CPF Life plans refined from four to two
With Singaporeans drawing down under CPF Life from January 1, 2013, the government announced further refinements to the Life plans to better cater to the needs of the people.
SINGAPORE: With Singaporeans drawing down under CPF Life from January 1, 2013, the government announced further refinements to the Life plans to better cater to the needs of the people.
From four plans, CPF Life will now offer only two plans for Singaporeans to make the choices simpler.
These announcements were made by Deputy Prime Minister and Manpower Minister, Tharman Shanmugaratnam during the Committee of Supply debates on the Manpower Ministry's estimates in Parliament on Monday.
As more Singaporeans are expected to live longer, they will need more money for their retirement.
About half of Singaporeans aged 65 today are expected to live beyond 85 years of age. One-third are expected to live beyond 90 years old.
Mr Tharman said: "More and more retirees will outlive their CPF savings if they were on the Minimum Sum Scheme. CPF LIFE is therefore an important and timely evolution of the Minimum Sum Scheme."
Since the introduction of CPF Life in 2009, there has been some feedback about the plans.
Mr Tharman said: "Some think the government introduced CPF LIFE to hold on to their money for life. Actually, all it means is you get paid for life through CPF LIFE instead of for about 20 years under the minimum sum scheme. CPF LIFE does not change how much you can withdraw from CPF in cash and it does not change how your savings in other CPF accounts can be used.
"The second misconception, some people believe you end up losing your CPF savings, if you do not live long enough under this new pooled insurance. This is not the case because when you're on CPF LIFE, you leave a bequest.
"The bequest goes to your loved ones, not to other CPF members and not to the government. You get all of your capital back either through your monthly payouts or in a bequest that you leave to your family and loved ones."
As a result of the feedback received, the CPF Board said it will be combining the desired features of the LIFE Plus and Balanced Plans into a new plan called the Standard Plan.
The new Standard Plan will also be the default plan, meaning if Singaporeans do not indicate their choice of which plan they want, they would automatically be placed under the Standard Plan.
Among the desired features of this plan include comparable payouts to the Minimum Sum Scheme, the bequest feature and the flexibility to use the Retirement Account.
Giving an example of how a member would benefit from the Standard Plan, CPF Board said a member with S$90,000 at age 55 in his CPF balances would receive S$780 as a monthly payout from his draw down age for life.
The draw down age for CPF Life is from 65 years of age.
If the member were under the minimum sum scheme, he would get S$800, but only for 20 years.
The second plan which will be retained is the existing LIFE Basic plan, which would provide a choice for members who prefer a higher bequest and a lower monthly payout.
The CPF Board will however, be removing the LIFE Income Plan as this has generated very low demand, with only three per cent of LIFE participants choosing this plan.
There had also been some confusion over the non-bequest feature in this plan and many members who initially chose the Income Plan changed their minds when the nil bequest feature was explained to them.
CPF Board will no longer offer the Income Plan as an option from 2013.
CPF Board said the Standard Plan will be available from 2013 onwards and about 58,000 members who turn 55 in 2013 will be able to choose between the Standard Plan and the Basic Plan.
As for existing CPF Life members, the Board emphasised that they may remain on their existing plans which they have chosen and there is no need for them to switch.
However, policy holders who still prefer the new Standard Plan will have up to the December 31, 2013 to make the switch.
CPF Board will be sending out customised information packages in the fourth quarter of this year to help them better understand the differences between their existing plan and the new Standard Plan.
The Board emphasised that CPF LIFE provides lifelong income for Singaporeans.
It was introduced in 2009 after extensive public consultation and it applies to CPF members with a Retirement Account balances above S$40,000 at age 55.
Those with lower balances can also opt-in any time.
Between 2009 and now, CPF Board said more than 73,000 members have joined CPF LIFE and since then it has given an opportunity for the Board to better understand the needs of Singaporeans and further refine the plans.
Feedback obtained from members indicated that they generally find it difficult to choose between the four plans and they preferred a simpler scheme.