The CPF Advisory Panel has just released their recommendations on the changes to the CPF.
A summary of the changes are as follows:
Minimum Sum to be Renamed With an Additional Level
There will now be 3 levels, the Basic Retirement Sum (BRS), the Full Retirement Sum (FRS) and the Enhanced Retirement Sum (ERS). These are levels that are set aside to your retirement account. Amounts in excess of this can be withdrawn at age 55.
- BRS – $80,500
- FRS (2 x of BRS) – $161,000
- ERS (3 x of BRS) – $241,500
The BRS will be applicable to those who own a property with a sufficient property pledge or CPF charge.
The FRS is actually the same as the current Minimum Sum (MS) and there is already a scheme where members can pledge their property to withdraw half of the MS. This is now known as the BRS, so don’t be mistaken that the MS has been reduced by half. It is just a change of names.
The ERS is something new though. You can choose to have a higher payout in excess of the current MS.
One thing I noticed in their projections of the payout is that they are not proportional.
If you have $80,500, your monthly payout is estimated to be $650-$700.
If you have $161,000, your monthly payout is estimated to be $1200-$1300.
If you have $241,500, your monthly payout is estimated to be $1750-$1900.
So you are a a male and your wife has very little CPF, it might actually make more sense to have $80,500 in both you and your wife’s account than to have $161,000 all in your own account.
Withdrawal at Age 65
You can choose to withdraw an additional 20% of your retirement account savings at 65.
Gradual Increase in BRS
The BRS (amount that needs to be set aside in the CPF) will be increased by 3% every year for cohorts turning 55 from 2017 to 2020. This is to factor for inflation so that their payouts will also be higher. This is quite similar to the current yearly increase in the MS with the only difference is that you know the increase in advance.
Currently, the change in MS is only announced one month before it happens.
Flexibility to Receive Higher CPF Retirement Payouts
- You can choose to defer your payout to start later instead of from 65. For each year you defer, your payouts will increase by 7%.
- Incentives will be given to top-up the CPF accounts of family members (no details yet).
- You can choose to top-up your own CPF to the ERS level.
For more details, you can refer to :
Part One of CPF Advisory Panel’s Recommendations
after reading your article, I am wondering if you could share why the payouts are not proportional for the 3 plans – BRS, FRS, and ERS? Also, is it wise to put more money into buying the ERS?