CPF Life Payout Table - For Standard Plan

[JuniorLion]

So, I decided to test if there is diminishing returns for each dollar put in CPF Life. This is what I have tabulated.

Birth Date: 1 March 1953
Gender: Male

Amount in RA || Estimated Monthly Payouts || % Increase over 50k
50,000 || 309-325||
100,000 || 582-614 || 88.3%-88.9%
150,000 || 839-886 || 171.5%-172.6%
200,000 || 1094-1156 || 254.0%-255.7%
250,000 || 1348-1426 || 336.2%-338.8%
300,000 || 1602-1695 || 418.4%-421.5%
350,000 || 1855-1965 || 500.0%-504.6%

From this simple exercise, I found that every 50k in CPF Life will increase your payout by approximately 82% over the previous band (e.g from 100k to 150k, the increase is 254%-171.5%=82.5%), except from 50k to 100k where the increase is 88.3%

So, I am guessing that once you have 100k in CPF Life, there isn't really diminishing returns, isn't it?

 

[dork32]

So, I decided to test if there is diminishing returns for each dollar put in CPF Life. This is what I have tabulated.

Birth Date: 1 March 1953
Gender: Male

Amount in RA || Estimated Monthly Payouts || % Increase over 50k
50,000 || 309-325||
100,000 || 582-614 || 88.3%-88.9%
150,000 || 839-886 || 171.5%-172.6%
200,000 || 1094-1156 || 254.0%-255.7%
250,000 || 1348-1426 || 336.2%-338.8%
300,000 || 1602-1695 || 418.4%-421.5%
350,000 || 1855-1965 || 500.0%-504.6%

From this simple exercise, I found that every 50k in CPF Life will increase your payout by approximately 82% over the previous band (e.g from 100k to 150k, the increase is 254%-171.5%=82.5%), except from 50k to 100k where the increase is 88.3%

So, I am guessing that once you have 100k in CPF Life, there isn't really diminishing returns, isn't it?

the best way to analyze this is to use a linear regression model.

ignoring the 50k point, the r square for the regression is 1.0. it means that it is a perfect fit for all the points on the straight line. it means that there is not diminishing return.

it is has a gradient of 5.09. it means that you will get $5.09 extra payout for every $1000 you have in your cpf life.

the y-intercept of the regression is not 0. it means that there are some benefits for the first x-thousands placed in the cpf.

wait. why am i doing this. cpf life is an insurance. it is the best of its kind. it has no returns. you have no choice but to swallow it. you also cannot do anything about it until many years later. why are you and me wasting so much time calculating things that you cannot control?

 

[ocs_woodlands]

Then how come the ERS payout is NOT 3x of the BRS payout? Is it entirely due to the first 50k effect?

Sent from Common Sense using GAGT

 

[JuniorLion]

Then how come the ERS payout is NOT 3x of the BRS payout? Is it entirely due to the first 50k effect?

Sent from Common Sense using GAGT

Yes, it would appear to be so. Actually I think up to BRS is a $x per 1 dollar put in. After BRS, it is $y per 1 dollar put in (doesn't matter if it is up to FRS or ERS).

 

[lazybee]

So, I decided to test if there is diminishing returns for each dollar put in CPF Life. This is what I have tabulated.

Birth Date: 1 March 1953
Gender: Male

Amount in RA || Estimated Monthly Payouts || % Increase over 50k
50,000 || 309-325||
100,000 || 582-614 || 88.3%-88.9%
150,000 || 839-886 || 171.5%-172.6%
200,000 || 1094-1156 || 254.0%-255.7%
250,000 || 1348-1426 || 336.2%-338.8%
300,000 || 1602-1695 || 418.4%-421.5%
350,000 || 1855-1965 || 500.0%-504.6%

From this simple exercise, I found that every 50k in CPF Life will increase your payout by approximately 82% over the previous band (e.g from 100k to 150k, the increase is 254%-171.5%=82.5%), except from 50k to 100k where the increase is 88.3%

So, I am guessing that once you have 100k in CPF Life, there isn't really diminishing returns, isn't it?

50K -> You get 309 per month
350K -> You get 1855 per month (600% of 309)

But you have put 700% amount, but only get back 600% of monthly payment.

