6 minutes read
The Retirement Sum Scheme (RSS) is a monthly payout scheme for CPF members to enable them to have a basic standard of living condition after retirement. This scheme was updated to CPF LIFE in 2009 for older adults above 55 years of age. This scheme was created to help increase life expectancy in the country, and since 2009, the average life expectancy has risen from 81.4 years to 83.1 years.
ABOUT THE RETIREMENT SUM SCHEME
This scheme is designed to cushion after-retirement economic effects on CPF members by providing monthly payouts from their CPF account balances. When an individual turns 55, his/her Special and/or Ordinary accounts savings would be transferred to the retirement account (RA) to form the retirement sum (RS). In 2007, the payout eligibility age for this scheme was increased from 62 to 65. This scheme requires that individuals having joined CPF LIFE must have set aside a retirement sum in his/her retirement account to be eligible. Also, the individual must be a Singaporean or a recognized permanent resident given birth to in 1958 or later.
The retirement sum expected to be in the retirement account categorized by age range include a;
- Minimum balance of $40,000: This category is for individuals who turned 55 years old between January 1st, 2013 & April 30th, 2016.
- Minimum balance of $60,000: This category is for individuals who turned 55 on May 1st, 2016 or after. Please note, this minimum balance must be available at least six months before the payout eligibility age.
RETIREMENT SUM SCHEME: HOW DOES IT WORK?
Having attained 55 years of age and fulfilled all the requirements as mentioned above, the retiree is entitled to a monthly payout. In essence, aside from the SRS, this scheme is a good retirement plan. Usually, the retirement sum increases yearly to account for the rising standard of living and inflation. This increment, in turn, increases payouts. An individual can only activate his/her payouts only when he has clocked 65 years; however, payout doesn’t automatically start at that time. The CPF Board begins payouts only when requested for by the owner.
To prevent recurrent cases where CPF members who didn’t request payout would pass away without getting their money, CPF Board automatically activates payouts at age 70. To enable payouts, you can download the form via the CPF website here and mail it to the CPF address. Alternatively, you can also activate payout by submitting an online application on your Singapore personal access account, i.e., SingPass or visiting any of the CPF service centers worldwide.
BENEFITS OF DEFERRING PAYMENTS
According to the scheme, deferring payouts has financial advantages, i.e., accruing interests. Yearly deferrals reward package gives the individual up to 6% risk-free interest. This package includes an extra interest of 1% for the first $60,000 and another 1% for the first $30,000. Therefore, CPF members can have up to 7% interest on the payout. If the CPF member doesn’t activate payout within five years, he/she automatically is entitled to 35% increment.
TYPES OF RETIREMENT SUM
There are three types of retirement sum namely; basic retirement sum (BRS), full retirement sum (FRS), and enhanced retirement sum (ERS). They are retirement sums expected to be in your retirement account. Usually, the higher the retirement sum, the higher the monthly payout you would receive.
For persons who would turn 55 on July 1st, 2019 or later, the basic retirement sum is $88,000 with a monthly payout of $730 – $790.
The full retirement sum is calculated as 2 x BRS which equals $176,000 with a monthly payout of $1,350 – $1,450.
The enhanced retirement sum, calculated as 3 x BRS which equals $264,000 is the highest amount that can be set aside in the retirement account.
Individuals who have deposited the ERS are entitled to a monthly payout of $1,960 – $2,110.
RSS VERSUS CPF LIFE SCHEME
The Central Provident Fund Lifelong Income for the Elderly (CPF LIFE) scheme is very much different from RSS. Usually, most CPF members find themselves on the CPF LIFE scheme after turning 55. Although these two schemes have a few similarities, it also has its differences. One key difference is that CPF LIFE is a life-long payout scheme while RSS exists as long as the RA balance is not depleted. Also, in RSS, the monthly payout is deducted from the RA whereas every fund in the RA is turned into CPF LIFE when the individual turns 65 years old. As an offshoot of RSS, people are automatically drafted into CPF LIFE only when they have fulfilled the requirements mentioned in section 2 above.
OTHER THINGS TO KNOW ABOUT RSS
It is possible to apply for an exemption in setting aside a retirement sum if you’re a pensioner receiving a monthly pension which is equal to or above the full monthly payout or you have bought your life annuity with cash. In such cases, you can submit a letter from the Pension Office, Accountant General’s Department stating the pension amount received monthly or a copy of the annuity policy.