Wanting to strike Toto is not a retirement plan. Fail to plan and plan to fail – Do you want to still be worrying about your finances at 70?
Phuan Wei Ning | Published on 23 Aug 2021
Quick facts about CPF Life
A national scheme that aims to help Singaporeans with their retirement planning, these are some points you must know about CPF Life:CPF Life is essentially an annuity and will give you pay-outs for life.Pay-outs start from age 65 with the latest age that you must start your CPF Life pay-outs being age 70.You will automatically be enrolled into CPF Life if you have at least $60,000 in your CPF Retirement Account by age 65.If you do not qualify for automatic enrollment into CPF Life, you can still apply to join CPF Life from anytime between age 65 to one month before you turn 80.There is no minimum amount needed to join CPF Life. However, if you only have a small sum of money in your Retirement Account, your pay-outs will correspond accordingly.There are three plans for CPF Life: Basic, Standard, and Escalating.
Now that we better idea of what CPF Life is, let us move on to the details.
CPF Life – What is the minimum sum?
Basic Retirement Sum | Full Retirement Sum | Enhanced Retirement Sum | |
2016 | $80,500 | $161,000 | $241,500 |
2017 | $83,000 | $166,000 | $249,000 |
2018 | $85,500 | $171,000 | $256,500 |
2019 | $88,000 | $176,000 | $264,000 |
2020 | $90,500 | $181,000 | $271,500 |
2021 | $93,000 | $186,000 | $279,000 |
When you look at CPF Life, you will always see three different sums being mentioned. They are the Basic Retirement Sum (BRS), Full Retirement Sum (FRS), and Enhanced Retirement Sum (ERS).
While there is no minimum amount required in order to join CPF Life, there is a minimum sum that you cannot withdraw from your CPF Retirement Account. This refers to the BRS and FRS and are the amounts that you must keep in your Retirement Account in order to withdraw any excess CPF monies.Basic Retirement Sum (BRS): If you own a home in Singapore and the property’s lease will last you up to at least age 95, then you may withdraw the excess beyond the BRS. For example, if you have $200,000 in your CPF Retirement Account, you may withdraw $107,000 ($200,000 – $93,000 = $107,000) if you fulfil the conditions for the BRS. In 2021, the BRS is at $93,000.Full Retirement Sum (FRS): If you do not own a home then you can only withdraw the amount above the FRS in your CPF. For example, if you have $200,000 in your CPF Retirement Account, you may withdraw $14,000 ($200,000 – $186,000 = $14,000) if you fulfil the conditions for the FRS. The FRS is at $186,000 in 2021.Enhanced Retirement Sum (ERS): The ERS requires 3 times the amount of the BRS and is used if you wish to receive even higher pay-outs from CPF Life. The amount needed for ERS in 2021 is $279,000.
CPF Life – Which plan should I choose?
There are three CPF Life plans available, namely the Basic, Standard, and Escalating plan.
CPF Life Basic | CPF Life Standard | CPF Life Escalating |
This is the legacy plan that is carried over from when CPF Life was first introduced. Under the Basic plan, your pay-outs start low and will get lower progressively as your combined CPF balance falls below $60,000. We do not recommend choosing the Basic plan. | This is the default plan that everyone is enrolled into when we join CPF Life. For Standard plans, pay-outs start higher but will remain the same for the rest of your life. Individuals who are willing to adjust their lifestyle to cope with inflating prices can consider the Standard plan. | Monthly pay-outs start low but increase by 2 per cent every year. This is recommended for individuals who wish to maintain their standards of living even as things progressively get more expensive over the years. |
All members will automatically join the Standard plan when they enroll into CPF Life. However, while the Standard plan is the default option, it is important that you choose a plan that will fit your retirement lifestyle. For example, are you willing to adjust your lifestyle to cope with the rising cost of living? If you are willing to do so then the Standard plan may be suitable for you. However, if you still wish to maintain the same standards of living even as prices increase over the years, then an Escalating plan may be more ideal.
CPF Life – How much will I get?
Apart from the BRS, FRS, and ERS being the minimum sum that you must-have in your Retirement Account in order to withdraw any excess CPF monies, this also determines the pay-outs you receive from CPF Life. To put it simply, the more you put into your CPF Retirement Account the higher your monthly pay-outs will be.
Amount in your Retirement Account at age 55 | Amount you will have in your Retirement Account by age 65 | Monthly pay-outs from CPF Life Standard plan at age 65 |
$40,000 | $65,000 | Female: $370Male: $400 |
$93,000 | $145,000 | Female: $770Male: $830 |
$186,000 | $280,000 | Female: $1,420Male: $1,530 |
$279,000 | $415,000 | Female: $2,080Male: $2,230 |
Pay-outs are computed using the CPF Life Estimator tool for the year of 2021.
For Standard and Escalating plans, you will receive monthly pay-outs for as long as you live regardless of the amount that you have in your Retirement Account.
Should I delay my CPF Life pay-outs to age 70?
Did you know that you for every year that you defer pay-outs, your pay-outs can increase by up to 7 per cent? Assuming that your CPF Life pay-outs increase at a rate of 7 per cent per annum, this could result in your pay-outs increasing by $309 to $334 a month.
Pay-outs to start at | Pay-out range | Interest rate |
Age 65 | $770.00 – $830 | – |
Age 66 | $823.90 – $888.10 | 7% |
Age 67 | $881.57 – $950.27 | 7% |
Age 68 | $943.28 – $1,016.79 | 7% |
Age 69 | $1,009.31 – $1,016.79 | 7% |
Age 70 | $1,079.96 – $1,164.12 | 7% |
Pay-outs shown are based on an individual who has $93,000 in his/her CPF Retirement Account at age 55 for CPF Life Standard plan, computed for the year of 2021. A 7 per cent rate of increment is assumed.
Alternatively, as shown on the CPF Life Estimator tool, even at a lower interest rate of 4 per cent per annum you will still receive an increase in pay-outs of $250 per month just by deferring pay-outs to age 70.1
Amount in Retirement Account at age 55 | Pay-outs to start at | Monthly pay-outs |
$93,000 | Age 65 | $770 |
$93,000 | Age 66 | $810 |
$93,000 | Age 67 | $840 |
$93,000 | Age 68 | $910 |
$93,000 | Age 69 | $950 |
$93,000 | Age 70 | $1,020 |
Pay-outs shown are based on an individual who has $93,000 in his/her CPF Retirement Account at age 55 for CPF Life Standard plan, computed for the year of 2021.
If you wish to receive a higher monthly pay-outs but do not wish to top up your Retirement Account, we recommend considering this option to defer your pay-outs to start at age 70. However, before doing so, do ensure that you have sufficient savings or income to sustain your daily expenses until your pay-outs commence at age 70. Also, do note that the interest rate for deferred pay-outs are not guaranteed and actual results may vary.
Top up your CPF Retirement Account for higher pay-outs
Alternatively, another way to get higher pay-outs is to top up your Retirement Account. For example, a woman with the BRS in her Retirement Account at age 55 would get $770 monthly pay-outs from age 65. This could increase to $1,420 if she tops up to the FRS amount and up to $2,080 with the ERS amount.
However, do note that these top ups are irrevocable and irreversible. Therefore, do only top up your Retirement Account if you do not need the liquidity from that sum.
In conclusion,
Whether the pay-outs from CPF Life is enough for your retirement is highly dependent on your retirement lifestyle. If you want a higher monthly pay-outs but yet are uncomfortable with the illiquidity of CPF RA top-ups, we share an alternative to CPF Life in our next retirement planning article.