Ever wondered why a chunk of your salary mysteriously disappears every month? That’s a question you might be asking yourself if you have no idea what Central Provident Fund (CPF) contributions are.
Every Singapore citizen and PR has a CPF account, one of the goals of which is to help you stash money away for retirement. However, the CPF system’s various ins and outs can be mind-boggling.
If you’re a salaried employee, every month, part of your salary gets deducted and paid into three (assuming you’re under the age of 55) different CPF accounts.
Eventually, when you reach the age of 55, you’ll get to withdraw some of your retirement money. But how much you receive will depend on which of the three different CPF retirement sums you meet, namely: Basic, Full and Enhanced Retirement Sums.
Later, from the age of 65 onwards, you’ll receive monthly payouts to contribute to your (hopefully) dream retirement.
If we haven’t already lost you, here’s a quick and hopefully easy-to-understand guide to the 3 Retirement Sums and why they matter.
- CPF Retirement Sum: Overview
- CPF Retirement Account: Opens at 55 Years Old
- CPF Withdrawal at 55: I own property
- CPF Withdrawal at 55: No property
- CPF Retirement Sum vs CPF LIFE
- CPF Basic Retirement Sum (BRS)
- CPF Full Retirement Sum (FRS)
- CPF Enhanced Retirement Sum (ERS)
- Does CPF Retirement Sum Increase Every Year?
- I can’t hit Basic Retirement Sum
- CPF Top Up Retirement Account
- How to grow my CPF Retirement Account
1. CPF Retirement Sum: Basic, Full, Enhanced
There are 3 types of CPF Retirement Sums according to the CPF Board. From lowest to highest, they are:
- Basic Retirement Sum (BRS)
- Full Retirement Sum (FRS) = BRS x 2
- Enhanced Retirement Sum (ERS) = BRS x 3
So, what are they for? And why am I being forced into this compulsory savings scheme by the government? According to CPF, here’s what the 3 retirement sums are for:
- Basic Retirement Sum: Gives you some monthly payouts when you retire, can cover your basic living expenses
- Full Retirement Sum: Gives you higher monthly payouts when you retire, can cover basic living expenses + rent
- Enhanced Retirement Sum: Gives you even higher monthly payouts when you retire, can cover your desired lifestyle
2. CPF Retirement Account: Opens when you turn 55 years old
The year you turn 55 will be a big year… not because you get to stop working, but because the money in your CPF Ordinary Account and Special Account will merge to form your Retirement Account. You will also be able to finally withdraw some money from your CPF account.
But of course, the government would never let you withdraw everything. So, how much can I withdraw from my CPF at 55 years old?
The CPF Retirement Sums will tell you.
Read more: CPF Beginner’s Guide: Monthly CPF Contributions, Interest Rates, Minimum Sum, Calculators
3. CPF Withdrawal at Age 55: I Own A Property
You are 55 years old. If you own a property with a lease that’s valid until you turn 95 years old (and beyond), the government thinks that you are financially safe for the rest of your life. Thus, the requirements for your CPF Retirement Account balance will be more relaxed. How much you can withdraw depends on how much money you have in your CPF Ordinary Account (OA), Special Account (SA), and Retirement Account (RA)… and if they hit the current Full Retirement Sum (FRS). Here is a summary of how much you can withdraw from your CPF Account at age 55 when you own a property that can last you till 95 years old:
|How much money do you have in your CPF OA & SA?||I can withdraw from my CPF…|
|$0 – $5,000||Everything|
|$5,000 – BRS||$5,000|
|Above BRS||$5,000 or Excess savings in your SA & OA above BRS|
I heard I can pledge my property to withdraw more money from CPF. Is it true?
