Is anyone ever prepared for retirement in Singapore? Probably not.
Personally, when I look at the old hawkers at my favourite hawker centre these days, I can’t help but feel a jolt of retirement-related existential panic. By the time I retire, they’ll be long dead and gone – and so will the $3 nasi padang and $1 dessert stalls. What will my life be like then? And can I still afford it?
It’s important for everyone to know about CPF LIFE because that’s the default retirement plan for Singaporeans. In fact, it’s probably the only retirement plan most of us have. (Having kids and hoping they’ll be filial to you doesn’t count.)
So let’s find out what CPF LIFE is all about, what you need to join the scheme, and what the payouts are like. Warning: It’s a long read.
Disclaimer: All information is taken from CPF’s website and processed to the best of my abilities. If you spot any factual errors or ambiguities, please feel free to correct me.
- What is CPF LIFE? How is it different from CPF Minimum Sum?
- Who is eligible for CPF LIFE? How do you sign up?
- How much are the CPF Basic / Full / Enhanced Retirement Sums?
- Can you still join CPF LIFE even if you don’t meet the CPF Retirement Sums?
- CPF LIFE payouts: How much will you get when you retire?
- CPF LIFE plans: What’s the difference between standard, basic & escalating plan?
- What if you want higher CPF LIFE payouts?
- What happens to your CPF LIFE when you die?
- Is it possible to opt out of CPF LIFE?
- Can you supplement (or replace) CPF LIFE with a private annuity plan?
What is CPF LIFE? How is it different from CPF Minimum Sum?
CPF LIFE is the current incarnation of the Central Provident Fund’s retirement scheme.
Previously, the retirement scheme was called the CPF Minimum Sum Scheme, later renamed as the CPF Retirement Sum Scheme.
Tied to both schemes is the CPF Retirement Account (RA), which is what every Singaporean gets when they turn 55 years old. At this point, 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), the excess will be left in your OA.
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, it means payouts will stop when your RA balance dwindles to $0 (expected to be 85 to 95 years old).
So CPF now has another retirement scheme called CPF LIFE. Actually it’s CPF “LIFE”, which stands for Lifelong Income For the Elderly. As the “Lifelong” bit suggests, your retirement payouts will never stop.
The trade-off is that you need to pay a lump sum premium, deducted from your RA, when you join the scheme. This means there’s a chance your Retirement Account will be depleted right from the start.
This has implications if you’re planning to use your CPF balance to pay for housing past age 55, like if you’re servicing a long-term home loan. It’s still possible to do so with your RA balance, but only the amount above the Basic Retirement Sum (now $88,000). But this also means your monthly retirement payouts will be lower.
Who is eligible for CPF LIFE? How do you sign up?
Assuming you won’t feel the need to use your RA to buy property, CPF LIFE is a lot more attractive than the CPF Retirement Sum scheme for the simple reason that you just don’t know how long you’ll live.
The retirement payouts are for life, even if you get bitten by Edward Cullen and become immortal. Since Singaporeans love buffets and unlimited data so much, I’d expect most of us to be all over this.
There’s no need to frantically look for a sign-up link, though, because as long as you’re under 61 years old, you won’t be left out of the scheme. In typical CPF fashion, you’ll be automatically enrolled, lest you take leave of your senses and neglect to do so.
Here are the auto-enrolment “rules”:
|Date of birth||CPF RA balance||Will you auto-join CPF LIFE?|
|Up to 31 Dec 1957||–||No (but you can apply to join)|
|1 Jan 1958 to 30 Apr 1961||$40,000 at age 55 OR $60,000 6 months before age 65||Yes|
|1 May 1961 & after||$60,000 6 months before age 65||Yes|
If you’re not automatically placed on CPF LIFE for some reason – most likely because your RA balance isn’t high enough – you’ll be placed on the Retirement Sum Scheme.
But you can still opt-in for CPF LIFE anytime from age 65 (the current payout eligibility age, for those born in 1954 or later) to age 79 – yes, even if you’ve already started receiving Retirement Sum payouts by then.
