CPF SA

[Andrew833]

36k annuity pays how much per month?

All along for simplification, I just take the frs amount as the sum I paid for the annuity and just look at the monthly payout cause bequest is zero from around 80 I think? Or earlier.

My thoughts;
65 years to 100 years, 35 years of insurance to cover.
36k divide by 35 years, each years is 1k+.
I think it’s reasonable. My father medi shield is more than 1k per year.

 

[BBCWatcher]

One idea that could possibly be accepted in the future is to allow CPFL at an earlier age for those who attain ERS.

Afterall, the point of CPFL is to ensure a minimum level of income for the rest of your life, and ERS can achieve this objective earlier without compromising on that minimum. However, with the longer lifespan involved, it might be necessary to require an escalating plan to fight inflation.

OK, so yes, this’d work economically (top up to the ERS, choose the Escalating Plan, and you can start payouts as early as age 60). However, undoubtedly it’d be politically unpopular, because only the “rich” could afford to do it that way....

On the other hand, if you offered this option(*) only to people participating in programs such as the HDB Lease Buyback Scheme or Silver Housing Bonus, which are not open to wealthier households, that’ll probably work both economically and politically. It would allow 60 to 64 year olds to unlock HDB leasehold equity in exchange for immediate retirement income, escalating and for life.

I still get nervous about spouses/partners, though, which CPF LIFE presently doesn’t handle well. I think the higher priority is a “Partner Plan” which would be like the Escalating Plan but with a couple pooling their RAs into a single joint/contingent life annuity (probably something like 100%/80% — that is, the payout for the surviving spouse/partner would be 80% of the couple’s payout). And in a Partner Plan there’d have to be allowance for the younger spouse to receive payouts before age 65. For example, the Partner Plan could allow payout start when the older spouse/partner is 65 but then, when that older spouse dies, allow the younger surviving spouse/partner to start payouts as early as age 60. So that’d be a way to get an age 60 payout start in certain cases.

(*) Payout start before age 65 (as early as age 60), CPF LIFE Escalating Plan only, program participants only (not the wealthiest households), and with ERS level RA funding (or FRS level with property pledge/charge).

 

[BBCWatcher]

My thoughts;
65 years to 100 years, 35 years of insurance to cover.
36k divide by 35 years, each years is 1k+.
I think it’s reasonable. My father medi shield is more than 1k per year.

One key difference is that this CPF LIFE premium is fully refundable, without interest. MediShield Life and Integrated Shield premiums are not refundable. That is to say only the interest is funding the longevity insurance, and it’s above market interest on a government subsidized premium in a not for profit, near universal risk pool (limited adverse selection) with low overheads. Good deal!

 

[dork32]

36k annuity pays how much per month?

All along for simplification, I just take the frs amount as the sum I paid for the annuity and just look at the monthly payout cause bequest is zero from around 80 I think? Or earlier.

the annuity pays you nothing at the start.

the is how basic works

eg you have 180k in ra at 65, 30k is used to buy annuity.

you have 150k left. this 150k, along with its interest, will be used to provide payout till you are 92 years old.

at 92 your ra just nice hit 0. it is then the annuity takes over and payout till you die.

cpf life basic has a very large bequest at the age of 80. eg if you are 55 today and have frs, bequest is 150k. it the gradually drops to 0 when you are 92.

cpf life standard has a bequest of 0 at the age of 80.

 

[dork32]

One key difference is that this CPF LIFE premium is fully refundable, without interest. MediShield Life and Integrated Shield premiums are not refundable. That is to say only the interest is funding the longevity insurance, and it’s above market interest on a government subsidized premium in a not for profit, near universal risk pool (limited adverse selection) with low overheads. Good deal!

interest lagi chia lat. interest of 4% of 36k is 1440. it means you pay 1440 a year to buy insurance

 

[Andrew833]

Let me give a more precise answer, using your examples, I am talking about CPF facts/rules, not opinion.

With CPF LIfe Basic Plan, 150k in RA and 30k as premium paid into the pool at 65:

1. 150k in RA will stream out as mthly payout from 65 to 90 until it becomes close to zero (CPF make some unwritten assumptions here).

2. Then payout will stream out from CPF Life pool (79.9k at 90)

Note on calculations of money in CPF Life Pool:

1. 30k premium will compound at 4%pa from 65 to 90 = about 30k+49.9k (interest) = 79.9k at 90.

2. Every insurance policy with surrender values has a guaranteed and non-guaranteed portion in the BI. CPF Life is no different. Eg

a. If u die at 90, what is guaranteed is 30k premium which will be refunded to your estate.

b. What is non-guaranteed is the compound interest of 49.9k which will be donated to the CPF Life Pool.

c. This non-guaranteed amount will slowly become guaranteed as u age and start to withdraw payouts after 90 until the breakeven age when all the non-guaranteed monies are streamed out as payout to u. Remember it will continue to compound at 4% from age 90 as non-guaranteed portion.

