What is CPF LIFE?
The CPF LIFE scheme or annuity plan, or CPF Lifelong Income For the Elderly, is a national longevity insurance annuity scheme launched by the Singapore Government in September 2009, to insure Singapore citizens and Permanent Residents (PRs) against running out of your retirement savings, by providing you with a monthly payout from age 65, no matter how long you live.
Why Do We Need CPF Life?
You usually know how much you have saved, but usually, you would not know how much of your savings you need for living expenses monthly because no one can actually predict how long they can live. This is a dilemma: what if you spend too much, and do not have enough if you live a long, happy life? What if you spend too little, and deprive yourself from enjoying your hard-earned savings?
To add to the complexity, you are more than ever likely to live longer than the past generations with rapid advances in healthcare technology. That means you cannot predict how long you will live just by looking at past data. As a result, most people underestimate their lifespans and find their savings depleted with many more years to live.
That is why the Singapore government created CPF LIFE, to give all Singapore citizens and permanent residents peace of mind when they retire, by providing them with a monthly payout no matter how long we live.
What Are the Benefits of CPF Life?
CPF LIFE provides you with monthly retirement payouts no matter how long you live. It is also a safe product that is guaranteed by the Singapore Government, with returns of up to 6% per year.
As CPF LIFE is administered by the CPF Board which is non-profit, it does not incur costs such as advertising. As well, longevity risks and costs can also be better managed with a large member base.
The Singapore CPF LIFE payouts are also not taxable.
How Does CPF Life Works?
Who Is Eligible for CPF LIFE?
You will receive a letter from the CPF Board one month after you reach age 55 to inform you if you are placed on CPF LIFE and inviting you to choose between the LIFE Standard Plan and LIFE Basic Plan. You will be given up to 6 months to choose your preference, and if you do not make a choice, you will automatically be placed under the LIFE Standard Plan.
Generally, you will be automatically included if you are a Singapore citizen or PR born in 1958 or after, and have at least SGD60,000 in your CPF retirement savings before you reach 65. If you are a Singapore citizen or PR who does not meet the criteria, you can still choose to join the scheme at any time from age 65 to one month before you reach 80 years old.
Is CPF LIFE Compulsory?
Although all CPF members are automatically included into the scheme, if you have a commercial annuity product from a private insurer which pays out the same or higher monthly payout for life, you can apply to be exempted from the plan and withdraw your CPF retirement savings.
If you are not automatically included, or you have applied to be exempted from it, you will remain on the Retirement Sum Scheme and you will still receive monthly payments from your payout eligibility age until your retirement savings are fully used up. If subsequently you want to join the plan, you have until one month before your 80th birthday. You can submit an online request.
CPF members with health problems such as an illness which renders you permanently unfit from ever continuing in any employment or are terminally ill may be exempted if they qualify under the Medical Ground Scheme (MGS).
When Will I Start to Get My CPF LIFE Payouts?
By default, you will start to receive the monthly payouts at the age of 65. However, if you wish to increase your payouts, you can defer the starting age up to age 70. This gives your retirement savings up to 5 more years to grow in your CPF.
How Long Is the CPF LIFE Payouts?
Once you are enrolled, a part of the cash savings in your RA will be set aside as the premium for an annuity. The premium will earn CPF interest rates of up to 6%, which includes an extra interest of up to 2% from the Government.
Your payout per month will first be paid from your premium (applicable to the CPF LIFE Standard and Escalating plans, see below for details of plan). Together with your remaining cash savings, you will get a lifelong income every month from your Draw Down Age* (DDA). No matter what age you live up to, you will always receive a monthly payout, and it is guaranteed for life after the age of 65 years old.
What Is the CPF LIFE Interest Rate?
CPF LIFE provides interest rates of up to 6% per year to CPF members aged 55 and above, including the extra 2% interest on the first SGD30,000 of their combined balances, capped at SGD20,000 for the Ordinary Account, and an extra 1% on the next SGD30,000.
What Are the CPF Life Plans Available?
So, which CPF LIFE plans are available, or which plan is better for you? It’s very important for you to decide on the kind of retirement lifestyle you want before choosing the right plan for yourself. Here are the three types of government annuity schemes available to you.
The CPF LIFE Escalating Plan is the one for you, if you are worried about things getting more and more expensive in future. It pays you monthly, starting at SGD1,000 when you are 65 years old, and it increases by 2% every year for life. This protects you against inflation and increasing prices, and you could generally maintain your standard of living even if prices rise over the years, which they most likely would.
The CPF LIFE Standard Plan is the default plan, and it provides a higher level of payout per month but leaves a lower CPF LIFE bequest. It is for those who wants to keep within a fixed budget as it has a level monthly payout. If you think you can cope with rising prices in the future by cutting down on your expenses and living a more modest lifestyle, then this plan is for you. If you join with the same CPF LIFE premium as the Escalating Plan above, your payouts will start higher than the Escalating Plan, but it will remain the same for the rest of your life and will become lower than the payouts for the Escalating Plan.
