CPF LIFE or Retirement Sum Scheme for your retirement?
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- Your Retirement Account (RA) savings will be used to as premiums for your CPF LIFE plan.
- Under Retirement Sum Scheme, you will receive monthly payouts till age 90 or until your savings runs out, whichever is earlier.
- CPF LIFE allows you to receive monthly payouts for life.
The Central Provident Fund (CPF) is a key pillar of Singapore’s social security system, and serves to meet our retirement, housing and healthcare needs.
Our CPF savings consist of compulsory contributions from us and our employers. With the interest earned, our CPF balances will compound and help build up our retirement nest egg.
Currently, there are 2 annuity options for Singaporeans to retire with their CPF funds – the Retirement Sum Scheme (RSS) and CPF Lifelong Income for The Elderly (CPF LIFE).
Most of us will be automatically enrolled into CPF LIFE. For those in the Pioneer and Merdeka Generation who were born before 1958, they would automatically join the RSS. However, they have the option to switch to CPF LIFE at any time before turning 80.
Before we take a look at the 2 options, let’s understand what is the so-called CPF Retirement Sum. This is the amount of retirement savings which you have chosen to set aside in your RA to receive monthly payouts from your payout eligibility age, which is currently at age 65.
Your retirement sum can be used to join CPF LIFE which provides you with life-long monthly payout or the RSS which provides you with a monthly payout until your RA balance is depleted.
If you are in the CPF LIFE scheme, the retirement sums indicate how much of your CPF savings you should set aside in order to have lifelong monthly payouts during your retirement years. These monthly payouts can be disbursed when you’re 65 years old. You may also wish to defer them anytime till you are age 70.
There are three CPF Retirement Sums: Basic Retirement Sum (BRS), Full Retirement Sum (FRS) and Enhanced Retirement Sum (ERS). This table illustrates their differences.
*Based on those who turn 55 in 2021.
Retirement Sum Scheme (RSS)
The RSS provides CPF members with monthly payouts to support a basic standard of living during retirement until your RA savings run out or when you turn 90, whichever is earlier.
To determine which scheme you are on, two factors are to be considered: 1) When you were born, and 2) the amount of savings in your RA before reaching age 65.
For those born between 1 Jan 1958 and 30 Apr 1961, you will be placed on CPF LIFE if you:
- Had $40,000 in your RA when you turned 55 (between 1 Jan 2013 and 30 Apr 2016); OR
- Will have $60,000 in your RA six months before your Payout Eligibility Age (PEA).
If you were not placed on CPF LIFE, you would be on the RSS. If you wish to join CPF LIFE to receive lifelong monthly payouts, you can choose to do so any time between your PEA and one month before you turn 80 years old. Regardless of which scheme you are on, you will receive a letter from CPF Board a few months before reaching your PEA with more information.
In the past, those on the RSS could keep their savings in their CPF accounts for as long as they like. CPF Board has since introduced a Latest Payout Start Age of 70, to prevent members from keeping their savings until they pass away. Thus, even if the member has not instructed for their payouts to start, they will automatically start receiving them at age 70.
CPF Lifelong Income for The Elderly (CPF LIFE)
Launched in 2009, CPF LIFE is a national annuity scheme that provides you with a monthly payout no matter how long you live. This is to ensure that you will not run out of retirement savings during your golden years.
If you are a Singaporean citizen or permanent resident (PR) born in 1958 or after and have at least $60,000 in your CPF RA six months before your payout eligibility age, you will be automatically enrolled in this scheme.
3 CPF Life Plans
- Provides you with a monthly pay-out for as long as you live
- Your RA savings will be used to pay the premiums for your CPF LIFE plan
- These premiums will earn attractive and risk-free CPF interest rates up to 6% per annum
- When you pass away, your beneficiaries will receive your CPF LIFE premium balance together with your remaining CPF savings
After you have decided on the CPF LIFE plan that best suits your retirement needs, the next step is to work out the amount of monthly payout you require, and the CPF savings you need to achieve it.
You can use the CPF LIFE Estimator to find out the amount of CPF LIFE premium needed to achieve your desired monthly pay-out under your selected CPF LIFE plan.
For example, to receive a monthly payout of $1,520 - $1,620, you will need $300,600 in your RA at 65. A much smaller sum of $200,000 is required if you set aside the amount in your RA at 55. This is because CPF interest rates of up to 6% will help you grow your savings through compound interest.
Desired Monthly Pay-out from 65
CPF LIFE Premium at 65 [Savings You Need at 65]
Savings You Need at 60
Savings You Need at 55
|$350 - $370||$60,000||$45,800||$35,500|
|$540 - $570||$97,300||$76,000||$60,000|
|$770 - $830||$145,200||$115,400||$93,000|
|$960 - $1,030||$184,400||$147,600||$120,000|
|$1,430 - $1,530||$280,200||$226,300||$186,000|
|$1,520 - $1,640||$300,600||$243,000||$200,000|
|$2,080 - $2,230||$415,300||$337,300||$279,000|
Source: CPF website
Note: These monthly payouts are estimates based on the CPF LIFE Standard Plan, for members who turn 65 in 2031, computed as of 2021. Payouts may also be adjusted to account for long-term changes in interest rates or life expectancy. Such adjustments (if any) are expected to be small and gradual.
Differences between CPF LIFE and RSS plan
It is important to understand the difference between the 2 retirement plans – CPF Life and RSS to give you a better idea of which one would be more suitable for you.
The main difference between CPF Life and RSS is that with RSS, your monthly pay-outs will stop when your RA savings are depleted or until age 90, whichever is earlier. On the other hand, CPF LIFE offers monthly payouts for life.
Another difference lies in the treatment of the interest of your RA savings. Depending on the CPF LIFE plan you choose and when you die, the bequest to your loved ones may not include the interest component of your CPF LIFE premiums, as they will remain in the fund to benefit others who live longer than you. For RSS, the beneficiaries will receive the balance RA savings including interest, if any.
You can also ask yourself a few questions - what kind of retirement lifestyle are you looking at? How will your home come into play as a retirement asset? Do you plan to live with your children?
These are important questions to think about as it can affect the type of retirement plan you choose, depending on your dream retirement lifestyle.
Retirement Sum Topping up Scheme (RSTU)
The Retirement Sum Topping Up Scheme (RSTU) helps to build up your retirement savings with cash or CPF top-ups to the Special Accounts(SA) for those who are below 55, up to the current Full Retirement Sum (FRS) or Retirement Accounts(RA) for those who are aged 55 and above, up to the current Enhanced Retirement Sum (ERS).
Cash top-ups can be made to your own CPF account or your family members’ CPF accounts, including your parents, parents-in-law, grandparents, grandparents-in-law, spouse and siblings. If you are topping up for yourself, you can enjoy tax relief of up to $8,000 per calendar year. In addition, if you are topping up for your loved ones**, you are eligible for another $8,000 per calendar year.
You can only make CPF transfers when your CPF account has at least the BRS.
**Terms and conditions apply
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This article is meant for information only and should not be relied upon as financial advice. Before making any decision to buy, sell or hold any investment or insurance product, you should seek advice from a financial adviser regarding its suitability.