(guaranteed and non-guaranteed are terms I use to help explain how the money/CPF Life premium in CPF Life Pool are segregated and paid/distributed)

Thumb up. Finally I understand CPF Life better.
What’s you thought for which plan to take?
Please not East Coast Plan

 

[maple96]

Thumb up. Finally I understand CPF Life better.
What’s you thought for which plan to take?
Please not East Coast Plan

Ok I am very decisive, will not fumble like him

I will choose CPF Life Basic Plan cos it has the least amount of non-guaranteed portion in the BI, and start payout at 65. I have other sources of retirement funds, and have many other plans at 65 which only I know.

Everyone's priorities, financial situation and needs/wants/strategies are different.

 

[Andrew833]

Ok I am very decisive, will not fumble like him

I will choose CPF Life Basic Plan cos it has the least amount of non-guaranteed portion in the BI, and start payout at 65. I have other sources of retirement funds, and have many other plans at 65 which only I know.

Everyone's priorities, financial situation and needs/wants/strategies are different.

Need to consider which plan to take. Thanks.

 

[Kaypohji]

I didn’t know this. Cpf website has such info? I was looking at cpf life previously but I can’t find this

Then what is the annuity for standard plan?

I assume even if u take up the standard plan and u died before the annuity starts, u still get back the premium paid as bequest?

Cpf life standard has lesser bequest because it has higher payout every year so naturally it will be 0 earlier at 80... this one I feel it makes sense.

How about the amount of annuity ? If die at 80, premiums is refunded to family right. If u die after 80, after the annuity start, the premium cannot get back already right?

the annuity pays you nothing at the start.

the is how basic works

eg you have 180k in ra at 65, 30k is used to buy annuity.

you have 150k left. this 150k, along with its interest, will be used to provide payout till you are 92 years old.

at 92 your ra just nice hit 0. it is then the annuity takes over and payout till you die.

cpf life basic has a very large bequest at the age of 80. eg if you are 55 today and have frs, bequest is 150k. it the gradually drops to 0 when you are 92.

cpf life standard has a bequest of 0 at the age of 80.

 

[chrisloh65]

You mis-understood.
The $36k insurance premium you paid at Age 65 for CPF Life Basic allows CPF Life "insurance" payout to kick in after your exhausted your own RA fund at about 92 years old.
I doubt I can live till 92 years old! So I will pay $36k insurance (+ lost interest of 4% p.a. over 27 years!) but get nothing back.

My thoughts;
65 years to 100 years, 35 years of insurance to cover.
36k divide by 35 years, each years is 1k+.
I think it’s reasonable. My father medi shield is more than 1k per year.

 

[Kaypohji]

For basic annuity premium is 36k but standard and escalating plan it is the full 180k?

To help u compare, let me use the same example to explain what happens if u choose the Standard/Escalating Plan:

If u have 180k in RA and u choose Standard or Escalating Plan,

1. 180k in RA will be transferred to CPF Life Pool as CPF Life Premium.

2. Your mthly payout will be streamed out from the Pool.

3. Assuming u choose to start payout at 65, the following will be your guaranteed and non-guaranteed portions of your BI:

a. Guaranteed = CPF Life Premium = 180k (reduces every time mthly payout is given to u)

b. Non-Guaranteed = 4% compounded interest on 180k (reducing balance after every payout) + extra interest of max $900 pa (1% on first 30k and 1% on first 60k of your combined balances)

Note: extra interest per year will always be $900 so long your CPF Life Premium is above 60k, paid into the CPF Life Pool

If u die anytime after 65, only the guaranteed portion (ie CPF Life Premium) will be refunded to your beneficiaries. The non-guaranteed portion will be donated to the CPF Life Pool.

If u are good at maths, u can estimate the non-guaranteed portion at every age to determine how much will be donated if u die at that age.

Point to note: If u use the CPF charts/estimator/calculator, the age where u see bequest is zero, it means the guaranteed portion above is zero, but the non-guaranteed portion is not yet zero.

 

[BBCWatcher]

One idea that could possibly be accepted in the future is to allow CPFL at an earlier age for those who attain ERS.

I thought of a potential problem if you peg the minimum withdrawal age to the funding level: loan sharks. That particular problem is at least reduced if the Retirement Account funding source is specifically from HDB leasehold equity (HDB Lease Buyback Scheme, Silver Housing Bonus).

 

[The_Davis]

Ok I am very decisive, will not fumble like him

I will choose CPF Life Basic Plan cos it has the least amount of non-guaranteed portion in the BI, and start payout at 65. I have other sources of retirement funds, and have many other plans at 65 which only I know.

Everyone's priorities, financial situation and needs/wants/strategies are different.

I will choose basic just coz at age 85 still got bequest.

