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What is CPF Life?
At age 55, the Minimum Sum cash balances will be split into two parts—a larger part that remains in the Retirement Account (RA), and a smaller part, the Refundable Premium (RP).
The RA pays a monthly income from age 65 to the CPF Life (LI) payout age, which the member chooses. The RP continues the same monthly payouts from the LI payout age as long as the member is living.
If the member dies before LI payouts start, the unused RA including interest, and the RP will be returned in full to his beneficiaries. If the member dies after the LI payouts start, the RP less sum of LI payouts given will be returned to his beneficiaries.
Participants can choose when their LI starts. But if they do not, they will be placed into the default “Refund 80” Plan with LI starting age at 80.
CPF members have the flexibility to choose to start their LI payouts at age 65 (Refund 65 or R65) 70(R70),75(R75),80(R80),85 (R85) or 90(R90).
If members prefer to receive higher monthly payouts during their lifetime, they can
start their LI earlier, say at age 75 or even 65. The earlier their LI starts, the more
they will receive each month but the higher the RP proportion will have to be to fund
the plans.
This means less RA balance would go to their beneficiaries if they pass
away before their LI starts. If members are prepared to receive less each month, they can start LI later, at age 85
Premiums
The premium to fund the LI scheme is affordable. Preliminary calculations indicate that for males, this will be 24% of the Minimum Sum, and for females, this will be 28%. The LI premium will be fully refunded as monthly LI payouts to members when alive. Any remaining unpaid amounts will be refunded to their beneficiaries upon their death. The only cost to individuals is the interest from their RP, which is pooled to fund the LI scheme.
That means a person with $60,000 in his CPF who would enjoy an additional $17,900 over 20 years, under the new interest rate structure, will have enough to cover a substantial part of the Refundable Premium.
Income
The income stream that members receive will be proportional to what they have set aside as cash for their Minimum Sum. Those with more Minimum Sum cash will receive a higher lifelong income. The payouts will range from about $350/mth to $1,100/mth for life, for those with the full MS in cash.
The payouts could be higher if members accumulate more CPF savings
after age 55 through continued employment, realisation of investment proceeds, property sale or top-ups.
LI vs CPF Minimum Sum scheme
Example: 55 year old CPF member with estimated $67,000 in CPF Minimum Sum.
With Minimum Sum scheme, he will get $600 for 20 years from age 65 to 85.
With new LI scheme, he could receive about $570 to $610 for as long as he lives. The member is able to get as much compared to the old scheme because of the extra 1% on the first $60,000 and the benefit of pooling.
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