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What you should know about CPF Life

metalslug

Alfrescian
Loyal
http://www.asiaone.com/Business/My+Money/Story/A1Story20090914-167794.html

Tue, Sep 15, 2009
The Straits Times

20090914.163453_know.jpg


What you should know about CPF Life

By Lorna Tan, Senior Correspondent

In the coming weeks, about 700,000 Central Provident Fund (CPF) members aged 55 and above will be invited to join the CPF Lifelong Income Scheme For The Elderly (CPF Life). The annuity scheme offers a choice of four plans that pay a monthly income for as long as you live.

These plans offer various combinations of two key elements that are traded off: monthly payouts and refund amounts upon death or withdrawal from the scheme.

In other words, if you want higher monthly payouts, that will reduce any final payout to your beneficiaries.

The initiative has been widely welcomed as being superior to the current CPF Minimum Sum (MS) scheme, which gives monthly payouts for about 20 years, but not necessarily for as long as you live.

The MS is the amount you are required to set aside at age 55 for retirement needs in your Retirement Account. The Retirement Account is set up when you turn 55 with savings coming from your Ordinary and Special accounts. CPF Life payouts come from the Retirement Account.

With rising life expectancy, it is prudent to ensure that your retirement savings will last for all your days.

The opt-in system began on Sept 5 and is open to older CPF members who wish to join the annuity scheme ahead of 2013, when it will be implemented for those turning 55 then. For older CPF members, the monthly payouts will start as early as next January.

While many are still undecided, some, like Madam Wong Kwai Sim, 55, have taken the plunge. She has opted for the CPF Life Balanced Plan, which will give her an estimated monthly payout of $856 to $948 when she hits 65.

Madam Wong, who works part-time as a clerk, currently has $117,000 in her Retirement Account, which is also the prevailing MS.

'By the time I can get the monthly payout, my children will be independent. I can get some from CPF Life and keep some for them when I pass away,' she said.

The Life Balanced Plan gives a moderate payout and a moderate refund. If she had stayed on the current MS scheme, her monthly payout would be some $910 for about 20 years.

Storeman Tay Lee Kheng, 61, said it was his son Benjamin, 32, who helped him choose the Life Plus Plan, estimated to pay $463 to $492 monthly when he turns 62 next year. He has about $80,000 in his Retirement Account.

'I'm not looking to get anything from him when he passes away. It is better that he gets a higher payout...All the money is his anyway,' said Mr Benjamin Tay. The Life Plus Plan provides for higher monthly payouts and a lower refund.

For those who have not decided, here are some things you should know about CPF Life. You must choose the most suitable plan as you cannot change it after you join the scheme. You cannot withdraw either, except under certain conditions.

Q Who can join CPF Life?

You can join CPF Life if you are a Singapore citizen or permanent resident aged between 55 and 80, with savings in your Retirement Account.

Those aged 55 to 79 have up to the time they reach age 80 to sign up for CPF Life. But those aged 80 and above have to do so by December next year.

A bonus of up to $4,000 is given to Singapore citizens who do so by December next year. To qualify, your annual income and the annual value of your property must not exceed $54,000 and $11,000 respectively.

Q What is the monthly payout?

Your monthly payout depends on your Retirement Account savings used to join CPF Life.

There is no minimum amount required, but note that members with lower balances will receive correspondingly lower monthly payouts.

Other factors that will affect the monthly payout include your gender, the age at which you join the scheme and the CPF Life plan chosen. Generally, females will receive lower payouts as they tend to live longer.

If you wish to have a higher payout, you may make cash and/or CPF top-ups to your Retirement Account up to the prevailing MS.

You can use the CPF Life Payout Estimator at the CPF website www.cpf.gov.sg to find out how the monthly payout varies with your Retirement Account balance.

Q Is the monthly payout fixed?

No, the monthly payout may be adjusted every year to take into account factors such as CPF interest rates and mortality experience.

The adjustments will usually be small so that payouts are stable.

The current estimated payout range is based on CPF interest rates of between 3.75 per cent and 4.25 per cent and do not necessarily represent the lower and upper limits of the payout.

Q When will I start receiving my monthly payouts?

If you join before your drawdown age (DDA), you will start to receive your monthly payout from your DDA.

If you join after your DDA, you will start to receive the monthly payout from the following month after you are included in the scheme.

If you were born in 1943 or earlier, your DDA is 60. For those born between 1944 and 1949, their DDA is 62. If you were born in 1950 or 1951, your DDA is 63 and if you were born in 1952 or 1953, your DDA is 64. For those born in 1954 or later, your DDA is 65.

Q Can I change my plan after I join?

No, you can't. This is because changing your plan will affect other members who are already in the scheme.

Q Can I withdraw after I join?