The CPF LIFE Basic Plan provides a lower payout per month, but leaves a higher CPF LIFE bequest. It is for those who do not mind starting with lower payouts every month, which will progressively get lower as the years pass by, and when your combined CPF balances fall below SGD60,000. This is because the extra interest that is earned on the first SGD60,000 of your combined CPF balances are credited to the RA, and paid as part of your payouts every month. As balances fall due to payouts, the extra interest earned and subsequent payouts will fall too.
When you join this plan, CPF will deduct about 10% to 20% of your RA savings as CPF LIFE premium, which can be any time from 65 to 70 years old. The payout you receive every month will first be paid from your RA, and will last to about 90 years old. After that, the monthly payouts will be paid from your CPF LIFE premium, and you will continue to receive your payouts no matter how long you live, even if your CPF LIFE premium is depleted.
For all the three plans, no matter how long you live, you will enjoy monthly payouts, and upon death, any premium balance, together with your remaining CPF savings, will be given to your beneficiaries.
How Much Will I Receive in Monthly Payouts?
If you have already chosen your CPF LIFE plan, how much you will receive every month will depend very much on how much you have in your RA when you join the scheme. The more savings that you used to join this scheme, the higher your payouts will be. Other factors that will affect your monthly payouts include your gender and age, the plan type you choose and CPF interest rates and mortality rates. An independent actuarial consultant will determine the premiums and payouts.
You can increase your payouts by topping up your RA, up to the Enhanced Retirement Sum or you can defer your payout date until the age of 70 years old because for every year that you defer, your payouts will increase by up to 7%.
You will get the monthly payouts directly into your desired bank account.
Annuity Payout Estimator
How much will you receive in monthly CPF LIFE payouts? You can use the CPF LIFE Estimator tool to find out the amount of premium needed to achieve your desired monthly payout under your selected plan. This tool is designed specially to help CPF members between age 55 and 79 estimate their monthly payouts based on their desired retirement lifestyle. This CPF LIFE calculator will take approximately 5 minutes of your time.
Here’s also an article which will give you more information on the amount of payouts you will receive.
What Is the Difference between the Retirement Sum Scheme and CPF LIFE?
The main difference between the Retirement Sum Scheme and CPF LIFE is that for the former, the interest is paid into your RA balances. For the latter, funds that are contributed to the scheme earns an interest that is paid to your Lifelong Income Fund, and this fund is meant to continue providing you with monthly payouts.
Can I Top Up My CPF LIFE?
If you are age 55 and above, you can top up your RA to the prevailing Enhanced Retirement Sum every year with either CPF savings or cash. In this way, you can receive higher monthly payouts.
Can I Change My CPF LIFE Plan?
You cannot change your CPF LIFE plan as this will affect the payouts of other CPF members on the scheme. But you have a free look period of 30 days to change your plan type. If you change your mind within 30 days from the date of your policy letter, you can submit a request to CPF on their website. After 30 days, you cannot change anymore, or withdraw from the Scheme.
If you are on a legacy plan such as the Basic, Balanced, Plus or Income plans which were introduced before 2013, you can switch to Standard or Escalating plans before age 80 by making a request.
Can I Cancel My Plan After I Join?
You can cancel your CPF LIFE plan after you join, for the following reasons, and upon cancellation, you will receive a refund of your premium balance. If your premium has been fully paid to you as monthly payouts, you will not get a refund as there will be no remaining balance left.
- You have to get a certification from an accredited doctor to certify that you have a reduced life expectancy due to a medical condition, is permanently unfit for work or has a permanent lack of mental capacity.
- You are going to leave or have left Singapore and West Malaysia permanently and do not intend to return for work or to live.
- You are a Malaysian citizen and have left Singapore permanently to live in West Malaysia.
- You are fully exempted from setting aside the retirement sum in your Retirement Account because you are receiving a monthly pension / annuity payout.
Is CPF LIFE Enough for My Retirement?
CPF LIFE alone might not be enough for your retirement, especially if you wish to maintain the same standards of living while you were still in the workforce. Of course, other than CPF LIFE, there are many ways you can invest in order to grow your retirement income. Some good options to consider are retirement or investment plans that can help you design your own desired retirement lifestyle, with the flexibility to let you decide when you want to retire and how much you wish to receive upon retirement. You can also choose to invest in other instruments such as properties, stocks, gold or others. You can always reach out to an experienced financial advisor to help you.
* Age at which members are allowed to withdraw their CPF savings in the form of monthly payouts. The DDA for members who turned 55 from 1999 to 2004 is 62. This has been gradually increased to 65 for those who will turn 55 in 2009.