However, the gist of the changes are:
- First glance would be the tweaking of the draw down age (DDA). The previous plans allow you to delay your withdrawal from CPF, in order to boost up your monthly income. This will be a total administration nightmare in my opinion. The revised CPF-Life instead will be pegged to the national retirement age, which is currently at 65. The table below shows the DDA for the older Singaporeans:
Born in DDA 1949 and earlier 62 1950 - 1951 63 1952 - 1953 64 1954 and later 65 - Next I would see is the simplification of the amount left to the beneficiaries upon the member's death, known as the bequest amount. This bequest amount is made up of the balance left in the member’s Retirement Account (RA) and any unused annuity premium. The previous scheme is so confusing that a lot of people are left scratching their heads. Again I would see this as a total administration nightmare. Now they have made it simpler to understand.
In summary, the higher monthly income you get, the lesser bequest amount you will have if you have chosen the refundable plans. The calculation of the bequest amount will be the CPF RA amount + the unused portion of the premium (annuity premium less the LIFE monthly income that member has received thus far). - The obvious change would the number of plans available. It has been simplified to 3 refundable plans and 1 non-refundable plan, a total of 4 CPF Life plans. The non-refundable plan (no bequest amount) is the LIFE Income Plan (a small amount may still be left due to the 1% extra interest credited for the year). By default, everyone will be on the LIFE Balanced Plan.
Below is the table generated from the CPF Life Income estimator here. This is for a male Singaporean, born in 1958, with $67,000 in the CPF RA:Estimated
monthly incomeLIFE Balanced Plan $559 to $615 LIFE Basic Plan $522 to $575 LIFE Plus Plan $594 to $654 LIFE Income Plan $635 to $696
This is for a female Singaporean, born in 1958, with $67,000 in the CPF RA:
| Estimated monthly income | ||||
| LIFE Balanced Plan |
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| LIFE Basic Plan |
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| LIFE Plus Plan |
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| LIFE Income Plan |
| |||
All in all, the plans have been tweaked to make it much simpler to the public. I would say good work has been done on this aspect.
On a side note, it would seem that from the figures here, Singaporean females live much longer than males. That explains the difference in the income level. Males live shorter, therefore getting more income. Good or bad? Hmm...
4 comments:
Regardless of the type of plan, what significance would there be for that SGD 600 annuity?
Let's say for 30 yrs, and annual inflation rate at 4%. That annuity you getting is only worth $185 compare to today's dollar value. And yet your CPF money is locked for "eternity".
Look like this is definitely a long term investment which gives you better return if you manage to live long enough.
Hi Anonymous, you're right in saying if you take into account inflation, the value of the money will be eroded as the years go by. $600 might not even be enough for 3 meals for a month.
However, talking in context, how much more can you make if you invest $67,000 for 10 years? (55 years old to 65 years old) So what happens if you encounter a year when the market dropped 50% and your investments go down accordingly at the time where you need to draw down your funds? Can your funds last until your death?
Long term investments is good if you have a very long term horizon, but the problem comes when you need to withdraw from the nest egg. How do you schedule your withdrawal? How do you re-adjust the asset allocation when you withdraw from the portfolio?
Annuity is one of the areas where you can plug the gap. Having a constant stream of income for life can introduce stability to your portfolio. It should not be the only income source though.
All along I have positioned the CPF to be my minimum base in my portfolio. Therefore, this annuity fits well into my portfolio, and I'm free to commit my other resources to other asset classes.
First, thanks chantc for compiling this useful information. Incidentally I was born in 1958, so the example sort of gave me a feel what I would be getting.
I agree with first person's comment that the dollar value is quite low if we take inflation into consideration. My conclusion from this is that CPF can only be part of the retirement income, but not the ONLY one. It has to be supplimented by other incomes from investment, savings, children support. (Sanye)
No problem. My gut feel though is that once this system is in place, they may try to add in an inflation component in later.
As usual, they are trying to be kiasu and play safe first. But just my gut feel.
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