Thursday, February 5, 2015

CPF Advisory Panel's Recommendations - 3 Basic Options You Need To Know

The first round of changes to the CPF system has been announced just a few days ago. From what I see, most of the changes are just renaming of the terms which were used previously with a few other additional flexibility to the system. This was indeed what a lot of people want for the system, to have more flexibility in handling their CPF monies. Let's take a look at the changes recommended.

The changes can be sum up into 3 different options as below:

1. Basic Retirement Sum (BRS)

It was previously not known to many people that they can actually pledge their property to leave just half of the minimum sum and draw out the rest in cash. Many people are still confused by the word minimum sum which has been completely removed in this round of changes. So, if you're still confused by what the term minimum sum means, you don't have to crack your head about it any more. Just forget about it.

The BRS will be set at $80,500 and be increased 3% every year from 2017 to 2020. If you set aside this BRS of $80,500 at age 55, the basic payout you'll be eligible at age 65 is about $650 to $700 for life. Your property will still be pledged in this instance. This BRS sum is half of the Full retirement sum below.

2. Full Retirement Sum (FRS)

Now, this is where the word minimum sum is replaced. The FRS is what we called the Minimum sum previously. This amount will be set at $161,000 for those turning 55 in 2016. If you set aside this amount at age 65, you can expect a full payout of $1200 to $1300 a month for life. If you do not pledge your property, most likely you'll be under this option.

3. Enhanced Retirement Sum (ERS)

This is a new initiative which is being recommended. The amount is set at a maximum of  $241,500 (3x the Basic Retirement Sum). This means anyone who wants to top up extra either from their excess CPF or cash to their CPF Life (Retirement Account) can do so to enjoy higher payouts at the payout eligibility age of 65. If they top up to the maximum of $241,500 by age 65, they can expect to receive $1750 to $1900 per month for life.

There you go, 3 basic options that you need to know for the changes to the CPF system. Besides the 3 basic options, there are also other additional details which you may want to take note of:

1. Flexibility to withdraw your Retirement account savings at age 65

If you turn 55 from 2013 or later, you can withdraw up to 20% of your Retirement Account savings at age 65. This is inclusive of the $5000 that can be withdrawn from age 55.

2. Draw down age is renamed to Payout eligibility age 

The payout eligibility age is at age 65. This is the time where you can start getting monthy payouts from your CPF account depending on the amount you have set before (BRS, FRS or ERS).

3. Start your payouts later, up to age 70

There is an option to start receiving monthly payouts at a later age. The advantage is every year you defer the payouts, monthly payouts permanently increase by 6-7%.

4. Top up your spouse’s CPF so that he/she can also have higher payout

Any amount you have above your Basic Retirement sum can be transferred to your spouse's special or Retirement account if you choose to.


The 3 basic options basically allows us to decide how much we want as payout for retirement when we reach age 65. You can receive about $650-$700 per month under the BRS, $1200-$1300 per month under the FRS and a maximum of $1750-$1900 per month under the ERS.

I suppose more changes will be announced on a later date. With the 3 options and the flexibility to withdraw 20% of our retirement savings at age 65, I think in a sense, it does make the system more flexible. The basic purpose of the CPF to provide for retirement needs still applies. Let's see what other changes will be announced in due course.

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Related Posts:
1. Queries on CPF minimum sum - Pledging your property
2. Changes to the CPF - CPF Focus Group Discussion
3. Return our CPF?

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