As every Singaporean knows, CPF LIFE is a mandatory retirement annuity scheme imposed by the government on us. Fundamentally, we pay for our own retirement and free up the government to use its fiscal budget for somewhere else.
With CPF Life, you will get a monthly sum from the annuity scheme after you hit the eligibility age of 65. You will get this monthly sum as long as you are alive.
By default, everyone is put on the "CPF Life Standard Plan". The Minimum Sum (now called Full Retirement Sum) - the sum of money retained by CPF Board - for those who are at 55 this year is $171,000. If you have excess of this amount, you can then take them out at 55 from your CPF. This is the most basic explanation for CPF.
Note that the Minimum Sum would escalate to $176,000 for next year (2019) and $181,000 the year after next (2020), for those who will be 55 at the stated respective years. CPF did not mention what the Minimum Sums will be after 2020 but one can be almost certain that it will be increased further by the govt.
For those who have insufficient Minimum Sum or do not want CPF to retain too much for the CPF LIFE scheme, you can pledge your property to CPF Board. This is what it said:
"Members who own a property with more than 30 years of remaining lease, and it is not a short-lease 2-room Flexi or Lease Buyback Scheme flat, may choose to set aside the Basic Retirement Sum. They may withdraw the savings (excluding interest earned, any government grants received and top-ups made under the Retirement Sum Topping-up scheme) above the Basic Retirement Sum in the Retirement Account, provided they have sufficient CPF property charge/pledge on their property."
Half of the Minimum Sum (now called Basic Retirement Sum) will be retained instead. This is calculated to be $85,500 (half of $171,000) for those who are at 55 this year and have a suitable property to pledge to CPF Board. The monthly payouts later will correspondingly be lesser too.
And for those who have a lot of money inside their CPF and like the CPF LIFE scheme very much, he can set aside more in his CPF so as to get more payouts later. Those who are 55 this year and want CPF Board to retain more for CPF LIFE, the sum will be $256,000 or 1.5 times of Minimum Sum (now called Enhanced Retirement Sum).
CPF LIFE Payout
After the CPF Board retains your money at 55 for CPF LIFE, you get nothing for the next ten years. Only after 65 (CPF Board called this the "payout eligibility age") you can then get your monthly payouts from CPF LIFE. They are stipulated as follows for the 2018 cohort (the default CPF Life Standard Plan):
Monthly payouts at 65 with the money retained at 55 by CPF Board:
- $720-$770 ($85,500 - half of Minimum Sum)
- $1,320-$1,410 ($171,000 - Minimum Sum)
- $1,910-$2,060 ($256,500 - 1.5 times of Minimum Sum)
Also, do take note that even though the payout eligibility age is set at 65 years old, you DO NOT get this monthly payout automatically. You must personally inform CPF Board that you want the payout at 65.
If for whatever reasons you did not give any instructions to CPF Board, it will only do the automatically payout when you hit 70:
No one knows why this automatic process of payout is not instituted at age 65 - the "payout eligibility age" written in our laws, and we must personally tell CPF Board to do so.
And finally, CPF Board is always encouraging you or your loved ones to top up your CPF Retirement Account so as to hit the prevailing "Enhanced Retirement Sum" (i.e, 1.5 times of Minimum Sum - currently set at $256,500 for 2018 cohort). It is also constantly reminding you to get your payouts later at age 70, so that you can get an even bigger monthly payout than the stated figures at 65.
Of course, no one will mind having an even bigger monthly payout, but that is provided if you are still breathing at 70.