (basic, escalating, etc.)
- Interest and mortality rates dictated by CPF
The current maximum for CPF LIFE is linked to CPF’s enhanced retirement sum, which is capped at $288,000 for 2022. On a pay outs basis, this would make the maximum monthly payout approximately $2,120 to $2,280 per month for a Singaporean on a standard plan turning 65 this year – or potentially even lower for those on an escalating plan.
The table below shows rough estimations of how stable monthly payouts can function with CPF LIFE from age 65 onwards. Just keep in mind that these are estimates and real pay outs must be adjusted on a case-by-case basis to account for interest rate changes, life expectancy and other factors. If you’d like to determine a more accurate representation of what level payouts you will receive personally, CPF offers a helpful CPF Life Estimator that enables you to do exactly that.
|
RA Savings at Payout Age 55
|
Expected Monthly Payouts (At Payout Age 65) |
||
|
Standard / Default CPF LIFE |
CPF Life Basic Package |
CPF Life Escalating Plan |
|
|
Basic Retirement Sum |
$720 to $780 |
$700 to $800 |
$600 to $640; With Monthly Payouts Increasing by 2% Year-on-Year |
|
Full Retirement Sum |
$1,400 to $1,500 |
$1,300 to $1,400 |
$1,100 to $1,200; With Monthly Payouts Increasing by 2% Year-on-Year |
|
Enhanced Retirement |
$1,900 to $2,100 |
$1,900 to $2,000 |
$1,500 to $1,700; With Monthly Payouts Increasing by 2% Year-on-Year |
Is a CPF LIFE Plan Enough for Retirement Income?
For many Singaporeans, the monthly payments accessible via CPF LIFE just won’t cut it. This is particularly true if you intend to live a lavish luxury lifestyle in your later years – under these circumstances, you may wish to look at additional retirement savings options to supplement your eventual retirement income.
That said, let’s compare the three CPF Life plans in closer detail to give you a better idea of what kind of terms you can expect once you start your pay outs with CPF.
Three Key CPF LIFE Plans Compared
The three key CPF LIFE Plans you’ll want to be aware of include the CPF LIFE Standard Plan, Escalating and Basic packages.
1. CPF LIFE Standard Plan
The first and most straightforward of the three CPF LIFE Plans worth considering is the standard plan. This offers you stable monthly payouts for the remainder of your elderly CPF life. This “default” plan will require you to pay 100% of your RA savings toward a lump sum premium when you join the scheme.
2. CPF LIFE Escalating Plan
With CPF’s “Escalating” plan option, all savings in your RA falls into funding a premium. With this option, you’ll get lower monthly payouts than on a standard plan at first, but your CPF LIFE payouts will increase at a rate of 2% per year to provide a more desired monthly payout in line with changes and fluctuations to inflation.
3. CPF LIFE Basic Plan
The final option from your choice of three CPF LIFE plans offers CPF LIFE payouts that are made up of a combination of CPF LIFE funds and your own elderly CPF LIFE savings. Only between 10 and 20% of your own savings will be deducted for your premium, but once your CPF retirement account or special account falls below $60,000, your monthly payouts will decrease.
Boosting CPF LIFE Savings and Retirement Income
There are several ways you can supplement your CPF LIFE payouts to enjoy higher monthly income than what is allowed solely through your remaining CPF. Your options include:
Retirement Insurance and Private Annuities
These are much like CPF LIFE but organized through private providers. You’ll be happy to hear that even without the need for a CPF LIFE exemption, you can enjoy up to two tailored retirement income streams.
Other Investments
Any kind of investment can effectively function as a CPF LIFE supplement. Examples include stock-related dividends, ETFs and robo advisor products. Learn more investment options for beginners.
What Happens to Your CPF LIFE Plan When you Pass Away?
You don’t need to worry about longevity risks with CPF. When you die, CPF will refund the unused portion of your lump sum premium back into your CPF retirement account. If you pass away before making any CPF nominations, your RA falls to the next person in line – i.e, your money will be given to your beneficiaries according to Singapore intestacy laws.
Frequently Asked Questions (FAQs) About CPF LIFE
1. How Are the CPF LIFE Premium and Payouts for Life Calculated?
CPF LIFE payouts anytime are calculated based on an interest rate of 6% per annum and are assumed to begin from the payout eligibility age of 65. You’ll get CPF LIFE payouts until age 70, 80 or beyond – as CPF LIFE provides payouts for life until the day you die.
2. Will My CPF LIFE Premium Earn Interest?
CPF LIFE retirement savings offer high interest that’s relatively risk-free for savers. You will earn interest at a rate of up to 6% per annum, which is typically higher than what many private providers offer.
3. Can I Withdraw My CPF LIFE After Age 65?
CPF LIFE offers monthly payouts for as long as you live. Any remaining savings or lump sums in your RA that haven’t been set aside for higher pay outs will automatically be transferred into your ordinary accounts once CPF LIFE payments start. Funds can be withdrawn from your OA at any time.
4. Is CPF LIFE Income Taxable?
At the time of writing, both CPF LIFE payments and Singapore government pensions are deemed tax-exempt. That said, if you have a private annuity plan, any income received privately is classed as taxable under Singaporean law.
5. How Can I Increase My CPF LIFE Payouts?
There are several things you can do to increase the value of your CPF LIFE payouts. These include top ups, using your withdrawable savings to increase your CPF LIFE premium, monetizing your property and deferring your monthly payouts. More information can be accessed on the CPF LIFE website here if you need it.
6. Can I Make Top Ups to CPF LIFE After Age 70?
You are free to top up your SA account at any point below age 55, or your RA account if you are aged 55 or over. Payments can be made via either CPF transfer or cash.
7. What Can My CPF LIFE Be Used For?
CPF LIFE can provide you with monthly payouts to help fund your retirement – and you can get started at any point up to age 70. As the money you receive acts as retirement income, it can be used to pay for many different things in life. If you’re worried about longevity risks, it’s worth noting that when you die, whatever amount of CPF you have accumulated in savings can also be given to your beneficiaries.
8. Are CPF LIFE Plans Compulsory?
While most Singaporeans will be automatically enrolled onto CPF LIFE, there are many ways in which you can opt out and the plans are by no means compulsory. Visit the CPF LIFE website here for more information.
9. What Does it Cost to Join a CPF Life Plan?
Currently, there is no minimum amount of savings required for joining CPF LIFE. That said, you might find yourself receiving low monthly payouts if you get started with a low RA balance.
CPF LIFE – Join CPF Life and Achieve Your Desired Retirement Lifestyle
From determining what kind of CPF LIFE payouts you need in later life to investigating new ways of achieving your ideal monthly income for as long as you live, there’s a lot to get your head around when it comes to CPF LIFE and retirement planning. Don’t forget that:
- CPF LIFE offers monthly payouts for your entire lifetime, using your remaining CPF to fund payouts. For most Singaporeans, this money is enough to cover any immediate need, though top ups may be necessary and a CPF Life Standard Plan won’t be enough for everyone – particularly those who enjoy luxury.
- You’ll be automatically enrolled onto a CPF Life package if you’re an eligible citizen who has accumulated at least $60,000 in RA savings before age 65 – meaning you won’t usually need to join the CPF scheme manually to start getting your desired regular payout.
- Achieving your desired monthly amount of CPF and retiree income may require signing up for more than just CPF LIFE payouts – you might wish to explore tops ups and alternative retirement savings plans too to avoid getting stuck with minimum sums or lower monthly payouts than you realistically require.
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