9 May 2022
Source: The Straits Times © SPH Media Limited. Permission required for reproduction
Central Provident Fund (CPF) monthly payouts have increased with each successive cohort and are set to keep going up for future cohorts, according to a report by the CPF Board. Median payouts have gone up by 25 per cent from 2019 to 2021. A CPF member who turned 65 in 2019 received monthly payouts of $460, compared with the $580 that a member who turned 65 last year now gets. For those who chose to start receiving payouts at age 70, the median payout among these cohorts also grew from $610 in 2019 to $760 in 2021. This is thanks to income growth, increased labour force participation and overall improvements to the CPF system.
Plans are also afoot to boost Singaporeans' savings and retirement adequacy. For example, CPF contribution rates for those aged 55 to 70 will increase gradually to help them earn more and save more even after turning 55. The retirement and re-employment ages for Singapore workers will also be progressively raised to 65 and 70 by 2030 to support those who wish to continue working. The Matched Retirement Savings Scheme launched last year will help seniors who have not reached their Basic Retirement Sum to build their retirement savings through a dollar-for-dollar matching grant up to a capped amount. The Workfare Income Supplement Scheme will be enhanced to boost payouts for all recipients and be extended to younger workers from 30 years old.
Notwithstanding Government-led efforts, Singaporeans should also do their own research and plan a sufficient buffer for their future retirement. One straightforward way to do so is to defer payouts. CPF members can generally gain 30 per cent more in their monthly payouts if they defer payouts to 70 years old. A person who turned 65 in 2019 is projected to get $610 if he defers his payouts to age 70, the latest age at which payouts can start. Meanwhile, a person who turned 65 in 2021 can get $760 if he starts the payouts at 70 years old. The increase in the proportion of members choosing to defer their payouts - from 43 per cent in 2019 to 54 per cent last year - is an encouraging sign.
But the report also noted that about 70 per cent of members made lump-sum withdrawals before payouts began at the age of 65. While some of this may be due to sheer necessity, those who can afford to wait longer should carefully consider whether early withdrawal is worth the financial loss from compounded interest. They could also take the extra step of setting aside the Full Retirement Sum, or up to Enhanced Retirement Sum with cash or CPF savings. With rising inflation affecting everyone, taking steps to make CPF Life pay out more is one way to enjoy a higher and sustainable lifelong income. Singaporeans should, as far as possible, save up today so that they have more to spend tomorrow.
Article was first published in The Straits Times on 9/5/2022