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10 Things You Need To Know About CPF Life, Straits Times, 13 Feb 2008.

Workers aged 50 and younger who pay CPF will come under the new annuities scheme that starts in five years' time in the year 2013.

1. How much do I pay? How much do I get?
You will pay for your CPF Life premium with your CPF Minimum Sum.You will not have to pay more out of your own pocket. CPF Life is the new name for annuities scheme. How much premium you pay depends on the annuity you choose. How much premium you pay depends on the annuity you choose. How much income you get monthly depends on how much you have in your Retirement Account at age 55, and on your annuity option.

2. What choices do I have?
You can choose the age at which you want to start receiving payouts from your CPF Life. You can ask for your payouts to start at age 65, 70, 75, 80, 85 or 90. For each of these six options, you have a further choice of whether you want your family to receive a refund of the CPF Life Premium should you die early.

Once you have made your choice, you cannot change your mind. So if you want your payouts to start at age 65, you can either choose option Refund 65 or option No Refund 65. The default option is Refund 80. The earlier you want your payouts to start, the larger the premium you will have to pay.But you will also receive a bigger payout every month.

Let's take an example of someone with a CPF Minimum Sum of SGD$67,000 when he turns 55.

If he chooses Refund 65, 100% of his CPF Minimum Sum will go intopaying the CPF Life premium. He will receive a monthly payout of $650 from age 65 until he dies. But if he chooses option Refund 90, only 6% of his Minimum Sum in the Retirement Account will be used to pay for the CPF Life premium. He, too, will receive a monthly payout from age 65 until he dies,but it will be $560. This payout is from the remaining amount in the Retirement Account. The payout from the annuity will start from age 90.

If he opts not to have a refund,his payout will be higher.The payouts for women will be lower because they are expected to live longer than men.
Different plans for a person with $67,000 cash in his Minimum Sum
Male Female
Old System (4%)

Monthly Payout for 20 years Monthly Payout for life Refundable premium as % of Minimum Sum Monthly Payout for life Refundable premium as % of Minimum Sum
Refund 65
Refund 70
Refund 75
Refund 80*
Refund 85
Refund 90
Assumption: CPF interest rates on Retirement Account balances is 4%, with an additional 1% on the first $60,000 of CPF monies.
* Refund 80 is the default plan.
For each of the six payouts ages 65 and 90, there is a No Refund plan, where premiums are lower and payouts are higher compared to the Refund plans.But the capital sum will not be refunded to the person's beneficiaries.
Source: National Longevity Insurance Committee

3. if I die early, does my family get a refund?
Yes, if you choose any one of the 6 options that gives a refund. The refund amount will be equal to the CPF Life premium minus the CPF Life payouts you would have received.

4. Am I covered by the new scheme? When does it start?
The CPF Life scheme starts in 2013. You are covered by CPF Life if you are aged 50 (from 2008) and younger, working and contributing to your CPF account. You are exempted if you have less than $40,000 in your Retirement Account at age 55, but you can still opt into the scheme.

The Government is expected to announce today incentives to help people in this group take part. Those over 50 can opt in.

You are also exempted if you are on a pension or have bought a private annuity that pays you an equivalent benefit; have a terminal illness; are of unsound mind; have a mental or physical condition that leaves you unable to work; or a medical condition that severely impairs your life expectancy.

5. Is it compulsory?
Yes, it is compulsory unless you are exempted. Allowing people to opt out would have an adverse impact on this national scheme, and make it less viable.

6. What happens to my CPF money when i turn 55?
When you turn 55, the money in your CPF Ordinary and Special accounts is moved to your Retirement Account. you are required to leave a Minimum Sum in your Retirement Account for your old age. The sum you must leave in your account, called the Full Minimum Sum, is currently $99,600.

It will be raised gradually to $120,000 (in 2003 dollars) by 2013, the year CPF Life scheme starts. The CPF Board estimates that after adjusting for inflation, the Full Minimum Sum in 2013 will be $134,000. If you have more than the Full Minimum Sum, you can withdraw the excess.

At age 55, you will also be asked to choose one of the 12 CPF Life options. the sum you have in your Retirement Account is then split into two, according to the option you choose. One part goes to pay for the CPF Life premium. This portion is pooled together with the premiums of other CPF Life members. The other part remains in your Retirement Account and earns interest from the CPF Board.

You start to receive an income from CPF Life at the age you ahve opted for. For most people, that age would be 80.

7. How is CPF Life different from the current Minimum Sum Scheme?
The current Minimumum Scheme gives you a monthly payout from age 65, but the for the rest of your life. The payout payment will roughly remain the same.

For example, under the current Minimum Sum scheme, if you have $67,000 in your Retirement Account at the age of 55, you get a monthly payout of $600 from age 65 to 85. But under the new CPF Life scheme, if you choose the standard Refund 80 option, you get a payout of $570 to $610 for life. The range in the size of payouts is to take into account interest rate fluctuations.

The standard option refers to the plan you are automatically put on if you do not make a choice at age 55.

8. Will my CPF Life payouts be indexed to inflation?
No. Otherwise, the payouts need to get bigger over time. That means the initialpayouts need to be much smaller. It also means bigger CPF Life premiums and fewer members being able to afford the scheme.

9. Who will run the new scheme?
The CPF Board will. The board offers better interest rates than most commercial annuity providers. Members of the public cited this as the main reason for preferring the CPF Board over private providers. Having one operator also reduces costs through efficiencies gained from having a larger scale of operations. The public trusts the CPF Board, as it has helped manage their retirement funds since 1955.

10. What happened to my feedback?
The scheme was changed in response to feedback. As a result, the new schemes provides for refunds and for a choice on the age people want to receive the payouts.

Source: The Straits Times, 13 February 2008