CPF review: 7 things to know about the proposed CPF Life Plan

AUG 3, 2016,

Rachel Au-Yong

SINGAPORE - The CPF Advisory Panel is proposing to introduce a new CPF Life Plan, one that will see rising levels of payments that will help keep pace with inflation.

The plan with escalating payouts starts with a lower monthly payout than under the current default option by about 20 per cent. But payments will increase by 2 per cent per year.

The two existing plans offer only fixed payouts till a member's death.

One is the default Standard plan, which offers higher monthly payouts, leaving less to beneficiaries after a member's death. The other is the Basic plan, which offers lower monthly payouts at a fixed rate, leaving more to beneficiaries after death.

The CPF Advisory Panel is proposing to introduce a new CPF Life Plan that will feature monthly payments that increase by 2 per cent every year.



1. WHO IS THIS PLAN FOR?

It is open to any CPF member who has sufficient savings in his or her account.

If you turn 55 between Jan 1, 2013, and April 30, 2016:

- $40,000 in your Retirement Account when you reach 55 years old; or

- $60,000 in your Retirement Account when you are near your payout eligibility age

If you turn 55 on May 1, 2016, and after:

- $60,000 in your Retirement Account when you are near your payout eligibility age

2. WHY INTRODUCE THE PLAN NOW?

Some Singaporeans are concerned that inflation could eat into the purchasing power of their CPF Life Plan payments. This new escalating payment plan will help protect against inflation.

3. WHY IS THE INCREASE PEGGED TO 2 PER CENT AND NOT INFLATION?

The panel did consider pegging increase to inflation but they also noted that inflation fluctuates from year to year.

There could even be deflation in some years, which would mean payments falling instead of rising. It is also simpler and more feasible to implement a plan with payouts that increase at a fixed rate.

As a result, the panel decided on the rate of 2 per cent. This is more or less consistent with the historical long-term inflation rates.

4. IS THE RATE OF 2 PER CENT PER YEAR SET IN STONE?

No. The long-term inflation rate could change in the future. The payout escalation rate will be reviewed periodically to ensure it is relevant for future cohorts of CPF members.

Such changes should not affect members who have already entered into a plan with payouts that escalate at the set rate of 2 per cent.

5. I WANT RISING PAYOUTS BUT NOT THE INITIAL LOWER PAYMENT. WHAT CAN I DO?

You can increase your starting payouts by topping up your Retirement Account up to the Enhanced Retirement Sum, which is three times the Basic Retirement Sum, currently set at $80,500 for those who turn 55 this year.

Or you can delay the age at which you receive your payouts, up to age 70.

6. WHAT HAPPENS IF A CPF MEMBER PASSES AWAY PREMATURELY?

Under CPF Life, all annuity premiums not paid out are bequeathed to members' loved ones upon death.

7. WHEN WILL THIS BE ROLLED OUT?

The Government has accepted the recommendations and will study how best to implement this. In other words, not for some time.