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Old 06-04-2019, 05:49 PM   #1134
Extech
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Hi BBCwatcher, was playing around with the CPF Life Estimator calculator https://www.cpf.gov.sg/eSvc/Web/Sche.../LifeEstimator and I found something quite puzzling.

According to the diagram, CPF Life's monthly payout for escalating plan is lower than that of the basic plan until it "catches up" at 72.

In fact, if you take a look at cummalative payouts, the escalating plan only "catches up" to that of basic at age 74.

However, why is it that the bequest amount on escalating plan is lesser than that on basic plan right from the start?
Dug around slightly and found the answer. Its not anywhere on the CPF website nor the areyouready portal. Instead, it was from an insurance website: https://www.aviva.com.sg/en/money-ba...cpf-life-plan/

CPF Life is an annuity plan based on premiums that you contribute into the Lifelong Income Fund.

For the basic plan, 10% of your RA is deducted at age 55. The rest about 90 per cent of the Retirement Account savings is untouched and can continue to grow and compound with interest. Near 65, two months before your birthday, there will be a second deduction. This time, it will be approximately 10 per cent of the new money that has built up between your 55th and 65th birthday. The rest of your Retirement Account savings will stay put until your payout eligibility age.

In comparison, for the standard and escalating plan, for those who join this plan at age 55, there will be two installments deducted as annuity premiums just at 55 and near 65, just like the basic Plan but the percentage of deductions differs.

Members who join this plan at age 55 will have the Retirement Account deducted for their CPF Life annuity premiums in two installments at age 55 and near 65. The first deduction is up to the current Basic Retirement Sum of $80,500. The premium goes into the Lifelong Income Fund.

Two months before you reach 65, the balance Retirement Account savings will be deducted as the second installment of your annuity premium and channeled into the Lifelong Income Fund. This will include any new money, including interest earned or refunds from sale of property or investments that you have built up between your 55th birthday and 65.

For members who join the Standard or Escalating Plan on their payout eligibility age or after, there will be only one annuity premium deduction, which is all the sum in their Retirement Account, made at the time of joining.


TL;DR- Interest earned from annuity premium will NOT be credited as bequest. Since basic plan only deduct a partial amount of your RA as premium, you stand to earn interest on the remainder amount on your RA amount. On the other hand, escalating plan will deduct your entire RA amount so there is no interest earned whatsoever. Hence, bequest for Escalating < Basic
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