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Good quality information is required for retirement planning. Leong Sze Hian

CPF Life: Helping Singaporeans to decide?

Leong Sze Hian

I refer to the article "Take-up rate of CPF annuity 'encouraging".

An estimated 700,000 CPF account holders age 55 to 80, are being encouraged to opt-in to CPF Life from September this year.

The obvious question that may come to the mind of those affected, is to ask what is the estimated monthly payout for 20 years, under the current CPF Minimum Sum Scheme (MSS), if one does not opt-in to CPF Life?

I would therefore like to suggest that the CPF Board include this information in their invitation letter that is being sent to those eligible to opt-in now.

Unless the letter states the amount, or indicates that there is a CPF Minimum Sum Payout Calculator (MSPC) on the CPF web site, a lot of people may be calling the CPF Board.

In this connection , I understand that the CPF Board has been inundated with calls and visits regarding CPF Life.

In any case, I used the MSPC and found that the calculator is still using the old four per cent interest rate to calculate the 20-year monthly payout.

In this regard, I would like to suggest that the calculator be up-dated, to reflect the extra one per cent on the first $60,000 in the Retirement Account.

Otherwise, it may not be a apple-to-apple comparison as CPF Life annuity payout estimates include the extra one per cent interest.

Since the most popular plan selected so far is Life Plus, which gives a higher payout but the beneficiaries get less, it may also be helpful to give more information on the bequest amount for the three out of the four CPF Life options that have a bequest to beneficiaries.

For example, instead of just a straight line graph to illustrate the bequest, information like a 55 year old with $67,000 in the Retirement Account shall have a bequest on death at age 75 of $1,000 to $8,000, $51,000 to $52,000, $72,000 to $77,000, for CPF Life Plus, Life Balanced and Life Basic, respectively, may help Singaporeans to select the appropriate option.

Similarly, for death at age 80, the bequest is 0, $21,000 to $23,000, and $54,000 to $58,000, respectively.

For those who have already opted over the previous 12 months for the V-Bonus, will they be able to now change to the new L-Bonus?

The reasons being that the L-Bonus may be more than the V-Bonus, and the L-Bonus starts the annuity payout from one’s original payout age of 62, 63 or 64. instead of 65 under V-Bonus.

Giving more information may help Singaporeans to decide on opting in to CPF Life, which is a very good scheme to alleviate the financial risk of living too long.