 

[Andrew833]

To help u compare, let me use the same example to explain what happens if u choose the Standard/Escalating Plan:

If u have 180k in RA and u choose Standard or Escalating Plan,

1. 180k in RA will be transferred to CPF Life Pool as CPF Life Premium.

2. Your mthly payout will be streamed out from the Pool.

3. Assuming u choose to start payout at 65, the following will be your guaranteed and non-guaranteed portions of your BI:

a. Guaranteed = CPF Life Premium = 180k (reduces every time mthly payout is given to u)

b. Non-Guaranteed = 4% compounded interest on 180k (reducing balance after every payout) + extra interest of max $900 pa (1% on first 30k and 1% on first 60k of your combined balances)

Note: extra interest per year will always be $900 so long your CPF Life Premium is above 60k, paid into the CPF Life Pool

If u die anytime after 65, only the guaranteed portion (ie CPF Life Premium) will be refunded to your beneficiaries. The non-guaranteed portion will be donated to the CPF Life Pool.

If u are good at maths, u can estimate the non-guaranteed portion at every age to determine how much will be donated if u die at that age.

Point to note: If u use the CPF charts/estimator/calculator, the age where u see bequest is zero, it means the guaranteed portion above is zero, but the non-guaranteed portion is not yet zero.

Thanks, I understand better now.

 

[Oldnerd79]

So does that mean if I have enough savings outside of CPF to last till I die. It is better to choose Basic so I 'donate' less to the CPF Life pool? I wonder how many people will still choose Standard/Escalating plan unless they expect to live till after 90.

 

[Kaypohji]

Donate also good ma

Help each other

It’s also like a bet because u won’t know for sure how long u will live..... my grandmother lived until 90 plus and she only passed away due to a fall not because she fell sick or what

So does that mean if I have enough savings outside of CPF to last till I die. It is better to choose Basic so I 'donate' less to the CPF Life pool? I wonder how many people will still choose Standard/Escalating plan unless they expect to live till after 90.

 

[dork32]

I didn’t know this. Cpf website has such info? I was looking at cpf life previously but I can’t find this

Then what is the annuity for standard plan?

I assume even if u take up the standard plan and u died before the annuity starts, u still get back the premium paid as bequest?

Cpf life standard has lesser bequest because it has higher payout every year so naturally it will be 0 earlier at 80... this one I feel it makes sense.

How about the amount of annuity ? If die at 80, premiums is refunded to family right. If u die after 80, after the annuity start, the premium cannot get back already right?

first is wat i write is true. the numbers may be a little off.

second is you are only abit right in the standard's bequest is less because of the bigger payout.

with a payout of just 100+ more a month at frs, it should not hit 0 so quickly. the main reason why it hits 0 quickly is that the principal does not earn any interest for itself. the interest earn is given to a common pool. money in this pool will kick in for your payout once your principal is gone.

why did i say you are a bit right. 100+ different a month will give you a difference of 1000+ a year. if you have 250k in your account (frs at 55) you would be donating 10k of interest to the pool every year.

bbc mentioned there is no direct premium to the insurance. they just take the interest of your principal as premium

 

[dork32]

You mis-understood.
The $36k insurance premium you paid at Age 65 for CPF Life Basic allows CPF Life "insurance" payout to kick in after your exhausted your own RA fund at about 92 years old.
I doubt I can live till 92 years old! So I will pay $36k insurance (+ lost interest of 4% p.a. over 27 years!) but get nothing back.

you are not alone.

i quote wat chris tan of providence.
"Personally, I will choose the Basic Plan. From the mathematical point of view, the Basic Plan makes the most sense to me.

"For a difference of about $100 or more per month between the Standard and Basic plans, the bequest for the Basic Plan is a lot higher than the Standard or Escalating plan.

"The $100 or more per month difference will also not make a big difference to my retirement lifestyle as I have other investment options for my retirement and these investment plans will also take care of the rising cost of living and as such, I do not need the Escalating Plan."

 

[dork32]

I will choose basic just coz at age 85 still got bequest.

just on the this page alone chris, davis, maple and dork will choose basic.

looks like the hard sell method on escalating is not working on us.

 

[dork32]

I will choose CPF Life Basic Plan cos it has the least amount of non-guaranteed portion in the BI, and start payout at 65. I have other sources of retirement funds, and have many other plans at 65 which only I know.

maple raised a point that some people really dont understand.

many investment have variable payout, depending on the financial situation. because of the variation, a standard deviation can be determined. the higher the standard deviation, the higher the investment risk. gamblers tend to like those with higher deviation because of the chance of higher rewards.

if you look at the cpf life, returns on Escalating has the highest standard deviation. in maple terms, highest non guaranteed. so gamblers will tend to go for the escalating plan.

but some people here tell us not to gamble and take the escalating plan.

also the same some people tell us cpf life is not an investment and you should not be calculating the returns. when you put some money in and take a different sum out it can be considered as an investment