The CPF Maxwell Service Centre. Since January, the CPF Board has started offering the CPF Retirement Planning Service to all members who reach the payout eligibility age of 65 years. These face-to-face meetings are held at any of the five CPF service
Invest Editor/Senior Correspondent
MAR 3, 2019
When can payouts start? How long will they last? Here are the answers to these and more
The nest egg that members set aside in their Central Provident Fund (CPF) Retirement Account will be used to provide them with monthly payouts once they reach their payout eligibility age (PEA). This is 65 years old for those born from 1954 onwards.
Recently, some CPF members were confused about when they can start receiving their monthly payouts.
Manpower Minister Josephine Teo cleared the air in Parliament a fortnight ago when she said there has been no change in the policy: CPF members can continue to choose to start monthly payouts at their PEA, or defer them to any time between PEA and 70.
The Sunday Times highlights some things you need to know about CPF withdrawals, monthly payouts and the Retirement Sum Scheme.
Q WHEN CAN I WITHDRAW MY CPF?
A You can withdraw any savings above your Full Retirement Sum (FRS) from the age of 55. If you own a property, you can also choose to set aside the lower Basic Retirement Sum (BRS) and withdraw above that.
The amount that can be withdrawn excludes top-ups made under the Retirement Sum Topping-Up Scheme, interest earned and government grants.
Even if you don't have enough to set aside for the FRS, or the BRS with sufficient property charge or pledge in your Retirement Account (RA), you can still withdraw up to $5,000 from your Ordinary and Special accounts.
Q WHEN CAN I START RECEIVING CPF MONTHLY PAYOUTS?
A You can start receiving your payouts from age 65. This applies to members born in 1954 and after. Six months before your PEA, you will get a letter from the CPF Board inviting you to start your payouts.
TOPPING UP RETIREMENT ACCOUNT IN RETIREMENT SUM SCHEME
This scenario illustrates how a top-up can increase the payout amount and extend the payout duration.
In this case, the member asks to increase his payments with a shorter payout duration.
Mr Daniel Lee (not his real name) turned 55 in July 2009 with $117,000 in his Retirement Account. With this amount, he can expect to receive about $1,000 a month for about 23 years when he reaches his payout eligibility age.
Last month, he made a top-up of $59,000 to meet the current Full Retirement Sum of $176,000. As a result, his monthly payouts and duration will be adjusted to around $1,200 for about 30 years.
However, Mr Lee wants to increase his monthly payout with a shorter duration. As a result, his monthly payouts and duration will be adjusted to about $1,400 for about 23 years.
You can start your payouts by completing a hard-copy application form that comes with the letter; or by applying online; or by visiting a CPF service centre. If you do not start your payouts, the CPF Board will remind you through your yearly statement of account.
Q WHAT ABOUT MEMBERS WHO JOINED CPF LIFE BEFORE JULY 2015?
A These members' monthly payouts will start automatically when they reach their PEA, unless they instruct the CPF Board to defer payouts. This is because the option to defer CPF Life payouts was not available before July 2015.
Q WHAT IF I DON'T NEED MY PAYOUTS AT AGE 65?
A If you don't need your payouts at age 65, you can choose to start them any time between 65 and 70. The latest you can start your payouts is at age 70. The benefit of deferring your payouts is that you will earn more interest on your CPF savings.
For CPF Life members, every year of deferral results in up to 7 per cent higher payouts. So if you defer for five years, that's up to 35 per cent more.
Q HOW LONG WILL MY CPF PAYOUTS LAST?
A If you are on the Retirement Sum Scheme (RSS), you will receive monthly payouts from your RA until your RA savings are depleted.
If you are on CPF Life, you will receive monthly payouts for as long as you live.
Q HOW DO I KNOW IF I'M ON THE RSS OR CPF LIFE?
A If you were born before Jan 1, 1958, you will be on the RSS unless you have opted to join CPF Life.
If you were born between Jan 1, 1958 and April 30, 1961 and have at least $40,000 in your RA when you reach 55 years old; or at least $60,000 in your RA six months before you reach your PEA, you will be on CPF Life.
If you were born from May 1, 1961 onwards, and have at least $60,000 in your RA six months before you reach your payout eligibility age, you will be on CPF Life.
