CPF series: Something to plan for when you're 54

In the final instalment of a two-part series on the Central Provident Fund (CPF), The Sunday Times highlights a new retirement planning service for those turning 54, and CPF withdrawals from age 55.

CPF members who turn 54 this year are eligible for a new CPF Retirement Planning Service (CRPS) offered by the CPF Board.

These one-on-one sessions aim to help members understand the CPF schemes and plan ahead for the options available to them when they turn 55.

The new service is part of the CPF Board's continuing efforts to help Singaporeans better understand their options, particularly with the various CPF enhancements introduced in the last few years.

Details of the new service can be found in a brochure to be mailed to members when they turn 54.

This initiative is going into full swing after a successful pilot exercise last year. That was when the CPF Board invited 1,200 members to test out the service - and 95 per cent said they would recommend it to their friends.


The new CPF Retirement Planning Service offered by the CPF Board consists of one-on-one sessions aimed at helping members who turn 54 this year to understand the CPF schemes and plan ahead for the options available to them when they reach the age of 55. ST PHOTO: FELINE LIM

Out of the cohort of about 60,000 members turning 54 this year, an estimated 20,000 who are servicing their housing loan balances will receive invitation letters to attend the CRPS. This means that if you are 54 and not one of the 20,000 members, you would have to make an appointment with the CPF Board for the new CRPS.

Mr Wong Yan Jun, group director of customer relations at the CPF Board, said: "Through the CPF Retirement Planning Service, we walk CPF members through the CPF policies that affect them and options they have at age 55 so they can better prepare for retirement.


MR WONG YAN JUN, group director of customer relations at the CPF Board, on its new CPF Retirement Planning Service.

"We are heartened that the service has been well received by members, who appreciate our efforts to help them make informed decisions using personalised information in a one-on-one setting."

Many CPF members are overwhelmed by the various CPF schemes and options, and find them difficult to understand. A recent talk at the National Library on CPF by The Sunday Times Invest drew 1,500 viewers via live streaming, in addition to the 250 who managed to get seats at the event.

Here are some things you should know about CPF as you turn 54.

HELP TO MAKE INFORMED DECISIONS

We are heartened that the service has been well received by members, who appreciate our efforts to help them make informed decisions using personalised information in a one-on-one setting. ''

MR WONG YAN JUN, group director of customer relations at the CPF Board, on its new CPF Retirement Planning Service.


More members now prefer to leave their CPF money in their CPF accounts so that they can continue to earn the attractive interest and grow their nest egg. With the recent CPF enhancements, after you turn 55, your CPF accounts can earn up to 6 per cent interest per year (the first $30,000 earns 6 per cent), certainly not something we can sniff at.

What to expect at a CRPS session

The new CRPS arises out of a recognition that Singaporeans prefer a personalised session before making a financial decision. During the one-on-one session, which typically takes an hour, a CPF officer would help the member better understand the various CPF options and decide on which option best suits his individual needs and circumstances.

Besides English, CRPS is available in the other main languages here. Both the session and the infographics contained in a customised brochure for each CRPS attendee will be prepared in the language that the member is most comfortable in.

With the help of the customised brochure, the member will have a better understanding on how much he has in his accounts and how much he can withdraw.

One of his options at 55 is to consider the retirement sums he needs to set aside in his Retirement Account (RA) so as to achieve his desired amount of monthly payouts that will commence when he turns 65.

Another consideration is topping up his and his loved ones' accounts so as to build up retirement savings and hence enjoy higher monthly payouts later.

A top concern for a member at age 55 is the future payments that he will be making from his Ordinary Account (OA) savings, since some or all of it may be transferred to the RA.

The CPF Board said it has taken great care in designing the CRPS invitation letters and the infographics incorporating design thinking strategies. For instance, instead of the usual textual contents, side-by-side bar charts were utilised to visually illustrate the changes to members' CPF accounts before and after they turn 55.

Colours have been used to differentiate the OA, Special Account (SA), Medisave Account (MA) and RA. Coloured boxes are also used in the letters to help members focus on the key messages and actions they are required to take.