Yes, if you’re aged 55, own a property (that can last you until age 95) and only want to keep $99,400 (Basic Retirement Sum) in your CPF, you need to pledge your property to withdraw the extra CPF. I pledged my property to CPF. I can withdraw: (Total CPF OA + SA) – $99,400 (BRS) = More CPF Withdrawal I do not want to pledge my property to CPF. I can withdraw (Total CPF OA + SA) – $198,800 (FRS) = Less CPF Withdrawal But… should you decide to sell off your property in the future, you must return the proceeds (or your share of them, if you co-own the home) to your CPF. And you must top up so your CPF reaches the Full Retirement Sum (!!). In the latter case, although you withdraw less money from your CPF, your subsequent CPF LIFE payouts will be higher.
4. CPF Withdrawal at Age 55: I Don’t Own Property
In a nutshell, for those who don’t own property, the government wants to make sure you have at least the Full Retirement Sum in your CPF account. However, as a consolation prize, they will allow you to withdraw at least $5,000 no matter how much or how little you have (for those born in 1958 and after).
|How much money do you have in your CPF OA & SA?||I can withdraw from my CPF…|
|$0 – $5,000||Everything|
|$5,000 – FRS||$5,000|
|Above FRS||$5,000 or excess savings in your SA & OA above FRS, whichever is higher|
5. CPF Retirement Sum vs CPF LIFE
Singaporeans born in 1958 and later will be automatically placed on the CPF LIFE scheme. However, you must have at least $60,000 in your CPF Retirement Account when your monthly payouts start (from age 65). At this juncture, CPF LIFE replaces the previous CPF Retirement Sum programme. The CPF Retirement Sum scheme that we talked about earlier pegs your monthly payouts to the retirement sum that is in your CPF accounts. The monthly payouts will end:
- when your CPF RA runs out of money
- when you turn 90 years old (like term life)
But CPF LIFE guarantees monthly payouts for life, and pro-rates payouts based on the exact sum of money in the account. CPF LIFE is different from CPF Retirement Sums because:
- you need to use your CPF RA savings to pay CPF LIFE premiums
- you get monthly payouts (lasting your whole life)
How much monthly payouts will I get from CPF LIFE? Unfortunately, there isn’t an accessible CPF LIFE Calculator. The closest thing you can get is the CPF LIFE Estimator which only seniors aged 55 and above are allowed to use. Ok… so if I’m in my 30s or 40s now, I’m confirm enrolled in CPF LIFE lah. I don’t need to think about CPF BRS, FRS, ERS etc. right? No. There is still one important reason why you need to know about the CPF Retirement Sum programme. When you turn 55 years old, the CPF Retirement Sums will affect how much money you can withdraw from your CPF account that year. Read more: CPF LIFE: The Complete Guide to Payouts, Plans & Minimum Sums Now, let’s dive into each of the 3 different types of CPF Retirement Sums in greater detail.
6. CPF Basic Retirement Sum (BRS)
The most recent BRS amounts are as follows:
|Year (If you turn 55 in this year…)||Basic Retirement Sum|
The government updates the BRS every year, but does not divulge figures more than 1 year in advance. Assuming your CPF balance meets the Basic Retirement Sum at age 55 — if you do not have property, you will be able to withdraw $5,000. If you own and pledge your property to CPF, you can withdraw any sums in excess of the BRS that you have in your Retirement Account.
7. CPF Full Retirement Sum (FRS)
The FRS is double the BRS. Here are the most recent FRS sums:
|Year (If you turn 55 in this year…)||Full Retirement Sum|
If you do not have property and manage to hit the FRS, you will be able to withdraw $5,000 or any sums in excess of the FRS in your account, whichever is higher. On the other hand, if you are a property owner and manage to hit the FRS, you’ll be able to withdraw any sums in excess of the BRS that you have in your Retirement Account. The FRS is generally double the BRS, so you’ll be able to withdraw at least half of the money in your account.