You can apply for CPF LIFE:
- Online through My CPF → My Requests
- In person at CPF Service Centres
- By mailing this CPF LIFE application form to CPF
- The cut-off date is 1 month before your 80th birthday
How much are the CPF Basic / Full / Enhanced Retirement Sums?
“Heng ah, so the CPF minimum sum is only $40,000,” you might be thinking with a sigh of relief.
Umm, no, it’s not, so you better not blow the rest of your money on 4D…
Confusingly enough, that $60,000 minimum balance in your Retirement Account is totally different from the other Retirement Account minimum balance known as the CPF Retirement Sums.
Here are the Basic, Full and Enhanced Retirement Sums for someone turning 55 in 2019. (They increase every year.)
|CPF retirement sum||RA savings at age 55|
|Basic Retirement Sum (BRS)||$88,000 (only possible if you own a property and pledge it to CPF)|
|Full Retirement Sum (FRS)||BRS x 2 = $176,000|
|Enhanced Retirement Sum (ERS)||BRS x 3 = $264,000|
The Basic Retirement Sum applies to property owners, based on the assumption that you won’t need to pay rent and therefore can live on a smaller paycheck. Do note that if you opt for BRS, the following conditions apply:
- You must make sure that your RA balance + the CPF you used to pay for the property can add up to the Full Retirement Sum, OR….
- Otherwise, you need to “pledge” your property to CPF. This means that, should you sell or transfer your property, you agree to put a certain amount of the proceeds back into your CPF – enough to hit the FRS.
- The amount you can withdraw from your CPF excludes CPF top-ups, any interest earned, and any government grants you’ve received in the past.
So if you’re unable or unwilling to do these, you will need to meet the Full Retirement Sum instead.
The Enhanced Retirement Sum is also an option, but completely on a voluntary basis.
Whichever one of these CPF retirement sums apply to you, it refers, more or less, to how much you need to leave inside your CPF when you turn 55. This means you can’t withdraw your entire CPF balance and use the money to buy a private island, I’m sorry.
That said, regardless of your CPF balance at age 55, you can still withdraw at least $5,000 at that point. If you were born in 1958 or after, you can also withdraw up to 20% of your RA savings at your payout eligibility age (now 65). This includes the $5,000 you took out at 55 years old.
Can you still join CPF LIFE even if you don’t meet the CPF Retirement Sums?
Yes, you can. Even if you cannot hit any of these CPF Retirement Sums, you can still join CPF LIFE.
That’s because the two schemes are for different things. For someone who’s interested in CPF LIFE, all the CPF Retirement Sum tells you is how much you can withdraw from your CPF when you turn 55.
But pretty much anyone can join CPF LIFE. The requirement for joining CPF LIFE is much lower than any of the minimum sums. Even if you have hardly anything left in your CPF, you can join – but you’ll just receive an extremely small amount every month, that’s all.
Confused yet? Here’s a breakdown of what’s going to happen to your retirement fund, depending on how much is left in your CPF when you turn 55:
|CPF balance at age 55||How much can you withdraw?||Minimum balance to keep in CPF||Will you auto-join CPF LIFE?|
|Up to $5,000||Every last cent||None||No|
|$5,000 to $176,000||$5,000||Whatever remains after you deduct $5,000||Yes if you have $60,000 in RA at age 64.5 (otherwise you can apply)|
|$5,000 to $176,000 (and you own property)||Any savings above $88,000||$88,000||Yes if you have $60,000 in RA at age 64.5 (otherwise you can apply)|
|More than $176,000||Any savings above $176,000 (or $5,000, whichever is higher)||$176,000||Yes|
|More than $176,000 (and you pledge your property to CPF)||Any savings above $88,000||$88,000||Yes|
Okay, maybe an illustration would be better. Imagine we have 3 Singaporeans who are turning 55 in 2019. Let’s call them Bubbles, Blossom and Buttercup.
Illustration 1: Bubbles has less than $5,000 in her CPF OA + SA combined on her 55th birthday. So, she’s allowed to withdraw every last cent in her CPF.
CPF will create a Retirement Account for Bubbles, but there will be nothing in it. Bubbles can then top up her empty RA, unless she has some alternate retirement fund stashed away in a Swiss bank or something.
