CPF LIFE SCHEME

CPF LIFE SCHEME: **

(Administering the scheme): **

21.

Mr Siew Kum Hong asked the Acting Minister for Manpower (a) who will administer the CPF LIFE scheme; (b) how will the Government ensure that the payouts from the CPF LIFE scheme will be adequate for Singaporeans' old age, given that the actual payouts will depend on actual interest rates; and (c) what are the estimated refund amounts at ages 75 and 80 under the LIFE Balanced, LIFE Plus and LIFE Basic Plans.

Mr Gan Kim Yong: As recommended by the National Longevity Insurance Committee (NLIC), CPF LIFE will be administered by the CPF Board.

Mr Siew asked about the adequacy of the CPF LIFE monthly payouts. CPF LIFE is intended to provide members with a monthly income from age 65, for as long as they live. The level of monthly income will depend on the amount of savings members have in their CPF Retirement Account, as well as interest rates. The more savings the member has and the higher the interest rates, the higher the payout will be. This is fair to members, and will also ensure that CPF LIFE remains self-funded and sustainable.

Although actual interest rates for the Retirement Account and CPF LIFE will move with the market, members should be assured that these will not fall below the guaranteed floor of 3.5% on the first $60,000 of CPF balances and 2.5% for amounts above that.

We have introduced several measures to help members accumulate more CPF savings. First, we have given an extra 1% interest on the first $60,000 of members’ CPF balances since January 2008. Next, we have introduced various bonuses, namely, the D-, V- and L-Bonuses. To recap, the D-Bonus is given to members whose Minimum Sum Draw-Down Age has been deferred beyond age 62. The V-Bonus is given to members who voluntarily defer their Draw-Down Age or purchase annuities. The L-Bonus is given to eligible members who participate in CPF LIFE.

Let me illustrate the impact of these measures using an example. Mr Lim is 59 years old this year and opts in to the LIFE Balanced Plan with $67,000 cash in his Retirement Account. Let us also assume he qualifies for the maximum L-Bonus of $4,000 and also receives the D-Bonus of $1,500. On top of this, he receives $1,200 in V-Bonus for

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purchasing an annuity, in this case, a CPF LIFE plan. Without the 1% extra interest and the bonuses, his CPF LIFE monthly income would be $360-$390. With the 1% extra interest and the various bonuses, his monthly income could be up to $450-$480. This is about 25% more.

We have also made it easier and more attractive for family members to top up their Retirement Accounts through the Minimum Sum Topping-Up Scheme. Givers will be eligible for tax relief for top-ups in cash. Top-ups, whether in cash or in CPF, will help the recipients participate in CPF LIFE, enjoy the 1% extra interest, the L-Bonus, and possibly higher D- and V-Bonuses. In addition, older low wage workers will receive additional CPF contributions from Workfare.

Lastly, Mr Siew asked about the bequest amounts at different ages, under the various CPF LIFE plans. The bequest amount is the sum of the member’s remaining CPF savings and the CPF LIFE premium less the monthly income received. It will therefore decrease as payouts are made.

Let me illustrate with the example of a 55-year-old male member who joins CPF LIFE in 2013 with $67,000 cash in his Retirement Account. Under the LIFE Balanced Plan , if he passes away at the age of 75, his beneficiaries will receive a bequest amount of between $51,000 and $52,000. However, if he passes away at the age of 80, the bequest amount reduces to between $21,000 and $23,000, as he has received five additional years of LIFE income.

For the LIFE Plus Plan , the bequest amount will be between $1,000 and $8,000 at age 75, and reduces to $0 by age 80. For the LIFE Basic Plan , the bequest amount will be $72,000 to $77,000 at age 75, and $54,000 to $58,000 at age 80. These numbers are only estimates, as LIFE payouts are dependent on actual CPF balances, interest rates and mortality experience. Members who would like to find out more can contact the CPF Board. They may also use the CPF LIFE Payout Estimator on CPF Board’s website.

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