Every salaried employee in Singapore makes CPF contributions each month, but the CPF system is understood by few. There are more fun things to do with those precious post-work hours than to spend it on the CPF Board’s website trying to decipher government-speak.
One of the most confusing aspects of the CPF system is that there are 3 different CPF retirement sums: Basic, Full and Enhanced Retirement Sum.
Apparently, it’s not enough to worry about whether we’ll have enough money to retire. We now need to worry about which of the 3 Retirement Sums we should meet! Here’s a quick guide to understanding the 3 Retirement Sums and how they affect us.
CPF Retirement Sums: Basic, Full & Enhanced
There are 3 Retirement Sums according to the CPF Board. From lowest to highest, they are:
- Basic Retirement Sum (BRS)
- Full Retirement Sum (FRS) = BRS x 2
- Enhanced Retirement Sum (ERS) = BRS x 3
Singaporeans born in 1958 and later will be automatically placed on the CPF LIFE scheme provided they have at least $60,000 in their Retirement Accounts when they reach 65. This scheme replaces the previous Retirement Sum scheme.
The old Retirement Sum scheme pegged payouts to the Retirement Sum that was in CPF members’ accounts. But CPF LIFE, which guarantees monthly payouts for life, pro-rates payouts based on the exact sum of money in the account.
So, there is now just one key reason the Retirement Sum is still relevant: When you turn 55 and are able to make CPF withdrawals, the Retirement Sum you hit will affect how much you are able to withdraw.
CPF Retirement Sum affects how much you can withdraw at age 55
The year you turn 55 will be a big year, not because you get to stop working, but because your CPF Ordinary Account and Special Account will merge to form your Retirement Account. You will also be able to finally withdraw some money from your CPF account.
But of course, the government would never let you withdraw everything. That’s where the Retirement Sums come in.
Depending on which Retirement Sum you have in your Retirement Account, you can withdraw the following amounts:
|If you hit:||If you don’t have property, you can withdraw:||If you have property*, you can withdraw:|
|Enhanced Retirement Sum||$5,000 or any sum above Full Retirement Sum, whichever is higher||Any sum after setting aside Basic Retirement Sum|
|Full Retirement Sum||$5,000 or any sum above Full Retirement Sum, whichever is higher||Any sum after setting aside Basic Retirement Sum|
|Basic Retirement Sum||$5,000||Any sum after setting aside Basic Retirement Sum|
|Less than BRS but more than $5,000||$5,000||$5,000|
|$5,000 or less||Everything||Everything|
*lease must continue at least until you turn 95
In a nutshell, for those who don’t own property, the government wants to make sure you have at least the Full Retirement Sum in your account. However, as a consolation prize, they will allow you to withdraw at least $5,000 no matter how much or how little you have.
Why does owning property affect your CPF withdrawal at age 55?
If you own a property whose lease will continue at least until you turn 95, the government thinks that you have a financial safety net. Thus, the requirements for your Retirement Account balance are less stringent.
As a result, they will let you get away with keeping just the Basic Retirement Sum in your account and withdrawing amounts beyond that.
But should you decide to sell off your property in the future, you must return the proceeds (or your share of them, if you co-own the home) to your CPF, topping it up to the Full Retirement Sum.
If you own property and have hit the Full Retirement Sum, you can either choose to pledge it (BRS applies) OR to not pledge it (FRS applies). In the latter case, you cannot withdraw as much money from your CPF, but your CPF LIFE payouts will be higher.
Now, let’s dive into each of the 3 Retirement Sums in greater detail.
CPF Basic Retirement Sum (BRS)
The most recent BRS amounts are as follows:
|Year in which CPF Member turns 55||Basic Retirement Sum|
The government updates the BRS every year, but does not divulge figures more than one year in advance.
Assuming your CPF balance meets the Basic Retirement Sum at age 55 — if you do not have property, you will be able to withdraw $5,000.
If you own and pledge your property to CPF, you can withdraw any sums in excess of the BRS that you have in your Retirement Account.
CPF Full Retirement Sum (FRS)
The FRS is double the BRS. Here are the most recent FRS sums:
|Year in which CPF Member turns 55||Full Retirement Sum|
If you do not have property and manage to hit the FRS, you will be able to withdraw $5,000 or any sums in excess of the FRS in your account, whichever is higher.
