All You Need To Know About The CPF Retirement Sum Scheme

All You Need To Know About The CPF Retirement Sum Scheme
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Last Updated on by Tree of Wealth

As a salaried employee in Singapore, you probably see a large portion of your earnings disappear into your CPF account each month.

You would also probably have heard about the Retirement Sum, and how you will be provided with payouts monthly after your retirement. However, what is the Retirement Sum exactly?

Here’s all you need to know about the Retirement Sum Scheme and how it will affect you.

What is the Retirement Sum Scheme?

The Retirement Sum Scheme was created to provide CPF members with a monthly income to support a basic standard of living in their years of retirement.

The CPF LIFE Scheme was then introduced in 2009 to mitigate longevity risks, and provides Singaporeans with a monthly payout for as long as they live. Citizens are placed on CPF Life if they are a Singaporean or Permanent Resident born in 1958 or after.

People who turn 55 years old after 1 May 2016 need to have at least S$60,000 in their Retirement Account six months before the payout eligibility age to qualify.

If you turned 55 between 1 January 2013 and 30 April 2016 , you will need to have at least (i) S$40,000 in your Retirement Account when you reach 55 years old, or (ii) at least S$60,000 in your Retirement Account before you reach payout eligibility age.

To begin receiving your monthly payouts when you reach your payout eligibility age, you may submit an online application via the CPF Digital Services using your Singpass account.

Retirement Account

Singaporeans will have a Retirement Account (RA) created for them on their 55th birthday, and savings from the Special Account and Ordinary Account will be transferred to the RA to form the Full Retirement Sum.

To receive higher monthly payouts, you can top up your RA to the prevailing Enhanced Retirement Sum. Those who own a property can choose to withdraw their RA savings above their Basic Retirement Sum.

Overview of retirement sums

Here’s a breakdown of the different types of retirement sums:

Basic Retirement Sum (BRS)

The BRS is mainly catered to CPF members who own a property with a lease that will not expire until they are at least 95 years old and above.

Members also can choose to withdraw their RA savings above their BRS.

RA savings required at 55

Monthly payouts received for life from 65

S$96,000

S$790 to S$850

Full Retirement Sum (BRS x 2)

As a general rule of thumb, the FRS is double that of the BRS.

CPF members who do not own a property, or choose not to withdraw their RA savings can choose to set aside a FRS instead.

RA savings required at 55

Monthly payouts received for life from 65
S$192,000

S$1,470 to S$1,570

Enhanced Retirement Sum (BRS x 3)

The ERS is triple that of the BRS, and members who wish to receive higher payouts can set aside the ERS. It is also suitable for those who wish to put more savings into CPF LIFE.

RA savings required at 55

Monthly payouts received for life from 65
S$288,000

S$2,140 to S$2,300

If you’re turning 55 in 2022, your BRS, FRS and ERS are S$96,000, S$192,000 and S$288,000 respectively.

However, do take note that the BRS is increased every year, to cater for long-term inflation and ensure that payouts remain relevant to Singaporeans. The BRS will be made known to you ahead of time.

How are the retirement sums calculated ?

All the retirement sums were created to ensure that CPF members are able to cover their cost of living in their retirement.

The BRS is set such that monthly payouts are referenced according to the lower-middle retiree household expenditure per person, and is measured according to the latest Household Expenditure Survey.

Under the BRS and Household Expenditure Survey, it is assumed that CPF members own a property that can last them until the age of 95, and are thus not required to pay rent in retirement.

This is why the BRS only takes into consideration the basic cost of living of CPF members. On the flipside, those who do not own a property may incur greater costs of living, especially when it comes to paying for accommodation.

Thus, the FRS comes into play to cover these additional expenses.

The FRS is calculated by adding up the cash balances in one’s SA and OA. If these values are insufficient, CPF savings will be withdrawn, and used to meet up to 50% of the FRS.

Lastly, the ERS caters to CPF members who wish to receive even higher payouts of three times the BRS.

How do I set aside a retirement sum after using up my OA savings on housing? 

 In the event that you have used up your OA savings on housing and do not have the required FRS when you reach 55 years old, you can use your SA savings to set aside your retirement sum instead.

While you will not be required to top up your RA in cash, new CPF contributions, government top-ups or refunds that enter your CPF account after age 55 will be transferred to your RA.

Will CPF savings withdrawn under the CPF Investment Scheme be used to make up the FRS?

 Only cash balances from your SA and OA will be used to set aside for the FRS. CPF savings withdrawn under the CPF Investment Scheme for investments will not be used to make up the FRS.

 However , the FRS computation for those below 55 would include the SA savings withdrawn under the CPF Investment Scheme for the purpose of participating in the Retirement Sum Topping-Up Scheme (RSTU).

For example, if the recipient is below 55, the amount he can receive is his current FRS minus his SA savings and net SA savings withdrawn under the CPF Investment Scheme for investments that have not been completely disposed of.

If the individual is 55 and above, the amount received under the RSTU will be his ERS minus his RA savings.

You can find out more about the computation here.

How do I get exempted from setting aside a retirement sum ?

Some groups of people that can apply for an exemption from setting aside a retirement sum include pensions and annuity policy holders.

To apply for an exemption, you can head down to any of the CPF Service Centres along with your identity card and following documents:

For pensioners:

Original pension letter bearing the Pension Office’s letterhead, dated within six months, declaring the following information:

  • You receive a pension payout monthly that is guaranteed upon retirement
  • Your pension payout is guaranteed for life
  • The conditions upon which your pension may be revoked or terminated
  • The amount of guaranteed lifelong monthly pension

For Annuity policyholders with a policy that was issued by MAS-registered providers and satisfies the requirements under the Insurance Act:

  • The original annuity policy and its terms and conditions. The policy has to be bought using cash or CPF monies under the CPF Investment Schemes.

Understanding the Retirement Sum Scheme

Understanding how the Retirement Sum Scheme works can help you to better prepare for the future.

Since the Basic Retirement Sum increases each year, you can begin preparing now to bolster your ability to hit the BRS, or even FRS.

Some strategies include topping up your SA in cash, transferring funds from your OA to SA to boost interest to 4% per annum, or investing your cash outside of CPF.

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