Illustration 2: Blossom has $70,000 in her CPF savings. She can withdraw $5,000 and leave $65,000 in there. Because she hasn’t met the Basic Retirement Sum of $88,000, she can’t pledge her flat to CPF.
Even though she can’t hit BRS, Blossom will still automatically be enrolled in CPF LIFE, assuming her CPF RA balance is at least $60,000 when she’s 64 and a half years old.
Illustration 3: Buttercup’s CPF balance at age 55 is $180,000. She also owns a home. (Share your secret, Buttercup!)
She has two options. The first is to withdraw $5,000 and leave $175,000 in her CPF RA. Or, she can choose to pledge her home to CPF. Then she can withdraw $92,000, leaving the Basic Retirement Sum of $88,000. But if she sells her home, she will have to use the proceeds from the sale to top up her CPF to $176,000.
Either way, Buttercup will also be on CPF LIFE as long as her CPF RA balance is $60,000 or more when she’s 6 months from 65 years old.
CPF LIFE payouts: How much will you get when you retire?
All right – enough about the Powerpuff Girls, let’s move on to how much you can actually get from CPF LIFE and when you can actually see the money.
But first, I need to emphasize that you don’t actually start receiving CPF LIFE payouts the moment you turn 55. You will only receive them from age 65 (or you can also defer your payout starting date up to age 70). This means you need some kind of income stream between age 55 and 65.
With that out of the way, CPF LIFE payouts simply depend on 2 variables: (a) your CPF RA balance and (b) the type of CPF LIFE plan you choose.
For (a), the more you have in your CPF RA, the more payouts you get. Most CPF LIFE payout illustrations use the Basic, Full and Enhanced Retirement Sums to demonstrate the payouts, but my understanding is that your CPF LIFE payouts are pro-rated, so there’s no need to hit a certain RA balance for fear of falling to the next tier.
As for (b), there are 3 CPF LIFE plans: Basic, Standard, and Escalating. These deserve a section of their own, so I’ll explain them in detail in the next section.
These are the CPF LIFE payouts for the 3 plans for 2019, assuming you have the following amount in your CPF RA.
|CPF RA balance||CPF LIFE payout (Basic)||CPF LIFE payout (Standard)||CPF LIFE payout (Escalating)|
|$88,000 (Basic Retirement Sum)||$690 to $720||$730 to $790||$570 to $620 (increases 2% p.a.)|
|$176,000 (Full Retirement Sum)||$1,280 to $1,320||$1,350 to $1,450||$1,040 to $1,140 (increases 2% p.a.)|
|$264,000 (Enhanced Retirement Sum)||$1,860 to $1,920||$1,960 to $2,110||$1,510 to $1,660 (increases 2% p.a.)|
These are just estimates. The actual amounts vary – especially from one year to the next – so for a better idea of what payouts you can actually get, use the CPF LIFE payout calculator (officially known as CPF LIFE Estimator). You can also put in your desired monthly payout and it will tell you how much you need to have in your RA to get that. Nifty.
Note, though, that the latest birth year you can input is 1978. Not too helpful for 20-somethings who want to get a head-start on retirement.
CPF LIFE plans: What’s the difference between standard, basic & escalating plan?
That previous section might have left you mind-blown – you mean there are different CPF LIFE payout plans!?
Yes there are, and if you’re auto-enrolled on CPF LIFE, you have to make your choice anytime from age 65 to age 70. If you don’t do so by age 70, you’ll just be put on the CPF LIFE Standard plan.
So how are the Basic, Standard and Escalating CPF LIFE plans different? Here’s a summary table with numbers for 2019, assuming your RA balance is $88,000 (CPF Basic Retirement Sum):
|CPF LIFE plan||Basic||Standard||Escalating|
|Cost of premium||10% to 20% of RA ($8,800 to $17,600)||100% of RA ($88,000)||100% of RA ($88,000)|
|Monthly payout structure||Monthly payout decreases once RA falls below $60,000||Same monthly payout for life||Monthly payout increases 2% every year|
|CPF LIFE payout (age 65)||$690 to $720||$730 to $790||$570 to $620|
|CPF LIFE payout (age 75)||$690 to $720||$730 to $790||$694.83 to $755.78|
|CPF LIFE payout (age 85)||$690 to $720||$730 to $790||$846.99 to $921.29|
|CPF LIFE payout (age 95)||$690 to $720||$730 to $790||$1,032.48 to $1,123.04|
We’ll start with the simplest of the 3 plans: CPF LIFE Standard plan. This is the default you will get if you don’t actively make a decision between age 65 to 70. Once you join this plan, CPF deducts 100% of your RA balance as the annuity premium, which basically empties your RA.
