The panel introduced several new terms, including three Retirement Sum tiers, at the press conference announcing their proposals on Feb 4.
SINGAPORE: A 13-member advisory panel on Wednesday (Feb 4) made several recommendations on how to enhance the CPF system. The proposals were aimed at giving Singaporeans more flexibility in how much they choose to leave in or withdraw from their retirement accounts, while staying true to the CPF scheme’s primary intent of providing retirement adequacy for the majority of Singaporeans.
Here’s a guide explaining some of the terms introduced at the press conference:
Basic Retirement Sum: The S$80,500 set aside will give members who turn 65 in 2026 monthly payouts of S$650 to S$700 for the rest of their lives, assuming they own their homes and need not pay rent.
Full Retirement Sum: This is the retirement sum of S$161,000 needed by CPF members who do not own their homes or do not wish to pledge it.
Enhanced Retirement Sum: Members with higher CPF savings can commit extra funds to CPF LIFE – to a cap of three times the Basic Retirement Sum. For example, those turning 55 in 2016 will have the option of topping it up to the maximum of S$241,500, or three times that of S$80,500.
Basic Payout: Refers to the monthly S$650 to S$700 payout members will receive if they set aside the Basic Retirement Sum in CPF savings. The panel reviewed data from the Household Expenditure Survey by the Department of Statistics and took reference from the lower-middle retiree household expenditure per person. Such a retiree spends about S$500 to S$550 per month today, or about S$650 to S$700 in 10 years, assuming an inflation rate of 2 per cent.
Payout Eligibility Age: Introduced to replace the term “Draw Down Age”, the Payout Eligibility Age will be 65 from 2018 onwards. This means members can opt to start receiving their monthly payouts from CPF LIFE.
Payout Start Age: This is the age at which members decide to kickstart their monthly payouts. The latest one can defer their payouts to is 70 years old.
Retirement Account: At age 55, the Basic Retirement Sum set aside will go to the Retirement Account. This account is where the monthly payouts will come from.
CPF charge: A charge is created when a CPF member withdraws savings from his/her Ordinary Account to finance the purchase of his/her property and pay housing loan instalments.
Property Pledge: A pledge is created if you withdraw sums in excess of the Basic Retirement Sum under the property pledge withdrawal rules. When your property is sold, the amount of the charge or pledge will be returned to your CPF account from the proceeds of the sale. It can then be re-used for subsequent housing purchases or drawn down if you have entered into retirement.
At 55, if you own a property and wish to withdraw your CPF savings above the Basic Retirement Sum, you can do so, on the condition that you have a CPF charge on your property. This means that if you sell your house, the amount of the charge will be returned to your CPF to supplement your Basic Payout.
This would be the case for the majority of CPF members who use CPF savings to buy their house. If you do not have a sufficient charge, you could pledge your property instead as it would have the same effect.