CPF Life scheme can do better ...
04:46 AM Mar 08, 2012
Letter from Tan Say Yin
THERE are two negatives in the Central Provident Fund Life scheme: Low payouts and, especially, the uncertainty of the monthly quantum, which could fluctuate yearly depending on interest rates.
And if the payout is at the lower end of the range, it could be further eroded by inflation in the future.
Private companies can structure their annuities with a locked-in monthly payout, with some even providing participating annuities whereby bonuses could be declared, which then raise the monthly payout.
The CPF Life scheme surely could do better, since it has a larger pool of members, as it is mandatory from next year for the majority of Singaporeans who turn 55.
I am in my late 50s and am looking at various options for my retirement. Using the CPF online calculator, I did some comparisons.
Assuming I have S$117,000 in my Retirement Account, the Minimum Sum monthly payout would be S$1,040 from the age of 65. The current CPF Life Balanced Plan, however, would provide a lower monthly payout ranging from S$768 to S$844.
I am aware that the monthly payouts last for as long as a member lives, But the Minimum Sum example I quoted could last for a good 20 years, likely to be sufficient for most Singaporeans.
Even if the difference in payouts between the two schemes was, say, only S$136, I would get S$32,640 more under the Minimum Sum scheme.
I could set aside this amount to possibly give me another three years of allowance, taking me to a ripe old age of 88 years. I am therefore not sold on CPF Life.
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