Do you know that CPF Life eats up all you accumulated interest if you die early?

An old schoolmate from RI (Raffles Institution), CK, alerted me to the following information which he was pointed to by the Central Provident Fund Board after asking what happens to his CPF money if he passes away early.

On the website, “areyouready.sg” which is a website run by the CPF board, it writes:

“3.  What happens to the premium if I pass away?
A bequest is the amount of money that you leave for your beneficiaries when you pass on. If you are on CPF LIFE, the bequest refers to the unused annuity premium and Retirement Account savings, if any, after death. This will be paid to your beneficiaries along with your remaining CPF savings.

However, the interest earned on annuity premiums does not form part of the individual member’s bequest as it is paid into the Lifelong Income Fund to provide lifelong monthly payouts to all members under CPF LIFE.

As with all annuity products, CPF LIFE works based on the concept of risk pooling. In order to provide lifelong monthly payout to all CPF LIFE members, the interest earned on the annuity premium has to be pooled. The pooled interest will then be used to pay the monthly payout to all surviving members in the scheme. Therefore, the interest earned on the CPF LIFE annuity premium will not form part of the individual member’s bequest upon death.”

However, on the official CPF website, under the section, “CPF Life – Details – Understand – Will I lose all my money if I pass away early? “. It wrote, “You and your loved ones will always get back at least the amount that you have put into CPF LIFE, in the form of payouts and/or bequest, no matter what age you live to.”

Don’t you find that the above explanation in the official CPF website may be somewhat misleading as it may give the impression that you may get more than what you have put into CPF Life if you pass away early, whereas the fact of the matter explained in the website, “areyouready.sg” is that “the interest earned on annuity premiums does not form part of the individual member’s bequest”?

Are there any national pension schemes in the world that eats up all your accumulated interest when you die early – only pays your beneficiaries the difference between your upfront premium and your total monthly annuity payouts received – and nothing at all if the total payouts exceed the premium?

Is this the national pension scheme with the lowest bequests in the world?

How many Singaporeans are aware of this?