CPF life questions

[wealth_farmer]

Oops totally skipped the Retirement Sum Scheme cos I thought I only need to look at CPF LIFE scheme as I fall under the latter. CPF should consider replicating the property charge FAQ under the CPF LIFE section as well. Thanks for pointing out!

erm... it's all in the CPF FAQ you know:

https://www.cpf.gov.sg/Members/Schemes/schemes/retirement/retirement-sum-scheme

Basically, the property pledge allows you to opt for BRS and withdraw the rest from your RA. In return, you promise to "return" the amount you withdrew to your RA when you sell your property

That's about it. The property is still yours. And if you never sell it, you never have to "return" the money you withdrew

 

[badsector]

Actually this 1200 payout has risen quite a bit, I used to remember the figure to be 1000 + a bit only.
Seems rising interest rate helps.

becoz retirement sum increase yearly.

 

[OngHuatHuat]

I mean to say the magnitude of increase is higher than expected.

becoz retirement sum increase yearly.

 

[Rooney3]

The interest in RA stays in RA and cannot be withdrawn. The principal plus interest will ultimately be used to fund your cpf life plan

Just exactly what I thought. Damn let an insurance agent almost lead me away from my own known information.

Thanks all.

 

[henrylbh]

Actually this 1200 payout has risen quite a bit, I used to remember the figure to be 1000 + a bit only.
Seems rising interest rate helps.

Rising interest rate? No increase in rate in the past many years. You confuse yourself? Earlier cohorts have lower min sum and of course payout is lesser than current cohort with 161k or 166k.

 

[OngHuatHuat]

Current interest rate is indeed higher.

Rising interest rate? No increase in rate in the past many years. You confuse yourself? Earlier cohorts have lower min sum and of course payout is lesser than current cohort with 161k or 166k.

 

[henrylbh]

Current interest rate is indeed higher.

No change in interest rate for RA that would affect monthly payout. Only additonal 1% on first 30k effective this year.

 

[soneat]

https://www.cpf.gov.sg/Members/FAQ/schemes/retirement/retirement-sum-scheme


Q
How much retirement sum do I need? And what are the future changes to the retirement sum?

A
For members who turn 55 in 2017, their Basic Retirement Sum (BRS) and Full Retirement Sum (FRS) are $83,000 and $166,000 respectively.

To help you better plan for your retirement, your BRS will be made known to you ahead of time. For members turning 55 from 2017 to 2020, the BRS will be increased by 3% from the cohort in the previous year to cater for long term inflation and increase in standard of living. Correspondingly, the FRS and Enhanced Retirement Sum (ERS) will be set at two times and three times the BRS respectively.

Year BRS FRS ERS
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
Q

Why increase the retirement sum?

A
The retirement sum has to be adjusted annually to account for higher standards of living and to ensure that payouts keep pace with inflation.

 

[OngHuatHuat]

I think you misunderstood what I meant.

No change in interest rate for RA that would affect monthly payout. Only additonal 1% on first 30k effective this year.

 

[henrylbh]

I think you misunderstood what I meant.

I could have misunderstood you.

But you said '1200 payout has risen quite a bit' and you remember the payout "to be 1000 + a bit only". And you are not wrong that payout has risen quite a bit. According to the calculator for basic plan, payout has risen -

At 55 from 1 Jul 2013 with FRS of $148k, payout is $936 - $1,017

At 55 from 1 Jul 2014 with FRS of $155k, payout is $972 - $1,061

At 55 from 1 Jan 2017 with FRS of $166k, payout is $1,162 - $1,282.

I misunderstood when you added 'seems rising interest rate helps'? But all this while there was no rise in interest rate on FRS amount. The higher payout of 1200 is simply due to higher FRS.

 

[nethdale]

May I just confirm that at 55 and following is the assumption:

--- Meet the MS for FRS of 166K in 2017

I understand that by default, it would be FRS in 2017, now my doubt is for whatever reason, can I change to BRS in 2018 or later? Or once it is decided at 55, the scheme will stick to you forever? Thanks.

 

[OngHuatHuat]

Look closer at the figure. Is the magnitude of pay out increase the same or really increase linearly with increase in FRS?

Try use a linear model and see if it fits in if you know what I meant. If dunno then it is okay, I am not very interested in defending cpf life coz my first feel about this increase is non linear increase.

I could have misunderstood you.

But you said '1200 payout has risen quite a bit' and you remember the payout "to be 1000 + a bit only". And you are not wrong that payout has risen quite a bit. According to the calculator for basic plan, payout has risen -

At 55 from 1 Jul 2013 with FRS of $148k, payout is $936 - $1,017

At 55 from 1 Jul 2014 with FRS of $155k, payout is $972 - $1,061

At 55 from 1 Jan 2017 with FRS of $166k, payout is $1,162 - $1,282.

