Guide to CPF LIFE: Lifelong payouts for your retirement

What happened?

Deputy Prime Minister Lawrence Wong announced several key changes to the Central Provident Fund (CPF) system in Budget 2024.

CPF Special Accounts (SA) will be be closed for those aged 55 and above from next year, and SA savings will be transferred to the Retirement Account (RA) up to the Full Retirement Sum.

Earlier, we shared that our guide to CPF Retirement Sum to explain what is the Full Retirement Sum and how the increase in Enhanced Retirement Sum (ERS) will affect members.

This led to questions about what happens to our Retirement Account savings which will be used as the premium for the CPF LIFE scheme.

Let us dive deeper to find out more about CPF LIFE, including the various CPF LIFE plans available and what you should consider before deciding on your CPF LIFE plan.

What is the CPF LIFE?

The CPF LIFE, or Lifelong Income For The Elderly, is a national insurance scheme that provides you with a monthly payouts regardless of how long you live.

CPF LIFE is an insurance product that protects you against the uncertainty of outliving your savings and running out of your retirement funds.

It is not an investment product intended to help you grow your wealth. 

How does the CPF LIFE work?

At the age of 55, your Retirement Account is created with savings from your CPF Special Account and Ordinary Account, up to the Full Retirement Sum.

The savings in your Retirement Account will be used as the premium for CPF LIFE to provide you lifelong payouts. 

You’ll be automatically included in CPF LIFE if you’re:

• A Singapore Citizen or Permanent Resident;
• Born in 1958 or after; and
• Have at least $60,000 in your retirement savings when you start your monthly payouts

What are the CPF LIFE plans available?

At the age of 65, you can choose from the three CPF LIFE plans that are available.

CPF LIFE Standard Plan

The Standard Plan is the default plan for CPF members who do not choose a plan when enrolled into CPF LIFE.

It offers a steady monthly payout which is higher than the Basic plan.

CPF LIFE Basic Plan

The Basic Plan offers progressively lower payouts than the Standard Plan, and will get progressively lower when your combined CPF balances eventually fall below $60,000. 

With the Basic Plan, about 10-20% of your RA savings will be deducted as CPF LIFE premium when you join CPF LIFE. 

As you will be receiving lower payouts with the Basic Plan, you will then be able to leave a larger inheritance to your loved ones. 

CPF LIFE Escalating Plan

The Escalating Plan is designed for those who are concerned about the rising cost of living, and would like their payouts to headge against inflation.

Unlike the Standard and Basic plans which offer steady monthly payouts, the Escalating Plan’s payouts will increase at a fixed annual rate of 2%, in return for a lower initial payout. 

How much monthly payment would you receive under CPF LIFE?

For those turning 55 years old in 2024, the estimated payout based on the CPF LIFE Standard plan is as follow. 

• With the BRS of $102,900, you will receive an estimated payout of $880 per month from the age of 65.
• With the FRS of $205,800, you will receive an estimated payout of $1,650 per month from the age of 65.
• With the ERS of $308,700, you will receive an estimated payout of $2,430 per month from the age of 65.

To get a better idea of your estimated monthly payouts, one helpful tool is the CPF LIFE Estimator calculator provided by the CPF Board.

What to consider in deciding which CPF LIFE Plan to choose?

To decide on your CPF LIFE plan, you will first need to consider the retirement lifestyle you want.

Next, you can estimate the amount of monthly payouts you will need to support the retirement lifestyle you want. Your desired monthly payouts should also take into consideration the impact of inflation.

Based on the illustrative example below, if you have a desired monthly payout of $840 to $900 from the age of 65, you will need to achieve savings of $102,900 at the age of 55, which is equivalent to the BRS for those turning 55 years old in 2024. 

if you have a desired monthly payout of $1,560 to $1,670 from the age of 65, you will need to achieve savings of $205,800 at the age of 55, which is equivalent to the FRS for those turning 55 years old in 2024. 

These monthly payouts are estimates based on the CPF LIFE Standard Plan, for members who turn 65 in 2034, computed as of 2024. Do note that payouts may be adjusted to account for long-term changes in interest rates or life expectancy.

How much CPF LIFE premium balance will your loved ones receive when you pass away? 

After you pass away, your loved ones will receive your CPF LIFE premium balance. This is calculated as the total CPF LIFE premium that you have paid minus the total payouts you have received. 

For example, if you paid a CPF LIFE premium of $100,000 and pass away after receiving a monthly payout of $500 for 10 months, your loved ones will receive a CPF LIFE premium balance of $95,000, based on $100,000 minus 10 months of $500.

The CPF LIFE premium balance will be paid out in addition to any CPF savings to your loved ones.

Does your CPF LIFE premium continue to earn interest?

Your CPF LIFE premium will continue to earn the interest rate floor of 4% per annum, as well as extra interest of up to 2% per annum on the first $60,000 of your combined CPF balances. 

The interest earned is factored into your monthly payouts, and you will receive a higher monthly payout compared to a scenario where the interest is not earned. 

In the illustrative example above, you will require an amount of $102,900 set aside in your RA at the age of 55, to be able to grow your RA savings to $159,600 at the age of 65, and receive a monthly payout of $840 to $900 per month. 

This is because the CPF interest rates of up to 6% per annum will help to grow your savings through compound interest. 

However, do note that your loved ones will only receive your CPF LIFE premium balance when your pass away, and this will exclude any interest earned. 

This is because the interest earned will be pooled to the CPF LIFE annuity to ensure that CPF LIFE members will receive monthly payouts for as long as they live.

How do you increase your CPF LIFE payouts?

Top up your RA

If you do not have sufficient CPF savings to pay the premiums required for your preferred CPF LIFE plan, you can choose to make a cash top-up or CPF transfer to your Retirement Account. 

Defer your CPF LIFE payouts

You can defer your CPF LIFE payouts to a later age, up until the age of 70, to increase the amount that you will receive later on.

For each year that you defer your payouts, your subsequent monthly payouts will increase by up to 7%. 

This means that if you choose to defer until the age of 70, your monthly payouts will increase by up to 35%.

How is the CPF LIFE different from the Retirement Sum Scheme (RSS)?

The Retirement Sum Scheme (RSS) was the default scheme for CPF members before it was replaced by CPF LIFE.

Like CPF LIFE, the RSS provides CPF members with monthly payouts from the time they reach retirement age at 65. 

However, CPF members under RSS will only receive payouts until their RA savings run out or when they reach 90 years, whichever is earlier.

The RSS will apply to those who are:

• Born before 1958
• Born in 1958 or after and have less than S$60,000 in your RA when your monthly payouts start OR
• Are a non-Singapore citizen or non-permanent resident.

Can you choose to join CPF LIFE voluntarily? 

You can still choose to join the CPF LIFE scheme if you are a Singapore Citizen or Permanent Resident, and are not automatically included in CPF LIFE.

You can enrol yourself to the CPF LIFE scheme any time from 65 to one month before you reach 80 years old. 

Can you opt out of CPF LIFE?

If you already have a pension or private annuity plan that pays the same or higher monthly payouts than CPF LIFE, you can choose to opt out. 

Where can you find more resources on CPF LIFE?

To learn more about CPF LIFE, refer to the guide provided by CPF.

To get a better idea of your estimated monthly payouts, you can use the CPF LIFE Estimator calculator provided by the CPF Board.

To understand more about CPF Full Retirement Sum (FRS), Basic Retirement Sum (BRS), and Enhanced Retirement Sum (ERS), check out our guide to CPF Retirement Sums.

To learn how to grow your CPF savings, check out our guide to making use of the make use of the CPF Investment Scheme (CPFIS).

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