FRS vs ERS

[BBCWatcher]

As a quick, imperfect comparison, the U.S. system has a combined (employer plus employee) contribution rate of 15.3% on earned income from work. All but 2.9 percentage points of that is subject to an income cap. In contrast, Singapore’s combined contribution rate (employer plus employee) is 37%, all subject to a cap.

U.S. retirement benefits are generally higher than Singapore’s, and there are disability, survivors, and spousal benefits, too. There’s also a modest death benefit ($255 in 2019), but there is no bequest, except in the form of survivors and spousal benefits. And there’s no compulsory housing-related savings associated with U.S. Social Security.

But in Singapore everybody must “win,” including heirs in the form of residual bequests. So we pay for that, a lot. Yes, OK, this comparison is oversimplified, but those are the headlines. And I’m not complaining! CPF works rather well for me, actually. My point is that if you want a system with the world’s highest emphasis on bequests, it’s obviously possible, but you pay for it.

....And before anybody jumps in here with a stupid comment about “Asian culture,” Japan’s system doesn’t feature any bequests either. Singapore’s median and average household wealth is among the world’s highest, and younger generations are doing even better than their elders. And yet.... we’ve got 37% CPF contributions, partly so we can hoard for possible (not guaranteed) lump sum bequests. It really is globally weird, but that’s what we’ve got.

 

[Mecisteus]

If you have chosen the CPF LIFE Basic Plan, we will pay the extra interest earned into your Retirement Account and pay it to you in the year it is earned as part of your monthly CPF LIFE payout. When your combined balances fall below $60,000, the extra interest will reduce. This reduces your monthly CPF LIFE payouts gradually.

Am I understanding wrongly ?

This answer is referring to the 80% in your RA.

The first Q&A is referring to the 20% annuity premiums for the case of Basic while 100% for the case of S and E.

 

[kelhot2001]

Key word here is CPF LIFE Basic Plan. The interest on the 80% *not* transferred to Lifelong Income Fund but left in your RA will go into your RA.

The interest on the annuity premium gets pooled into the Lifelong Fund and distributed to everyone.

Let look for the same key works and see the whole context

Q Where will the extra interest be paid to after I join CPF LIFE?
A
If you have chosen the CPF LIFE Standard Plan or CPF LIFE Escalating Plan, the extra interest will be paid into the Lifelong Income Fund. By paying the extra interest into the Lifelong Income Fund, you will be able to enjoy a more stable payout for the rest of your life. The extra interest will be pooled and factored into your monthly CPF LIFE payouts.

If you have chosen the CPF LIFE Basic Plan, we will pay the extra interest earned into your Retirement Account and pay it to you in the year it is earned as part of your monthly CPF LIFE payout. When your combined balances fall below $60,000, the extra interest will reduce. This reduces your monthly CPF LIFE payouts gradually.

The word in red the extra interest both refer to interest earn by premium.
Correct ?

 

[Mecisteus]

Q What happens if I choose the CPF LIFE Basic Plan?
A When you join the CPF LIFE Basic Plan, we will deduct about 10 - 20% of your Retirement Account (RA) savings for the annuity premium at the point of policy issuance. The actual percentage will depend on your age and gender. We will inform you on the amount deducted when your policy is issued. The premium deducted will be paid into the Lifelong Income Fund. The rest of your RA savings will stay in your RA.

You will receive monthly payouts from the savings in your RA from your payout start age until one month before you reach 90 years old. Once you reach 90 years old, you will continue to receive monthly payouts from the Lifelong Income Fund for as long as you live.

Payouts under your CPF LIFE Basic Plan will be reduced when the combined balances in your CPF accounts, including the amount committed to CPF LIFE, falls below $60,000.This is due to the reduction in any extra interest earned and paid to you.

Q What happens if I choose the CPF LIFE Standard Plan?
A When you join the CPF LIFE Standard Plan, we will deduct all the savings in your Retirement Account as the annuity premium at the point of policy issuance. The premiums deducted will be paid into the Lifelong Income Fund. You will receive monthly payouts from the Lifelong Income Fund from your payout start age for as long as you live.

 

[Mecisteus]

kelhot just use some simple logic here.

If CPF Life Basic holders can take back all the interests earned from the insurance premiums, then where is the insurance portion?

