TL;DR – Our CPF system is only going to get more awesome!
*cue Stars Wars music and credits* A long long time ago, in the year 2014, on a sunny little island, PM Lee threw together a motley crew of academics, finance industry practitioners and various representatives to set up the CPF Advisory Panel. Their aim was to see how best to enhance our (already pretty awesome) CPF system.
Fast forward to 2015, they already put up part 1 of the recommendations and part 2 is due to be out soon. And in case you’ve forgotten (like me) what they were, we’ve condensed the 16-page recommendations report into a quick refresher… in our own words!
Recommendation 1: Say Uncle Lim is retiring in 10 years, the CPF advisory board has decided that for him to maintain his lifestyle, including a daily breakfast of kaya toast and kopi, he needs a “Basic Payout” of $650-$700. And the sum that Uncle Lim needs to set aside for this payout is $80,500 and known as the “Basic Retirement Sum”.
Recommendation 2: Uncle Lim’s friend, Uncle Chandra, does not want to pledge his property and therefore has to set aside double of the Basic Retirement Sum aka “Full Retirement Sum” at $161,000. Uncle Chandra will be getting a “Full Payout” of $1200-$1300.
Recommendation 3: Every CPF member so be able to reap the benefits of his/her own CPF LIFE plan and more will be done to help members transfer CPF savings to other family members with lower account balances. For instance, Mrs Lim can bug Uncle Lim to help top up her CPF savings so they both can have kaya toast and kopi every day!
Recommendation 4: Uncle Yusof might be 65 but he enjoys his work and doesn’t intend on stopping work so early. He will now have an option to defer taking his monthly payouts until age 70. To thank him for voluntarily deferring payouts, he will get slightly higher payouts per month at age 70. Yeap… Uncle Yusof will definitely not having just kaya toast and kopi then. 😉
Recommendation 5: Similar to recommendation 1 and 2, CPF members can opt for an “Enhanced Retirement Sum”, set at three times the Basic Retirement Sum, where monthly “Enhanced Payouts” are between $1750-$1900.
Recommendation 6 and 7: The retirement sums will continue to increase to account for both inflation and standard of living. Uncle Lim, Uncle Chandra and Uncle Yusof don’t like this part but they know once the sum has been set for their cohort, they can be rest assured that it would not be changed.
Recommendation 8: CPF members can withdraw up to 20% of their Retirement Account Savings at the Payout Eligibility Age of 55. This means that Uncle Lim, Uncle Chandra and Uncle Yusof can go on a round-the-world tour together if they choose to! That said, their monthly payouts after withdrawal would also be affected.
Recommendation 9: Provide appropriate and timely information, and financial counselling, to help members make informed choices.
All in all, it just basically means everyone gets flexibility in choosing different payment options that would best suit your needs. Stay tuned… we’ll be back for part 2!
P.S. These graphics sum it up pretttyyy well we must add