The annuity premium will then earn interest. Interest from all CPF members’ premiums are pooled, based on the principle of risk pooling (in this case the risk of longevity). What interest you get on your premiums is drawn from this pool.
You will receive the same monthly payout for life. For the first 10 to 15 years, this amount will be the highest among the 3 plans, but it will be overtaken by the Escalating plan from then onwards.
The CPF LIFE Standard plan doesn’t account for inflation, which is a real problem. If you think $730 to $790 a month sounds pathetic, imagine what it’ll be like after 30 years of inflation.
So if you’re concerned about that – as you should be, given life expectancies these days – the CPF LIFE Escalating plan is a lot more attractive.
The payouts start low and increase by 2% every year – which can’t quite beat inflation, but it’s better than nothing. Based on the example above, the CPF LIFE Escalating plan payouts start to beat the Standard payout in the 13th year.
The one problem is that the starting payout is so, so low – it’s significantly lower than that of the Standard plan payouts. If you’re going for this, you might need to pump more money in your RA to get a decent standard of living.
Finally, the most complicated scheme is the CPF LIFE Basic plan. This is a hybrid of CPF LIFE and the original CPF Retirement Sum Scheme. Instead of deducting 100% of your RA savings, CPF will deduct only 10% to 20% for your CPF LIFE premium. That leaves you with a bit of buffer savings in your RA, which continues to earn interest.
From ages 65 to 90, you get monthly payouts from your RA savings, just like with the old CPF Retirement Sum Scheme. From age 90, your payouts come from the communal CPF LIFE fund, so the payouts are for life.
You’ll notice that the monthly payouts for the CPF LIFE Basic plan are lower than that of the Standard plan and even the Escalating plan (after the first 10 years).
But the real problem is that Basic plan payouts will actually DECREASE once your RA balance (including the 10% to 20% for CPF LIFE) falls below $60,000.
This is due to decreasing Extra Interest (EI), but facing lower payouts at an advanced age is something that most of us would want to avoid – so opt for the Basic plan only if you’re very comfortable with this.
The interest that you get is from pooled from of all CPF members, using the common method of risk pooling.
What if you want higher CPF LIFE payouts?
If you’ve done the calculations and found your projected CPF LIFE payouts rather dismaying, there are 2 ways to boost them from within CPF.
You can either top up your CPF RA balance, and/or defer your CPF LIFE payout date.
CPF RA top up: Since CPF LIFE payouts correlate to your RA balance, you can increase the former by topping up your CPF RA with cash, up to the Enhanced Retirement Sum (currently $264,000).
If this is done after CPF has already deducted the premium for CPF LIFE, don’t worry – you’ll be prompted to put the top-up towards an extra annuity plan or to boost your CPF LIFE payouts. Either way, it means you’ll get more retirement income.
Defer CPF LIFE payout: Alternatively, or concurrently, you can also defer your CPF LIFE payout starting date from 65 up to age 70, whichever age you want.
Your CPF LIFE payouts will increase by “up to 7%” for each year you defer, so you can theoretically boost your payouts by up to 35%. Of course, it also means you won’t have any retirement income for those 5 years, which isn’t ideal.
If you have exhausted these options or are unwilling to pursue them, you can consider supplementing CPF LIFE with an annuity plan from a private insurer. For more on that, see the final section on private annuity plans.
What happens to your CPF LIFE when you die?
Receiving monthly payouts for life sounds very well and good, but what if you die shortly after you start receiving CPF LIFE payouts? Apart from the tragedy of dying while there’s so much life ahead of you, there’s also the matter of what happens to the payouts you were supposed to get.
