A 2-Minute Review of the CPF Changes in 2015

The CPF Advisory Panel was set up in September 2014 by the Ministry of Manpower (MOM) to review and bolster the requirements of Singapore’s Central Provident Fund.

Chaired by Professor Tan Chorh Chuan, President of the National University of Singapore (NUS), 13 panel members were selected based on their diverse backgrounds, ranging from union representatives to independent consultants.

On February 4 2015, the panel put forward Part 1 of its proposal to the Government. If the recommendations are accepted, Singapore residents can look forward to greater customisation and flexibility in managing their CPF accounts. We will get to know for sure regarding the CPF changes in 2015 on Feb 23, when the Budget is released.

Instead of reading through all the information on the MOM website, here’s Part 1 of the proposal consolidated into 10 simple points for your easy reading (applause, please):

1. Take note of critical ages 55 and 65: As you probably already know, every Singaporean and PR is subjected to CPF contribution. Part of this CPF contribution is used for retirement, which will go into a CPF LIFE Scheme, meant to provide monthly income from age 65. To qualify for the scheme, one must reach a minimum sum (MS) by age 55.
*The MS was set at $80,000 in 2003 and is being raised gradually until it reaches $120,000 ($161,000 after inflation) in 2015.

2. “Minimum Sum” renamed to “Basic Retirement Sum”: What was initially called the “minimum sum” will now be called the “basic retirement sum (BRS)”. This only applies to people who own a home. If you set aside a BRS of $80,500, you’ll be eligible for $650-700 monthly payouts at age 65.

3. Full Retirement Sum (FRS): Basic Retirement Sum (BRS) x 2 = $161,000. Monthly payouts are between $1,200-1,300. Only for people who do not own a  home, or who do not wish to pledge their homes. *Note that $161,000 is already the current minimum sum required by the CPF.

4. Enhanced Retirement Sum (ERS): Basic Retirement Sum (BRS) x 3 = $241,500. Monthly payouts are between $1,750-1,900. This can be done through a top-up into the CPF LIFE account, either through CPF savings or cash.

5. “Draw Down Age” renamed to “Payout Eligibility Age”: This is the age where you are eligible to receive payouts from your CPF LIFE Scheme. It does not mean you start receiving them. It is now set at 64, but will be 65 from 2018.

6. “Payout Start Age” is not “Payout Eligibility Age”: This is the age where payouts actually start, and can be deferred up to age 70 in exchange for higher monthly payouts. For every year that the payout start age is deferred, monthly payouts will permanently increase by 6 to 7 per cent.

7. Basic Retirement Sum (BRS) to gradually increase: Taking into account long-term inflation and increased standards of living, the BRS for members turning 55 from 2017 to 2020 will be increased by 3% for each successive cohort.

8. Flexibility to top-up CPF accounts of loved ones: The Panel proposes that each individual should have their own CPF LIFE plan and members should be allowed to transfer their CPF savings to their loved ones, especially non-working spouses or wives with longer life expectancies. This is to reduce the over-reliance on one working spouse for the provision of income upon retirement.

9. Option to withdraw up to 20% of CPF Savings at Payout Eligibility Age: Now you won’t be limited to just withdrawing $5,000 at age 55, as the panel proposes for a withdrawal of up to 20% of your CPF savings for your personal use. This will be made available to CPF members who turned 55 from 2013 onwards.

10. Better public education efforts on CPF: The panel realised that many Singapore residents and PRs are still unfamiliar with the intricacies of the CPF system. As such, better provision of specific and timely information, and financial counseling in some cases, would go a long way.

Part 2 of the panel’s proposal will be submitted in mid-2015. Stay tuned.

Like what you read? You may also be interested in these resources:

Itemised Payslips for Business Owners
ECF/SINDA/CDAC/MBMF Contribution 2015 and CPF Contribution Updates