You will pay for your CPF Life premium with your CPF Minimum Sum. You will not have to pay more out of your own pocket.
CPF Life is the new name for the annuities scheme.
How much you pay for the CPF Life premium depends on the type of annuity you choose.
How much income you get each month depends on how much you have in your CPF Retirement Account at age 55, and on the annuity option you pick.
2) What choices do I have?
You will have 12 options to choose from.
You can choose the age at which you want to start receiving payouts from your CPF Life.
You can ask for your payouts to start at age 65, 70, 75, 80, 85 or 90.
For each of these six options, you have a further choice of whether you want your family to receive a refund of the CPF Life premium, should you die early.
So if you want your payouts to start at age 65, you can either choose option Refund 65 or option No-refund 65.
The default option is Refund 80.
The earlier you want your CPF Life payouts to start, the larger the premium you will have to pay.
But you will also receive a bigger payout every month.
Let's take an example of someone with a CPF Minimum Sum of $67,000 when he turns 55.
If he chooses Refund 65, 100 per cent of his CPF Minimum Sum will go into paying the CPF Life premium.
He will receive a monthly payout of $650 from age 65 until he dies.
But if he chooses option Refund 90, only 6 per cent of his Minimum Sum in the Retirement Account will be used to pay for the CPF Life premium.
He too will receive a monthly payout from age 65 until he dies, but it will be $560. This payout is from the remaining amount in the Retirement Account.
The payout from the annuity will start from age 90.
If he opts not to have a refund, his payout will be higher.
The payouts for women will be lower because they are expected to live longer than men.
3) If I die early, does my family get a refund?
Yes, if you choose any one of the six options that gives a refund.
The refund amount will be equal to the CPF Life premium minus the CPF Life payouts you would have received.
4) Am I covered by CPF Life or exempted?
You are covered by CPF Life if you are aged 50 and younger, working and contributing to your CPF account.
You are exempted if you have less than $40,000 in your CPF Retirement Account when you turn 55, but you can still opt into the CPF Life scheme. Those over 50 can also opt in.
You are also exempted if you are on a pension or have bought a private annuity that pays you an equivalent benefit.
If you have a terminal illness, are of unsound mind, have a mental or physical condition that leaves you unable to work, or a medical condition that severely impairs your life expectancy, you are also exempted.
5) Is it compulsory?
Yes, it is compulsory unless you are exempted.
Allowing people to opt out would have an adverse impact on this national scheme, and make it less viable.
6) What happens to my CPF money when I turn 55?
When you turn 55, the money in your CPF Ordinary and Special Accounts is moved to your Retirement Account.
You are required to leave a Minimum Sum in your Retirement Account for your old age.
The sum you must leave in your account, called the Full Minimum Sum, is currently $99,600.
It will be raised gradually to $120,000 (in 2003 dollars) by 2013, the year the CPF Life scheme starts. The CPF Board estimates that after adjusting for inflation, the Full Minimum Sum in 2013 will be $134,000.
If you have more than the Full Minimum Sum, you can withdraw the excess.
At age 55, you will also be asked to choose one of the 12 CPF Life options.
The sum you have in your Retirement Account is then split into two, according to the option you choose.
One part goes to pay for the CPF Life premium. This portion is pooled together with the premiums of other CPF Life members.
The other part remains in your Retirement Account and earns interest from the CPF Board.
You start to receive an income from the sum in your Retirement Account when you turn 65.
You start to receive an income from CPF Life at the age you have opted for. For most people, that age should be 80.
7) How is CPF Life different from the current Minimum Sum scheme?
The current Minimum Sum Scheme gives you a monthly payout for 20 years from age 65.
CPF Life also gives you a monthly payout from age 65, but for the rest of your life.
The payout amount will remain roughly the same.
For example, under the current Minimum Sum scheme, if you have $67,000 in your Retirement Account at the age of 55, you get a monthly payout of $600 from age 65 to 85.
But under the new CPF Life scheme, if you choose the default Refund 80 option, you get a payout of $570 to $610 for life.
The range in the size of payouts is to take into account interest rate fluctuations.
8) Will my CPF Life payouts be indexed to inflation?
No. Otherwise, the payouts need to get bigger over time. That means the initial payouts need to be much smaller.
It also means bigger CPF Life premiums and fewer members being able to afford the scheme.
9) How can I increase the size of my payouts?
You can increase your payouts by working longer and continuing to contribute to your CPF Retirement Account past age 55.
You can also top up your Retirement Account by selling your CPF investments, downgrading to a smaller home or taking part in HDB's lease buyback scheme which allows people to swop the value of their homes for cash without having to move out.
10) What happened to my feedback?
The scheme was changed in response to feedback.
As a result, the new scheme provides for refunds and for a choice on the age they want to receive the payouts.