 

[maple96]

another "chicken and duck debate"

 

[maple96]

This is not what I understand

https://www.cpf.gov.sg/Members/Schemes/schemes/retirement/cpf-life#

If you have chosen the CPF LIFE Basic Plan, we will pay the extra interest earned into your Retirement Account and pay it to you in the year it is earned as part of your monthly CPF LIFE payout. When your combined balances fall below $60,000, the extra interest will reduce. This reduces your monthly CPF LIFE payouts gradually.

this is "chicken"

Another STATEMENT from CPF
Your savings used to join CPF LIFE (i.e. annuity premiums) will continue to earn interest like your Retirement Account (RA) savings, which is currently at 4% per year. The interest earned on the annuity premiums will be paid to the Lifelong Income Fund and pooled together with the interest of all CPF LIFE participants. The interest will be paid to you as your monthly payouts for as long as you live.

this is "duck"

Is this not the premium interest earn in LIF which will be return into your RA

"chicken" = the extra interest refers to 1% on first 60k and 1% on first 30k, these will be paid to RA for Basic Plans, for Standard and Escalating it will be paid into LIF.

"duck" = 4% on annuity premium = 20% of RA at 65 if start 65 = 4% interest paid into LIF

My accounting 101 post explains the 4% interest on the 20% premium only.

 

[kelhot2001]

"chicken" = the extra interest refers to 1% on first 60k and 1% on first 30k, these will be paid to RA for Basic Plans, for Standard and Escalating it will be paid into LIF.

"duck" = 4% on annuity premium = 20% of RA at 65 if start 65 = 4% interest paid into LIF

My accounting 101 post explains the 4% interest on the 20% premium only.

sound legit

 

[maple96]

If say a total of $20K SA only top-up is done before 55 years old, is this amount and/or the compounded interest earned from this $20K topup excluded from the total amount calculations of BRS? And if excluded.. Where is this money parked?

Does it make more economic sense if we feel we will die early to simply go for the BRS? Or we don't really have anyone to bequest to?

If u have been following this thread, using the formula:

FRS=181k, BRS=50%*FRS=90.5

Property charge/pledge to withdraw = FRS – BRS – SA topup
= 181 -90.5 -20 =70.5
Balance 90.5+20 =110.5k in RA

If u choose BRS with Basic Plan, only 20% of 110.5k will go into CPF Life pool as premium.
If u choose FRS with Basic Plan, only 20% of 181k will go into CPF Life pool as premium.
The smaller the premium, the lower your cost of insurance = 4% interest on premium compounded until u die before 90.

What I will do:

I have no dependents, I prefer to give my monies to my siblings instead of CPF Life pool. I have no property to pledge. So I will choose Basic Plan with FRS, I can withdraw 20% before the monies get calculated for premium = 181k less 20% then take 20% of this as premium to reduce my cost of insurance. If I die early, I get more money back. If I get hit with critical illness which qualifies to exit from CPF Life, I get more money back.

It also depends on your financial situation. Above just the key points relevant for this discussion, not the complete strategy I have which is secret.

 

[kelhot2001]

kelhot just use some simple logic here.

If CPF Life Basic holders can take back all the interests earned from the insurance premiums, then where is the insurance portion?

Yes, logically doesnt make sense that why need clarification

Another STATEMENT from CPF
Your savings used to join CPF LIFE (i.e. annuity premiums) will continue to earn interest like your Retirement Account (RA) savings, which is currently at 4% per year. The interest earned on the annuity premiums will be paid to the Lifelong Income Fund and pooled together with the interest of all CPF LIFE participants. The interest will be paid to you as your monthly payouts for as long as you live.

So how does this means to you?

 

[starmaze]

I think there is a very simple way to decide:

1) Those without anyone to bequest to can choose Standard Plan, get highest payout from the start. If they die earlier (before their own money runs out - most likely case, probably >90% of them), they benefit others by contributing all their remaining money to the CPF Lifelong Income Fund (but no choice). Nowadays there may be many singles in this circumstances.

2) Those with people to bequest to, you can choose Basic. If you die early, you benefit people you left behind while still contributing some money to the CPF Lifelong Income Fund (but not so much as those who choose Standard or Escalating). If you live too long you are still covered by the annuity insurance. Best of both worlds!

agree.. it depends on one's requirements and preferences. whether you wanna leave anything behind

 

[madtari]

From my comprehension on that statement in red, it simply means that all interests (including capital) from everyone's premium will be pooled and invested, with the returns to be used to fund all the lifelong payouts. It doesn't necessary mean interest earned from your premium will be eventually paid to you. (eg. Some who die earlier will lugi, and the paid premium less bequest amount, if any, will still remain in the pool to benefit the others. Some who outlive their premium, will continue to benefit from the pool fund)

Yes, logically doesnt make sense that why need clarification

Another STATEMENT from CPF
Your savings used to join CPF LIFE (i.e. annuity premiums) will continue to earn interest like your Retirement Account (RA) savings, which is currently at 4% per year. The interest earned on the annuity premiums will be paid to the Lifelong Income Fund and pooled together with the interest of all CPF LIFE participants. The interest will be paid to you as your monthly payouts for as long as you live.