If you are on the RSS and would like to receive lifelong monthly payouts, you can join CPF Life any time before age 80.
RETIREMENT SUM SCHEME
The RSS - previously known as the Minimum Sum Scheme - provides members with a monthly payout until their RA balance is depleted. In the past, the payout duration was capped at 20 years. There have been changes to the RSS.
The CPF Board says: "Under RSS, the RSS monthly payouts can last up to 20 years, taking into account the base interest rate on RA savings, which is now 4 per cent per annum.
"To benefit members aged 55 and above, extra interest (EI) of 1 per cent per annum is paid on the first $60,000 and additional extra interest of 1 per cent per annum on the first $30,000 of your savings.
"The extra interest provided by the Government is used to extend the RSS payout beyond 20 years, with no reduction in payout amount."
The potential extension of the RSS payout duration beyond 20 years occurred when the EI was introduced in 2008. The duration is capped so that the payouts do not extend beyond 95 years old.
This age cap was introduced in July 1, 2017 to prevent the payout duration from being overly stretched while, at the same time, reducing the risk of RSS members outliving their RA savings.
Do note that while the payout duration is up to age 95, the actual duration for each RSS member will vary as it depends on the amount of RA savings he has.
For instance, for those who are able to top up their RA to the prevailing Full Retirement Sum, the payout duration may be extended beyond 20 years, up to an additional 10 years, capped at age 95. The minimum payout is $250 a month.
This extension of payouts is also in line with the increasing life expectancy of CPF members.
The CPF Board sends letters to members who will reach their PEA to inform them of their payout amount and payout duration. Members can start their monthly payouts any time after their PEA.
In the past, RSS members who did not activate their payouts could end up leaving their savings in their CPF accounts until their death.
Last year, the CPF Board decided to introduce a latest payout start age of 70. So even if a member does not instruct the board to start his monthly payouts, this will automatically commence at age 70.
Hence, for members turning age 70 from 2018 onwards, the board will automatically start their payouts at age 70 if they have deferred receiving their RSS payouts.
The automatic payout start age of 70 is similar to that for CPF Life and it simplifies the activation process for RSS members to receive payouts for retirement. With this automatic commencement, elderly members can enjoy a retirement income from their CPF savings with greater ease.
Do note that there is still a risk of CPF members running out of retirement income.
So for members who desire retirement payouts for as long as they live, they can consider opting into CPF Life before they turn 80.
REACHING OUT TO CPF MEMBERS
There are various touchpoints for the CPF Board to educate members about their options.
CPF RETIREMENT PLANNING SERVICE (CRPS)
Since January, the CPF Board has started offering the CRPS to all members who reach the PEA of 65 years. These face-to-face meetings are held at any of the five CPF service centres across Singapore. A CPF officer can provide personalised guidance to the member at the meeting.
The CRPS was first offered to members who were 12 months away from turning 55, about four years ago. There is also an online CRPS that allows members from age 54, to before they turn 55, to view their personalised info.
Madam Angela Lai, 64, attended a CRPS session recently to learn more about her CPF options upon reaching 65. As she was born before 1958, she is on the RSS unless she opts for CPF Life.
During the session, the CPF officer provided information on when she can start her monthly payouts and the differences between the three CPF Life plans - Basic, Standard and Escalating.
Madam Lai says she is likely to remain on the RSS. She has not decided if she wants to start her payouts at 65 or defer them for a couple of years so as to earn more interest in her RA.
She was informed by the CPF officer that under the RSS, if she starts her payouts at 65, her payout duration is likely to stretch till age 91. Should she start receiving her payouts at 70, the duration can stretch till age 95.
WORKING WITH AGENCIES
In addition, the Government will work with other agencies, such as the social service offices (SSOs), to reach out to CPF members, Mrs Teo said in Parliament recently.
"For example, where appropriate, staff at the SSOs will ask members who approach the SSOs for financial help whether they have activated their CPF payouts, and assist them to do so if they wish. We also will collaborate with the Silver Generation Office to communicate this issue to elderly members," she said.
CPF SERVICE CENTRES
CPF members are encouraged to make an e-appointment online to visit any of the five CPF service centres islandwide, or call its hotline on 1800-227-1188 to speak to an officer who will be able to help them.