The returns diminish in term of percentage, isn't it.

 

[Mecisteus]

50K -> You get 309 per month
350K -> You get 1855 per month (600% of 309)

But you have put 700% amount, but only get back 600% of monthly payment.

The returns diminish in term of percentage, isn't it.

lol I thought it is quite obvious but you beat me to this post.

 

[JuniorLion]

50K -> You get 309 per month
350K -> You get 1855 per month (600% of 309)

But you have put 700% amount, but only get back 600% of monthly payment.

The returns diminish in term of percentage, isn't it.

Did you read the full post?

 

[V_for_Vanilla]

How come so complicated?

50,000 || 309-325||
The yield varies 7.4 to 7.8%

350,000 || 1855-1965 ||
Yield varies 6.36 to 6.74%

 

[fr33d0m]

The first buck always got higher yield. What’s so hard to understand? The government has to offer more to the poor.

 

[lazybee]

Did you read the full post?

Did you read your own statement? You are asking a qn, and I'm giving an answer isn't it? As V_for_Vanilla replies, just use yield can liao. Yes, it give same percentage of return for every 50K increase above 100K, but it is still an absolute decrease when you cater for the sum as a whole. By right, since some overhead are fixed (manpower, etc), shouldn't yield get higher instead with a larger sum of money (like bank interest rate) ?

" So, I am guessing that once you have 100k in CPF Life, there isn't really diminishing returns, isn't it?"

 

[BBCWatcher]

The government has to offer more to the poor.

There is a possibility that this arrangement is actuarially fair due to risk effects. First of all, well-to-do people tend to live a bit longer than not well-to-do people, and CPF balances are correlated with wealth. Second, individuals have some ability to control how much they plow into CPF LIFE, and people who expect to live longer (and do) might plow a bit more into the system.

On the other hand, the CPF members with the bigger balances usually got more tax relief along the way (higher tax brackets). So don't feel sorry for them. CPF works really well for rich and poor alike.

Given the way this "skew" works, and bonus interest, it's generally very, very smart to make sure your spouse has a "reasonable" CPF asset base. If you've got a big fat CPF balance, but your spouse/partner has zero (or nearly zero), it's a good idea to fix that.

 

[dork32]

How come so complicated?

50,000 || 309-325||
The yield varies 7.4 to 7.8%

350,000 || 1855-1965 ||
Yield varies 6.36 to 6.74%

how come you calculate like that one?

this is not the correct way to calculate yield

 

[foozgarden]

how come you calculate like that one?

this is not the correct way to calculate yield

then how?..............

 

[BBCWatcher]

There's no "yield" on a lifetime annuity (longevity insurance). So you shouldn't even attempt to calculate a "yield," because the concept doesn't exist.

What's the "yield" of automobile insurance? That doesn't even make sense. Same thing for longevity insurance.

If you're looking for the correct financial metric, then you'd examine Actuarial Present Values (APVs) and compare those. But that only gets you so far with CPF LIFE because the premium is subsidized in various ways.

That said, you're comparing payouts as a percentage of varying premiums while holding the payout start date and payout plan type (Standard) constant. That's a reasonable approach in the circumstances. You've (re)discovered there is a "skew," that the first premium dollars are slightly more payout-productive than other premium dollars. As I've explained, while that skew might have public policy considerations attached, to bias CPF LIFE slightly in favor of those with lower Retirement Account balances, the skew might also have some reasonable actuarial justifications.

 

[bobobob]

There's no "yield" on a lifetime annuity (longevity insurance). So you shouldn't even attempt to calculate a "yield," because the concept doesn't exist.

What calculations should we do when considering how much annuity to purchase then?

 

[Mecisteus]

It's CNY. I think some people are thinking too complicatedly.

 

[SBC]

It does has yield. But is during its building phase, not during payout phase.

Can ask your MP during the walkout or during CPF public forum.

 

[henrylbh]

Agree that for CPF Life whether basic or standard plan, there is no such thing as premium is subsidised in various ways. Premium deducted is gone unless you survive passed a certain age and yield can be calculated at each point of time, if you really want to because you have a certain payout based on a fixed principal sum and a certain bequest. Of course, the payout and bequest can change according to events. But for calculation, we need to hold them constant until a change of event takes place.