Before you start posting on Facebook about the evils of CPF – no, CPF won’t just quietly absorb everything and put it towards nation building.
Instead, CPF will refund the unused portion of your annuity premium, without interest, back into your CPF account. This amount, along with any CPF Retirement Account savings left over, will be bequeathed to your CPF nominee(s), if any, in cash (by default) or their CPF (if you so choose).
If you haven’t made any CPF nominations at the point of death, the money goes to your next-of-kin according to Singapore’s intestacy laws.
Is it possible to opt out of CPF LIFE?
CPF LIFE is an optional scheme for Singaporeans who are currently older than 60 years old, but the rest of us will be automatically placed on CPF LIFE once we retire, whether we like it or not.
So, is there any way to opt out of the scheme?
Yes, you actually can – if you buy your own private life annuity plan, and CPF deems it sufficient to provide for your retirement, then you can be exempted from CPF LIFE. In fact, you’ll also be exempted from setting aside any of the CPF Retirement Sums.
I’ll cover the private annuity options in the next section.
Otherwise, you can only leave CPF LIFE under the following circumstances:
- You have a severe medical condition (terminal illness, physical/mental incapacitation, and/or severely shortened life expectancy)
- You are going to leave Singapore and West Malaysia permanently with no intention of ever returning
- You are a Malaysian citizen and have left Singapore permanently to live in West Malaysia
If you successfully leave CPF Life, CPF will refund the unused portion of your RA savings used for CPF Life (or otherwise), minus any monthly payouts you’ve already received.
Can you supplement (or replace) CPF LIFE with a private annuity plan?
Private annuity plans are just like CPF LIFE, except provided by private insurers rather than the government. They work the same way: You pay a premium (often a single premium), and in return, you get monthly payouts for life (with life annuity) or until a certain age (with term annuity).
So it is possible to get your retirement finances sorted out via a private insurer, if you don’t want to go through CPF.
But even if you’re happy with CPF’s triple-A credit rating and the “returns” from CPF LIFE, you might also consider a private annuity plan to supplement your CPF LIFE payouts to support your desired quality of life.
Consider this. Assuming you top up your CPF RA balance to the maximum Enhanced Retirement Sum ($264,000), the highest possible CPF LIFE payout you can get at age 65 are as follows:
|CPF LIFE plan||Monthly payout|
|CPF LIFE Basic||$1,860 to $1,920|
|CPF LIFE Standard||$1,960 to $2,110|
|CPF LIFE Escalating||$1,510 to $1,660 (increases 2% p.a.)|
If you’re used to a $3,000/month lifestyle and have no intention of downsizing your life, then no matter which CPF LIFE plan you choose, it’s going to be tough for you. Even if you can live within these means, you might want the security of having more cash around as a buffer.
As of March 2019, the private life annuities available on the market are (list courtesy of BBCWatcher on HardwareZone, the apparent subject matter expert online):
- Aviva MyLifeIncome
- China Life Lifetime Income Plan
- China Taiping Infinite Harvest
- Etiqa ePremier Eternity Presto
- Great Eastern Prestige Life Rewards 2
- Manulife RetireReady (eligible for Supplementary Retirement Scheme)
- Tokio Marine Retirement GIO
- Tokio Marine Retirement PaycheckLife
As with most things insurance, how much these cost will depend on your profile at the point of purchase. Similar to CPF LIFE, you can usually tailor the plan depending how much much income you’d like to receive when you retire. Read this article for a comparison of the private annuities in Singapore.
If you’re getting one of these as a supplement for CPF LIFE, CPF has absolutely no problem with that – you don’t have to seek approval or anything.
But if you plan to get a private annuity plan to be exempted from CPF LIFE, on the other hand, you will need to submit an official application to CPF, complete with endorsements by your private insurer. The private annuity plan also needs to be for life, i.e. the payments must not stop at a certain age, no matter how advanced.
If you’re applying for CPF LIFE exemption while you already have a CPF LIFE policy, you need to apply separately to cancel your CPF LIFE plan. You’ll get a letter from CPF to proceed with the cancellation if your application is successful.
Got a burning question about CPF LIFE we haven’t answered? Leave a comment below.
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