Common questions (and answers!) on the latest CPF changes: Part 2

This article first appeared in The Straits Times on 9 Feb 2015.

In the second of a three-part series, Joanna Seow answers questions on how the changes affect the payouts you can receive in your later years. 

How are my monthly payouts under CPF Life calculated?

Payouts are based on how much you have in your Retirement Account.

The payouts are reviewed every year to account for changes in life expectancy, interest rates and transactions that change your Retirement Account balance. 

What is the difference between my “payout eligibility age” and my “payout start age”?

Payout eligibility age: When you are entitled to start drawing payouts (previously known as drawdown age). This is 63 now, and will be 65 from 2018.

Payout start age: When you want your payouts to start. You can choose to push them back, up to 70. For every year you defer the payouts, they will go up 6 per cent to 7 per cent because of the interest compounded, among other reasons. 

I think I will need more monthly income in retirement. How can I get higher payouts?

You can top up your Retirement Account to use for your CPF Life premium, or continue working, as further contributions will continue to grow your Retirement Account. The cap on the savings you can use for CPF Life premiums is the Enhanced Retirement Sum of $241,500 (as of 2016).

You can also choose to defer your payouts. 

What types of CPF Life plans are there?

Life Standard Plan (default): Higher monthly payouts, leaving less to beneficiaries after your death.

Life Basic Plan: Lower monthly payouts, leaving more to beneficiaries after your death.

The CPF advisory panel is discussing an option for a third plan which provides monthly payouts that increase over time. It will make recommendations later this year. 

What happens if I am not on CPF Life?

You will stay on the Minimum Sum scheme, which gives you monthly payouts for about 20 years.

You can choose to join CPF Life any time between 55 and before you turn 80. 

Are the interest rates on my CPF accounts changing with the tweaks?

No. You will still earn at least 2.5 per cent per annum on your Ordinary Account savings, and around 4 per cent on your Special, Medisave and Retirement Accounts.

The first $60,000 of combined balances, with up to $20,000 from the Ordinary Account, earns an extra 1 per cent interest. 

Read Part 3 of this series on CPF changes to find out how the changes affect withdrawals from your CPF accounts and other decisions you will need to make. 

Source: The Straits Times © Singapore Press Holdings Limited. Reproduced with permission 

Note: Since 1 May 2015, CPF Board has changed the term “Minimum Sum” to “Basic Retirement Sum”.