No, except on the following grounds:

Medical grounds of shortened life expectancy;
Leaving Singapore and West Malaysia permanently with no intention of returning to either country.
If you are on one of the three CPF Life plans with a refund feature, you will receive a discounted refund of the savings used to join the scheme less the monthly payouts that you have received prior to your withdrawal. There may not be a refund if your savings have been fully paid out in monthly payouts.

If you are on the Life Income Plan, which is a non-refund plan, you will not receive any refund if you withdraw from the scheme.

Q What happens when I die?

Let's assume you have opted for a CPF Life plan with a refund feature. If you die before any payout is made, the full savings will be refunded. If you die after monthly payouts have started, the savings less monthly payouts will be refunded.

Do note that there may not be a refund if you die after the savings used to join CPF Life have been fully paid out in monthly payouts.

Any refund will be made to your CPF account and paid to your beneficiaries, together with the rest of your CPF savings.

If you had chosen the CPF Life plan without a refund feature, that is, the Life Income Plan, there is no refund upon death even if monthly payouts have not started.

Q How do I choose the most suitable CPF Life plan?

The four plans differ in the level of monthly payout and the refund amount that may be left to your beneficiaries. The refund, also known as the bequest, is based on the savings used to join CPF Life less monthly payouts already received.

Alpha Financial Advisers' business unit director, Mr Tan Siak Lim, says that a CPF member should try to strike a balance between his retirement lifestyle and the bequest amount.

'You should consider the effect inflation will have on the payouts over your life. As these are level payouts, the value of payouts will shrink over time as prices of goods rise.'

Here are the four plans:

Life Basic Plan
This plan gives a lower payout than the Balanced Plan, but leaves more for your beneficiaries. It is recommended if you are in the pink of health or have sufficient savings outside your CPF, says Mr Patrick Lim, associate director at financial advisory firm PromiseLand Independent.

Life Balanced Plan
If you wish to strike a balance between your monthly payout and the bequest, the Life Balanced Plan may be more suitable for you. This is also the default plan for members who are automatically included under the scheme from 2013, if they do not choose a particular plan.

Mr Thio Eng Huat, vice-president at ipac financial planning Singapore, believes that those who are fortunate to have supplementary income in their retirement may find the Life Basic or Balanced plans more suitable.

Life Plus Plan
This plan provides a higher payout than the Balanced Plan, but leaves less for your beneficiaries.

Mr Lim says this will appeal more to individuals with chronic medical conditions who want the higher payouts to cope with the cost of living, and yet wish to leave something behind for their beneficiaries.

Life Income Plan
This plan gives the highest payout, but does not leave anything for your beneficiaries. Although it is logical to conclude that this plan may be more suitable for those who do not have beneficiaries, Mr Lim does not recommend this for anyone. This is in case the member changes his mind or if his personal circumstances change. Another reason is that there is no refund upon withdrawal from the scheme.

Q What else should I consider?

You should not depend on CPF Life to meet all your retirement needs as the payouts may be insufficient.

Start saving more and plan your retirement early. To bridge the gap, you can consider additional income plans like annuities from insurers, says Mr Tan.

Mr Lim recommends NTUC Income's annuity, which comes with a guaranteed monthly or annual payout, with a potential to receive higher payouts the longer the policyholder lives.

Also, ensure that you have funds set aside for medical expenses and insurance, says Mr Thio.

This article was first published in The Straits Times.

Read related:
» To enjoy 4% interest rate, top up your CPF
 

metalslug

Alfrescian
Loyal
http://business.asiaone.com/Busines...And+Savings/Story/A1Story20090914-167795.html

Tue, Sep 15, 2009
The Straits Times

20090914.163750_scheme.jpg


To enjoy 4% interest rate, top up your CPF

With bank interest rates at an all-time low, Singaporeans are on the constant lookout for alternatives that provide higher returns.

The Central Provident Fund (CPF) Minimum Sum Topping-Up Scheme, which pays 4 per cent for a portion of your CPF savings, is one option.

The Minimum Sum is the amount that you set aside in your Retirement Account at age 55 for your retirement needs. This account will be used to fund monthly payouts for members after a certain age.

The Ministry of Manpower has announced that it will extend the guaranteed 4 per cent rate for the Special, Medisave and Retirement Accounts (SMRA) until the end of next year. The guarantee will be removed after that.

The Special and Medisave Accounts will be pegged to the interest rate of 10-year Singapore Government Securities plus 1 percentage point. The Retirement Account and the CPF Life funds will earn a weighted average interest on a portfolio of government bonds.

Besides the SMRA, there is the CPF Ordinary Account, which earns an annual interest of 2.5 per cent.

The first $60,000 of your SMRA including up to $20,000 from the Ordinary Account earns an extra 1 percentage point. This means that if you have $20,000 in your Ordinary Account, it earns 3.5 per cent while $40,000 in your SMRA currently earns 5 per cent.

