CPF panel: Greater focus should be on retirement payouts

SINGAPORE — In studying future adjustments to the Minimum Sum and the issue of lump-sum withdrawals, the Central Provident Fund advisory panel felt a greater focus should be on payouts in retirement.

The basic payout of S$650 to S$700 a month for someone turning 55 next year, who sets aside S$80,500 in his Retirement Account, would be the baseline for most CPF members, said panel chairman Tan Chorh Chuan.

A key question for most people when planning for retirement is how much they would need a month as a retiree. CPF plays an important role in providing a stable stream of payouts to meet basic retirement needs, he said.

The recommended retirement sum for those who do not own their homes or have not made a CPF pledge on the value of their property (which refers to the sum of money that will go into his CPF account if he sells the property) is higher, at double the Basic Retirement Sum. This is because homeowners generally have the option to monetise their housing.

The panel also recommended that Singaporeans who continue to work between age 65 to 70 be allowed to defer payouts up to age 70, with monthly payouts increasing by 6 to 7 per cent with every year that the payout-starting age is deferred.

The panel also aimed to strike a balance between the lump-sum of CPF funds allowed to be taken out, and payout adequacy, said Professor Tan. CPF members may have short-term cash needs – some may want the money to go on the haj, or pilgrimage, before they get too old, for instance, said panel member Muhammad Faizal Othman.

The panel recommended the option to withdraw 20 per cent of one’s Retirement Account savings at age 65, inclusive of the S$5,000 they are allowed to take out from age 55. This is an option CPF members should exercise with care, as monthly payouts will go down with lump-sum withdrawals made, said Prof Tan, who advocated financial counselling for CPF members to make well-informed decisions.

The panel also felt every CPF member should be encouraged to have his own CPF LIFE annuity plan to provide lifelong retirement payouts. To enable that, Singaporeans should be encouraged to top up the accounts of relatives with lower CPF balances, Prof Tan said.

The panel made its first set of recommendations after meeting with over 400 Singaporeans at focus group discussions. It also received over 150 pieces of feedback from individuals and organisations such as the Singapore Actuarial Society.