What the CPF Minimum Sum Changes Really Mean for You

CPF minimum sum Singapore

In 2016, say goodbye to the “CPF Minimum Sum”. And say hello to “Retirement Sum”. I can just imagine how the CPF Advisory Panel started their discussion. “Okay, ladies and gentlemen, from now on, “Minimum Sum” is a bad word.”

A quick glance at the Executive Summary of the CPF Advisory Panel Report (basically the supposed less cheem version) shows that the phrase “Minimum Sum” appears only 6 times. In comparison, the phrase “Retirement Sum” appears 63 times!

The late, great comedian George Carlin famously said, “I don’t like words that hide the truth. I don’t like words that conceal reality. I don’t like euphemisms, or euphemistic language.” It’s like they’re finally acknowledging what we’ve always known – the “Minimum” Sum is actually becoming quite a significant amount, and now want to remind us that this amount is supposed to be for our “retirement” (and at the rate Singapore is “progressing” now, retirement will probably happen AFTER we die).

If you saw our earlier CPF infographic on the new changes you’ll know that the “Minimum Sum” has now evolved into three “Retirement Sum” amounts. There’s “Basic”, “Full” and “Enhanced”. Or, as I want to call it:

  1. “The Absolute Minimum Minimum Sum”,
  2. “Same Same But Different Minimum Sum” and
  3. “Put In More, Get Back More Minimum Sum”.

If you turn 55 in 2016, you will be given the option to choose one of these three “Retirement Sum” schemes. We’ll discuss who benefits the most from each scheme and which one you should opt for.


1. Basic Retirement Sum – The Absolute Minimum Minimum Sum

For years, the CPF Minimum Sum has been increasing, supposedly to combat inflation and rising costs of living. As we’ve said before, this Minimum Sum is supposed to be just enough to help you to live comfortably when you retire. The government was essentially treating us like children, not only by telling us that we cannot manage our own finances, but by not giving us the ability to prove them wrong.

In 2016, change will come. The government is actually giving us what we want. They’re giving us some of our money back. Call me cynical, but that tells me is that the General Elections are near.

We expect most people would be happy with the “Basic Retirement Sum”. It’s half of what today’s CPF Minimum Sum is. It means by age 65, you should be able to withdraw almost all of your CPF, except for $80,500. And guess what? This is practically the amount that was set in 2003.

All you need to do to qualify for the Basic Retirement Sum is to own a property, or at least have used your CPF funds to help pay for it.

Who should opt for the Basic Retirement Sum? Everyone who was worried they’d never see their CPF money again. This is the government’s way of shutting you up and giving you exactly what you want. They’re letting you withdraw a significant amount of your CPF at 65. The government will not have any control over how you use it. How will this affect Singaporeans? Hopefully we won’t have to find out by reading about an increase in casino blacklists and bankruptcy orders.

Seriously, who should opt for the Basic Retirement Sum? This is for those who own their property and want the most flexibility with their retirement options. By taking out most of your CPF, you now probably have a sizable amount of capital which you can invest. If you’ve developed a good investing sense over the years, this may be the best option for you. Just remember that currently, the CPF Interest Rate for the Retirement Account is between 4-5%. If you are convinced you can achieve returns that are better than that, you should definitely consider withdrawing as much of your CPF as possible. Especially since you’ll only get the absolute minimum monthly payout of $650 to $700.


2. Full Retirement Sum – The Same Same But Different Minimum Sum

Now, if you don’t own a house, then you don’t have much of a choice. You don’t qualify for the “Basic Retirement Sum” so you have to set aside the “Full Retirement Sum”, set at $161,000 for 2016. Surprise, surprise, this is the same amount as the 2015 “Minimum Sum”.

In other words, if you don’t own a house, or you don’t want to pledge it, technically nothing has changed for you. If you don’t have at least $161,000 to set aside in your CPF Retirement Account, you’re still not going to be able to withdraw any more than $5000 of your CPF funds at 55. The good thing is, you’ll generally end up getting a higher monthly payout.

Who should opt for the Full Retirement Sum? If you really have no urgent use for thousands of dollars suddenly showing up in your bank account when you turn 65, you would be better off leaving it in your CPF Retirement Account and receiving a higher payout each month. This way, you’re not tempted to spend it unnecessarily, and you will be ensured of an income that will allow you to live somewhat comfortably.


3. Enhanced Retirement Sum – Put In More, Get Back More Minimum Sum

It’s not immediately obvious why the Enhanced Retirement Sum of $241,500 was recommended by the CPF Advisory Board. After all, the calls for a change to the CPF Minimum Sum scheme have been for the amount to be reduced, not increased further. And the truth of the matter is this option is not really anything special. It’s not like you get any added benefit from choosing this option, like a higher interest rate or a bonus.

Very simply put, it means: You put in more of your own money, you get back more of your own money.

Okay, okay, but if I switch off my cynicism for a moment, there is a way to use the Enhanced Retirement Sum to your benefit, and that’s CPF LIFE. When you top up your Retirement Account to meet the Enhanced Retirement Sum, you stand to get monthly payouts of $1750 to $1900 for life.

For life. That’s not a bad deal.

Life expectancy in a modern city like Singapore is bound to increase, maybe even matching that of Japan, which produced the oldest living man and woman. That being said, life is a gamble, of course, and if you’re unfortunate enough not to live to a ripe old age, your beneficiaries will receive the unused money, if any.

Who should opt for the Full Retirement Sum? People who have more than enough money to set aside, so as to receive a substantial monthly payout. This is important as you won’t be able to withdraw the amount after you’ve joined, except under unique circumstances.



This is all still rather confusing…

Let’s do a quick case study: Peter, Steve and Tony will each turn 55 in 2016. They each have $150,000 in their CPF now.


1. Peter, the wannabe photographer

Peter needs money urgently as his retirement plan is to start a photography business. Among other things, it requires him to purchase expensive equipment. He opts to pledge his HDB flat and go for the Basic Retirement Scheme.

In 2016, at 55, he chooses to withdraw $69,500. This leaves $80,500 in his Retirement Account. In 2026, at 65, he starts getting about $700 a month for the rest of his life. He hopes the photography business can sustain him for the rest of his life, because $700 definitely can’t.


2. Steve, the strong silent type

Steve has always believed in prudence and doesn’t get caught up in the technology fads of today. You could say he’s a man out of time. He doesn’t see the need for a huge sum of money urgently. He opts to go for the Full Retirement Scheme.

In 2016, at 55, he withdraws only $5000 to travel the world. This leaves $145,000 in his Retirement Account. In 2026, at 65, he starts getting about $1200 for the rest of his life. He’s happy with that – he’s never needed to live too extravagantly.


3. Tony, the extravagant technology guru

Tony is a genius, billionaire, playboy and philanthropist. He’s got more than enough money set aside for his retirement. But he likes the decent interest rates that the CPF offers, and the assurance it gives. He opts to go for the Enhanced Retirement Scheme.

In 2016, at 55, he tops up his Retirement Account with another $91,500. This leaves $241,500 in his Retirement Account. In 2026, at 65, he starts getting $1900 for the rest of his life. Not that he really needs it.


Got any further questions about the CPF changes? Ask MoneySmart. We’ll try our best to help you.