So how does this means to you?

 

[Mecisteus]

Yes, logically doesnt make sense that why need clarification

Another STATEMENT from CPF
Your savings used to join CPF LIFE (i.e. annuity premiums) will continue to earn interest like your Retirement Account (RA) savings, which is currently at 4% per year. The interest earned on the annuity premiums will be paid to the Lifelong Income Fund and pooled together with the interest of all CPF LIFE participants. The interest will be paid to you as your monthly payouts for as long as you live.

So how does this means to you?

Don't need to think so complicated.

For CPF Life, you need to pay a premium. 20% for B and 100% for S & E.

The interests earned on these premiums can be 10% but technically, they don't belong to you.

If you die early, you will get back unused premiums only without the interests.

If you live long enough, you will claim these interests.

This is what a longevity insurance is all about.

 

[maple96]

https://mothership.sg/2019/04/cpf-life-interest/

first time mom make it public after opposition query?

Never ever talked about in roadshows nor CPF After 55 talks?

Always first to publish clarifications on facebook after all the debate?

This is a first by CPFB:

https://www.areyouready.sg/YourInfo...skpooling-how-CPFLIFE-secures-lifelong-income

CPFB just held their first After 55 talk on Mar 30 2019, this was not even in the slides/handout!

 

[kelhot2001]

Don't need to think so complicated.

For CPF Life, you need to pay a premium. 20% for B and 100% for S & E.

The interests earned on these premiums can be 10% but technically, they don't belong to you.

If you die early, you will get back unused premiums only without the interests.

If you live long enough, you will claim these interests.

This is what a longevity insurance is all about.

I presume you are right. Meaning to say premium at 10 - 20% of FRS $181,000.00 (male probably lower, while female will be higher)
I take at 15% OF FRS ($181K) or $282K (65 age) which roughly is $42.3K.

This mean that those on basic would only get to withdraw thier interest at age 90 after their funds run out. The premium and interest will accrued to about $123K and then I will start drawing from there if I am still alive.

Presume that is the way for basic withdrawal

 

[kelhot2001]

One more question , if I use SA 120k for investment, and leave behind 40k.After that, can I transfer another 100k either cash or OA fund into SA

Say at after 55, after all is transfer to RA, can i return this sum back to SA

What happen if it is more than Frs, does the rule still stand, ?

 

[dork32]

From my comprehension on that statement in red, it simply means that all interests (including capital) from everyone's premium will be pooled and invested, with the returns to be used to fund all the lifelong payouts. It doesn't necessary mean interest earned from your premium will be eventually paid to you. (eg. Some who die earlier will lugi, and the paid premium less bequest amount, if any, will still remain in the pool to benefit the others. Some who outlive their premium, will continue to benefit from the pool fund)

because the interest do not go into your own account, your premium depletes very quickly. many will actually outlive the premium (age 80)

drawing from pool does not mean that you have benefited from it because you will be drawing from your own contribution to the pool. You only finish your own portion when you hit about 87, 88. It is then you become a parasite.

 

[BBCWatcher]

One more question , if I use SA 120k for investment, and leave behind 40k.After that, can I transfer another 100k either cash or OA fund into SA

No. The contribution limit is not reset or otherwise adjusted when you shift funds from traditional SA to the CPF Investment Scheme (SA).

Say at after 55, after all is transfer to RA, can i return this sum back to SA

Your RA can be fully funded on your 55th birthday with $40,000 from your SA (the minimum you must leave behind when you use the CPF Investment Scheme to "shield" SA dollars) and the rest from your OA. There are many threads discussing "SA shielding."

 

[kelhot2001]

No. The contribution limit is not reset or otherwise adjusted when you shift funds from traditional SA to the CPF Investment Scheme (SA).


Your RA can be fully funded on your 55th birthday with $40,000 from your SA (the minimum you must leave behind when you use the CPF Investment Scheme to "shield" SA dollars) and the rest from your OA. There are many threads discussing "SA shielding."

Last 3 questions,

IF after 55, normal contribution still go to SA like salary contribution
Can I still top up to SA?
Is the SA still limited to FRS after 55?

Thanks in advance

 

[henrylbh]

Last 3 questions,

IF after 55, normal contribution still go to SA like salary contribution
Can I still top up to SA?
Is the SA still limited to FRS after 55?

Thanks in advance

Once RA created at 55, with or without FRS, no more topping up of SA (by cash or by transfer from OA) is allowed. Part of mandatory and voluntary contributions from 55 will still go into SA with no cap.