On the other hand, if you are a property owner and manage to hit the FRS, you’ll be able to withdraw any sums in excess of the BRS that you have in your Retirement Account.
The FRS is generally double the BRS, so you’ll be able to withdraw at least half of the money in your account.
CPF Enhanced Retirement Sum (ERS)
For those on CPF LIFE, the ERS indicates the maximum amount of money you can keep in your Retirement Account, as well as the maximum amount of monthly payouts you can receive from age 65 onwards.
So, if you’re thinking of transferring more money to CPF in order to take advantage of the high interest rates, try not to exceed the ERS.
The ERS is 3 times the BRS. Here are the ERS rates from 2020 to 2022:
|Year in which CPF Member turns 55||Enhanced Retirement Sum|
How much do BRS, FRS and ERS increase every year?
Increases in the BRS, FRS and ERS are made by the CPF Board according to their analysis of long-term inflation and rises in the standard of living.
While there is no way to predict the future, looking to the past, the past five years’ Retirement Sums were as follows:
|Year||Basic Retirement Sum||Full Retirement Sum||Enhanced Retirement Sum|
There has been an increase of about 3% each year. To estimate the Retirement Sums when you turn 55, you can thus base your calculations on a 3% year-on-year increase, bearing in mind that that might change depending on Singapore’s financial future.
What if you can’t hit even the Basic Retirement Sum?
It’s perfectly OK to not hit any of the 3 Retirement Sums above. There is no penalty for not hitting the Basic Retirement Sum.
Not hitting the BRS only means you’ll only be able to withdraw $5,000 from CPF at age 55. Your retirement payouts will not be affected.
In the past, the old CPF Retirement Sum scheme did peg retirement payouts to whichever Retirement Sum you hit. Back then, failing to meet BRS might have been a cause for concern.
But the current CPF LIFE scheme is fully pro-rated based on the exact amount of retirement savings you have. So whether you hit BRS or not, your lifetime payouts will be calculated fair and square.
Can you top up your CPF to meet the Retirement Sum?
Thinking of topping up your CPF so you can withdraw more money at age 55 to travel the world? It’s not gonna work.
CPF top-ups do not count towards the Basic/Full/Enhanced Retirement Sum (insofar as they’re used for calculating the amount of money you can withdraw at age 55). For that matter, government grants and earned interest also do not count.
But CPF top-ups do count towards your retirement savings. The more you top up, the higher your CPF LIFE payouts. So you’re still encouraged to top up to boost your retirement savings.
FYI, if your parents have not met the BRS, you can get dollar-for-dollar matching on voluntary CPF top ups through the CPF Matched Retirement Savings Scheme. More details in the following article.
Ways to grow your retirement savings
To recap, the Retirement Sum in your account will determine how much of your CPF savings you can withdraw after your 55th birthday.
Your CPF top-ups will not count towards the amount you withdraw at age 55. But it’s still a good idea to grow your retirement savings anyway. After all, withdrawing money at age 55 is a one-time event, while CPF LIFE payouts are for as long as you live.
There are generally 2 methods to boost your retirement income from CPF:
1. Top up your Retirement Account – The Retirement Sum Topping-Up Scheme lets you transfer cash to your CPF SA or RA. This not only boosts your monthly payouts and entitle you to tax relief, but also enables you to enjoy CPF’s SA and RA interest rates, which are currently at a base rate of 4%. You can top up your account to the ERS to maximise your payouts.
2. Invest your cash and top up CPF account later on – Not everyone is comfortable with locking money in their CPF account(s). One alternative is to invest your cash when you’re younger and have a higher appetite for risk. Then when you’re older, funnel some of your portfolio into CPF to earn risk-free interest rates, and to get higher monthly payouts for CPF LIFE.
If you’re looking to do the latter, here are some guides to get you started:
- How to Buy Stocks in Singapore: Start Investing in 5 Easy Steps
- How to Buy US Stocks in Singapore: 3 Best Investment Brokerages
- Compare the Best Online Investment Brokerages in Singapore 2021
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