CPF LIFE Simplified

Singa­pore National LIFE Long Income Scheme, CPF LIFE, is a new scheme that will provide lifelong income for cit­izens from age 65 onwards. This annu­ity scheme will be imple­men­ted in year 2013 for those who are age 50 and below in 2008. Cit­izens will need to set aside Min­imum Sum (MS) in their CPF Retire­ment Account when they reach 55 years old. The MS can be made up all in cash, or part cash and part prop­erty, with the prop­erty form­ing up to 50% of MS. Part of this MS will be used to pay for the CPF LIFE premium at age 55.

There are twelve options avail­able for CPF LIFE, as shown below, when it was first intro­duced in 2008:

Draw-down age 65 70 75 80 85 90
Refund Option

Yes

No

Yes

No

Yes

No

Yes

No

Yes

No

Yes

No


CPF mem­bers will start get­ting their retire­ment income from age 65, either from their MS or CPF LIFE. Draw-down age is the age that the retire­ment income will draw from CPF LIFE. The earlier the draw-down age, more money will be channeled to CPF LIFE and less money left at MS. Unlike MS, money paid to CPF LIFE does not attract any interest for indi­vidual CPF mem­ber from age 55 onwards. The Refund option gives the CPF mem­ber the option to refund the remain­ing CPF Life premium to the bene­fi­ciar­ies if he were to pass on earlier without deplet­ing the premium. No-refund option is suit­able for those without any depend­ents or whose depend­ents do not require the money. The stand­ard default option is Refund 80, which is most suit­able for the major­ity since it strike a bal­ance between monthly pay­out and CPF LIFE premium.

The monthly lifelong pay­out will depend on the actual amount of MS set aside. The pay­out will also depends on the Spe­cial, Medis­ave ad Retire­ment Accounts (SMRA) interest rate over the retire­ment period, which range from $350 at entry to $1,100 per month for the max­imum MS.

Effect­ive from Feb 2009, the above 12 plans will be sim­plied to the below 4 plans:-

  1. CPF LIFE Bal­anced Plan (Default Option) — Mod­er­ate Income and bequest amount
  2. CPF LIFE Plus Plan — Higher Income; Lower bequest amount
  3. CPF LIFE Basic Plan — Lower Income; Higher bequest amount
  4. CPF LIFE Income Plan — Highest Income; No bequest amount

All the money from the Min­imum Sum will be used to paid for annu­ity premium for both CPF LIFE Plus and Income Plans. This implies that both Plans will not earn any interest in their Retire­ment Account as there is no money in the Min­imum Sum account. The interest earned on the pooled money in the CPF LIFE annu­ity will remain in the pool and not cred­ited into indi­vidual CPF RA account. About 10% and 30% of Min­imum Sum will be used to pay for the CPF LIFE premium for a male of age 55 when he joins the scheme. So to max­im­ise the mon­et­ary bene­fits for both yourselves (in your life­time) and your bene­fi­ciar­ies (when you pass on), CPF LIFE Basic beats the other 3 plans. You can ana­lyse it using the CPF LIFE Pay­out Estim­ator.   

CPF mem­bers who are 50 years old and below in 2008 and with at least $40,000 in their MS will be auto­mat­ic­ally included in the CPF LIFE scheme. For mem­bers with less than $40,000 in their MS, but want to par­ti­cip­ate in the CPF LIFE Scheme, the Singa­pore Gov­ern­ment will assist by giv­ing them LIFE-Bonus (L-Bonus). But the monthly pay­outs will be lower. Mem­bers with less than $20,000 in their MS will receive a pro-rated L-Bonus upon opt­ing in to the scheme. They will receive the full L-Bonus if they top up their Min­imum Sum to at least $20,000.

L-Bonus will be provided for the first five cohorts of Singa­por­eans who join the LIFE Scheme i.e. those aged 46 to 50 in 2008, with up to $54,000 Assess­able Income (AI) and live in a prop­erty of up to $11,000 Annual Value (AV) at the time of enrol­ment. Mem­bers in the old­est cohort, those aged 50 in 2008, can expect to receive between $2,200 and $4,000. The young­est cohort, those aged 46 today, will get 30 per­cent of what the 50-year-olds receive. L-Bonus will also be exten­ded to those aged above 50 in 2008 who opt in.

The amount of L-Bonus you can receive depends on the following: 

  • Your age in the year 2008; and
  • The Annual Value (AV) of your home as assessed by IRAS based on your NRIC address as of 31 Decem­ber of the year pre­ced­ing the year that you enrol in the CPF LIFE Scheme; and
  • Your Annual Assess­able Income (AI) for the Year of Assess­ment pre­ced­ing the year that you enrol in the CPF LIFE Scheme (if 2009 is the year you join, Year of Assess­ment will be 2008, which takes into account income earned in cal­en­dar year 2007).

 Mem­bers in the old­est cohort, those aged 50 in 2008, with at least $20,000 in their Min­imum Sum, can expect to receive between $2,200 and $4,000 (Table 1).

 

Annual Value (AV)

Annual Assess­able Income (AI)

$6,000 or less

More than $6,000 and up to $11,000

$24,000 or less

$4,000

$3,200

More than $24,000 and up to $54,000

$3,200

$2,200

Table 1: L-Bonus for those 55 and older in 2013

The young­est cohort, those aged 46 today, will get 30 per­cent of what the 50-year-olds receive.

The eli­gib­il­ity cri­teria to receive the L-Bonus are as follows:-

  • Be a Singa­pore cit­izen; and
  • Be aged 46 or above in 2008; and
  • Enrol in the CPF LIFE Scheme; and
  • Have up to $54,000 Assess­able Income (AI) and live in a prop­erty of up to $11,000 Annual Value (AV) at the time of enrolment

CPF Mem­bers aged 56 to 65 in 2009 who opt in will also receive the V-Bonus of up to $1,800, which is inten­ded to encour­age them to vol­un­tar­ily defer their draw downs. The V-bonus is set at 2% interest on mem­bers’ bal­ances up to $30,000 in their RA.  A mem­ber there­fore can get up to $600 for each year deferred, which means he can get up to $1,800 if he defers draw down for 3 years.

Use­ful Resource:

CPF LIFE Pay­out Estimator

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