I misunderstood when you added 'seems rising interest rate helps'? But all this while there was no rise in interest rate on FRS amount. The higher payout of 1200 is simply due to higher FRS.

 

[soneat]

Look closer at the figure. Is the magnitude of pay out increase the same or really increase linearly with increase in FRS?

Try use a linear model and see if it fits in if you know what I meant. If dunno then it is okay, I am not very interested in defending cpf life coz my first feel about this increase is non linear increase.

It is non-linear. I think the rationale was the first S$60K would be earning a higher interest. Hence if you look at the BRS vs FRS vs ERS payout, FRS is slightly less than 2xBRS; ERS<3xBRS.

So when FRS increase from year to year, you will also feel that it is non-linear. =)

 

[OngHuatHuat]

What I trying to say is during the cpf payout period, the model they used to simulate return is interest dependent. Not during that 10 years of compounding.

It is non-linear. I think the rationale was the first S$60K would be earning a higher interest. Hence if you look at the BRS vs FRS vs ERS payout, FRS is slightly less than 2xBRS; ERS<3xBRS.

So when FRS increase from year to year, you will also feel that it is non-linear. =)

 

[henrylbh]

Look closer at the figure. Is the magnitude of pay out increase the same or really increase linearly with increase in FRS?

Try use a linear model and see if it fits in if you know what I meant. If dunno then it is okay, I am not very interested in defending cpf life coz my first feel about this increase is non linear increase.

How could you expect the increase to be linear

 

[OngHuatHuat]

So what is your explanation for this?
I believe higher interest rate will give better return during the cpf life payout period.

How could you expect the increase to be linear

 

[henrylbh]

What I trying to say is during the cpf payout period, the model they used to simulate return is interest dependent. Not during that 10 years of compounding.

No doubt that the payout is dependant on interest rate, among other factors. But there was NO increase in interest rate over the last many years. So increase in payout from 1k plus a bit to 1,200 is NOT due to increase in interest rate. I give up

 

[henrylbh]

So what is your explanation for this?
I believe higher interest rate will give better return during the cpf life payout period.

either one of us have a blockage somewhere. Let it be.

 

[OngHuatHuat]

That's why I said part of the reasons.

Your figure just confirm my observation.

No doubt that the payout is dependant on interest rate, among other factors. But there was NO increase in interest rate over the last many years. So increase in payout from 1k plus a bit to 1,200 is NOT due to increase in interest rate. I give up

 

[maple96]

Have some enquiries hopefully people can clear it up.

1) At 55, 161k is transferred from OA and SA to RA. The yearly interest in RA cannot be withdrawn as it's earmarked for CPF Life correct?

2) If I have 100k remaining in my OA and SA after the transfer, it will continue getting the 2.5% and 4% interest correct?

May I just confirm that at 55 and following is the assumption:

--- Meet the MS for FRS of 166K in 2017

I understand that by default, it would be FRS in 2017, now my doubt is for whatever reason, can I change to BRS in 2018 or later? Or once it is decided at 55, the scheme will stick to you forever? Thanks.

At 55, money (FRS) in SA/OA will be transferred to RA, balance in SA/OA can be withdrawn any time.

At 65, u need to choose the CPF life plan to join (Basic or Standard) and make the following decisions:

1. U can withdraw up to 20% of RA

2. Do u want BRS? If yes and can, u can withdraw the difference between BRS and FRS. U can do this at 55 also. U can still do it after u join CFP Life (see details below)

3. Do u want to defer CPF Life payout to 70? If not, payout will start at 65

4. At 65 – 70 payout start age, balance in RA will be transferred to CPF Life Pool, ie about 10% for Basic, all monies for Standard.

In short, u have up to age 65 to make your final decisions before monies go in to CPF Life which “u cannot see”.


Below quote From CPF website:

Q: I am on CPF LIFE. Can I withdraw from my Retirement Account if I own a property?

A: If you own a property, you may withdraw your Retirement Account savings (excluding interest earned, any government grants received and top-ups made under the Retirement Sum Topping-up scheme) above the Basic Retirement Sum (applicable to you) that have not been deducted as annuity premium for CPF LIFE, provided you have met the eligibility criteria. For more information on withdrawal of Retirement Account savings based on sufficient charge/pledge, please click here.

Withdrawing your Retirement Account savings will reduce your monthly payouts from your payout eligibility age.