8. CPF Enhanced Retirement Sum (ERS)
For those on CPF LIFE, the ERS indicates the maximum amount of money you can keep in your Retirement Account, as well as the maximum amount of monthly payouts you can receive from age 65 onwards. So, if you’re thinking of transferring more money to CPF to take advantage of the high interest rates, try not to exceed the ERS. The ERS is 3 times the BRS. Here are the ERS rates:
|Year (If you turn 55 in this year…)||Enhanced Retirement Sum|
9. Does CPF Retirement Sum Increase Every Year?
Increases in the BRS, FRS and ERS are made by the CPF Board according to their analysis of long-term inflation and rises in the standard of living. While there is no way to predict the future, looking to the past, the past five years’ Retirement Sums were as follows:
|Year (If you turn 55 in this year…)||Basic Retirement Sum||Full Retirement Sum||Enhanced Retirement Sum|
In the past, there has been an increase of about 3% each year. From 2023 to 2027, the Retirement Sums will increase by 3.5% per year. To estimate the Retirement Sums when you turn 55, you can thus base your calculations on a 3.5% year-on-year increase, bearing in mind that that might change depending on Singapore’s financial future.
10. I Can’t Even Hit Basic Retirement Sum
It’s perfectly OK to not hit any of the 3 Retirement Sums above. There is no penalty for not hitting the Basic Retirement Sum. Not hitting the BRS only means you’ll only be able to withdraw $5,000 from CPF at age 55. Your retirement payouts will not be affected. In the past, the old CPF Retirement Sum scheme pegged retirement payouts to whichever Retirement Sum you hit. Back then, failing to meet BRS might have been a cause for concern. But the current CPF LIFE scheme is fully pro-rated based on the exact amount of retirement savings you have. So whether you hit BRS or not, your lifetime payouts will be calculated fair and square. Read more: CPF LIFE: The Complete Guide to Payouts, Plans & Minimum Sums
11. CPF Top Up: Retirement Account
Thinking of topping up your CPF so you can withdraw more money at age 55 to travel the world? It’s not gonna work. CPF top-ups do not count towards the Basic/Full/Enhanced Retirement Sum (insofar as they’re used for calculating the amount of money you can withdraw at age 55). For that matter, government grants and earned interest also do not count. But CPF top-ups do count towards your retirement savings. The more you top up, the higher your CPF LIFE payouts. So you’re still encouraged to top up to boost your retirement savings. FYI, if your parents have not met the BRS, you can get dollar-for-dollar matching on voluntary CPF top ups through the CPF Matched Retirement Savings Scheme. More details in the following article. Read more: CPF Matched Retirement Savings Scheme: Who Is Eligible & How It Works
12. How to Grow My CPF Retirement Account
To recap, the Retirement Sum in your account will determine how much of your CPF savings you can withdraw after your 55th birthday. Your CPF top-ups will not count towards the amount you withdraw at age 55. But it’s still a good idea to grow your retirement savings anyway. After all, withdrawing money at age 55 is a one-time event, while CPF LIFE payouts are for as long as you live. There are generally 2 methods to boost your retirement income from CPF: 1. Top up your Retirement Account – The Retirement Sum Topping-Up Scheme lets you transfer cash to your CPF SA or RA. This not only boosts your monthly payouts and entitle you to tax relief, but also enables you to enjoy CPF’s SA and RA interest rates, which are currently at a base rate of 4%. You can top up your account to the ERS to maximise your payouts. 2. Invest your cash and top up CPF account later on – Not everyone is comfortable with locking money in their CPF account(s). One alternative is to invest your cash when you’re younger and have a higher appetite for risk. Then when you’re older, funnel some of your portfolio into CPF to earn risk-free interest rates, and to get higher monthly payouts for CPF LIFE. If you’re looking to do the latter, here are some guides to get you started:
- How to Buy Stocks in Singapore: Start Investing in 5 Easy Steps
- How to Buy US Stocks in Singapore: 3 Best Investment Brokerages
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13) How to plan for retirement in advance
If you’re a salaried employee aged 16 to 53, you can make use of the CPF Planner for retirement income. Launched in 2022, the online tool helps you work out your retirement savings goals and payouts. Based on your current CPF savings and your projected future income, you can use the CPF Planner to estimate your future CPF payouts so you can work them into the rest of your financial planning. Found this article useful? Share it with anyone who might need it. The post What Are the CPF Basic, Full & Enhanced Retirement Sum and How Do They Affect Your Retirement? appeared first on the MoneySmart blog.
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