Note that the first $30,000 and $20,000 in your Special Account and Ordinary Account, respectively, cannot be used for investment.

Here is how the Minimum Sum Topping-Up Scheme works.

It allows top-ups for yourself or loved ones up to the prevailing Minimum Sum of $117,000 and enables you to enjoy the higher interest rates. The top-ups can go into the Special Account - for recipients below 55 - or Retirement Account, for those aged 55 and above.

The top-ups can come from your CPF Ordinary Account or be in cash. Note that the top-ups are irreversible.

1 Top up your CPF account with your CPF savings

You can transfer your Ordinary Account savings to your Special or Retirement Account to earn the 4 per cent rate. You can transfer any amount and as often as you wish. However, the total savings in your Special or Retirement Account, inclusive of the amount withdrawn for investments, should not exceed the prevailing CPF Minimum Sum after the transfer.

2 Top up your loved ones' CPF account with your CPF money

To make the top-up using your CPF Ordinary Account, the net balances in your Ordinary and Special or Retirement Accounts, including the amount withdrawn for investments, must be more than the prevailing Minimum Sum.

Your loved ones may include your grandparents, parents, siblings and spouse. After the top-up, the total savings in their Ordinary and Special or Retirement Accounts, inclusive of the amount withdrawn for investments, should not exceed the prevailing Minimum Sum.

3 Cash top-ups

You can use cash to top up your and/or your loved ones' Special or Retirement Account, up to the prevailing Minimum Sum cap.

For cash top-ups to loved ones' accounts, you need not satisfy the prevailing Minimum Sum cap in your CPF.

An advantage of using cash is that it can bring a tax benefit.

You can get tax relief of up to $7,000 per calendar year for cash top-ups to yourself and additional tax relief of up to $7,000 a year if you make cash top-ups to siblings, spouse, parents or grandparents.

Note that to qualify for tax relief for this latter cash top-up, the sibling or spouse must not have earned more than $2,000 in the preceding year.

For example, if you make a cash top-up of $7,000 to a 62-year-old parent who does not have any Minimum Sum payout, he or she would start to receive $297 a month for two years immediately upon application. At the same time, you could also receive tax savings of up to $1,400, depending on your assessable income. You can use the basic tax calculator at www.iras.gov.sg

Top-ups can be done using a form on the CPF website.

Finally, to make the best use of the guaranteed 4 per cent CPF rate, you should avoid investing money in your Special Account if your investments cannot earn you more than 4 per cent in returns annually.

After all, leaving money in your Special Account is risk-free and the interest is guaranteed at 4 per cent at least until the end of next year.

Lorna Tan

This article was first published in The Straits Times.

Read related:
» What you should know about CPF Life
 

Watchman

Alfrescian
Loyal
If you got the money why you need a nanny to babysit your money with pathetic interest rates. If you got no money they are not interested anyway .
 

mscitw

Alfrescian
Loyal
Annunity

Old people paying for older people. If peasants die before their cut off date, e money goes to older peasants.

If the fund is insolvent, the agent can stop payment and peasants can do nothing about it.
 

vamjok

Alfrescian
Loyal
i still remember when i was working, a few of my friends whom decided to snake from work went for a talk organised by some big fuck from cpf at the work place.

the very first sentance he made piss the hell out of everyone off and that the only statement i remember.

"this is government money .....
 

Watchman

Alfrescian
Loyal
the very first sentance he made piss the hell out of everyone off and that the only statement i remember.

"this is government money .....

WTF I would be pissed too.

rights-september-challenge-bears-are-crack-shots-demotivational-poster-1252192285.jpg
 

Ramseth

Alfrescian (Inf)
Asset
I think that it's opt-in period now, with an opt-in bonus of $4,000 extra. In 2013, then become "compulsory", but they use the word "automatic" (no more bonus too).
 

zhihau

Super Moderator
SuperMod
Asset
I think that it's opt-in period now, with an opt-in bonus of $4,000 extra. In 2013, then become "compulsory", but they use the word "automatic" (no more bonus too).

then CPF is taking our money without our permission, and that is robbery. :mad::mad::mad:
 

Ramseth

Alfrescian (Inf)
Asset
then CPF is taking our money without our permission, and that is robbery. :mad::mad::mad:

"Your" permission is given through Parliament. CPF Act is passed by Parliament. You might have voted for opposition, but majority wins.
 

zhihau

Super Moderator
SuperMod
Asset
"Your" permission is given through Parliament. CPF Act is passed by Parliament. You might have voted for opposition, but majority wins.

no wonder people are giving up the Singapore Citizenship by the thousands every year for good! :mad::mad::mad:
 
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