Singapore National Annuities Scheme, termed CPF Life, is out! It will be compulsory for those below 50 years old when CPF Life starts in 2013 in 5 years time.
CPF Life pays roughly about the same monthly amount as the old scheme if you choose the standard option, Refund 80. Hence, it is definitely a good deal compared to the old scheme, since the new scheme pays for life whereas the current scheme pays for only 20 years.
The only drawback about this National Annuities Scheme is that it cannot hedge against inflation rate. A bowl of noodle that cost $3 now will cost $5.40 in 20 years times, assuming 3% inflation rate. Hence, the same $600 payout per month now in fact only worth $332 in 20 years time.
CPF Life helps some citizens to get at least some basic income for life. However, to have a more comfortable retirement, you may want to consider buying those private annuities that hedge against inflation. The guaranteed interest rate may be lower at 2.5% (CPF Life offer min 3.5%), but it also offers additioanal non-guaranteed bonus rate of 1–3 percent. This type of private annuities scheme in fact will give a more total payout after about 12 years. But many people shun because it is human nature to want to see immediate monetary benefits. We lose out in the long run, in this case, 12 years time.