 

The board says it has received positive feedback on the simple and clear visuals from members who have attended the CRPS.

Setting aside your Retirement Sum On your 55th birthday, an RA is created for you. This is where savings from your SA and OA, up to the prevailing Full Retirement Sum of $166,000, will be transferred to your RA to form your retirement sum which will provide you with monthly payouts.

For higher monthly payouts, you may top up your RA up to the Enhanced Retirement Sum, which is a new option made available last year as part of enhancements to the CPF system.

Your Medisave savings will remain in your MA to pay for future healthcare expenses.

Your retirement sum will provide you with a monthly payout from your payout eligibility age, which is currently age 65 for members who were born in 1954 or later.

If you have $60,000 or more in your RA when you are near your payout eligibility age, you will be automatically placed under the national annuity CPF Life scheme, which provides you with monthly payouts for as long as you live.

You can choose your desired amount of monthly payouts to meet your retirement needs. The payouts you will receive depend on the retirement sum you set aside in your RA. The more you set aside, the higher your payouts.

How much can I withdraw from my CPF at age 55? The amount you can withdraw at age 55 depends on how much you have in your OA and SA.

Expect to receive a letter from the CPF Board six months before your 55th birthday. You can apply to withdraw your CPF savings once you receive the letter and payment will be made to you within a week from your 55th birthday.

Here are four scenarios:

SCENARIO 1

Mr Raju's OA savings at age 55 amount to $100,000 while his SA savings are $180,000, which is a total of $280,000.

The Full Retirement Sum of $166,000 will be set aside in his RA, which will provide him with a monthly payout of $1,380 from age 65 for life.

He can withdraw the remaining amount of $114,000 in his OA and SA. If he owns a property with sufficient property charge/pledge, he can also choose to set aside his Basic Retirement Sum of $83,000 in his RA and receive a correspondingly lower monthly payout of $750 from age 65 for life. In this case, he can withdraw $114,000 from his OA and SA, and an additional $83,000 from his RA.

SCENARIO 2

At 55, Mr Ahmad has $45,000 in his OA and $55,000 in his SA, or a total of $100,000.

From this, $95,000 will be set aside in his RA to form his retirement sum which will provide him with $840 monthly from age 65 for life. He can withdraw the remaining amount of $5,000 in his OA.

If he owns a property with sufficient property charge/pledge, he can choose to set aside his Basic Retirement Sum of $83,000 in his RA and receive a correspondingly lower monthly payout of $750 from age 65 for life. In this case, he can withdraw $5,000 from his OA, and an additional $12,000 from his RA.

SCENARIO 3

Mr Lim's OA savings are $25,000 while his SA savings are $35,000 - a total sum of $60,000.

An amount of $55,000 will be set aside in his RA to form his retirement sum which will provide him with $530 a month from age 65 for life.

He can withdraw the remaining amount of $5,000 in his OA.

SCENARIO 4

Mr Robert's OA savings at 55 are $3,000 while his SA savings amount to $1,000. As Mr Robert has less than $5,000, he can withdraw all the balances amounting to $4,000.

How to apply for withdrawal

There are two options. For the online application, apply at www.cpf.gov.sg. You will need your SingPass and a bank account with OCBC, POSB or United Overseas Bank.

Alternatively, download the relevant form from the CPF website and mail it to the board.

The online application process is about five days. It will take about 10 days if you mail in the form.

What if I don't withdraw my savings?

It is not compulsory to withdraw your CPF savings once you turn 55.

In fact, more members now prefer to leave their CPF money in their CPF accounts so that they can continue to earn the attractive interest and grow their nest egg. With the recent CPF enhancements, after you turn 55, your CPF accounts can earn up to 6 per cent interest per year (the first $30,000 earns 6 per cent), certainly not something we can sniff at.

For a member with $30,000 in his RA at age 55, the additional 1 percentage point in extra interest amounts to about a 15 per cent increase in his monthly payout, or about $40 more each month, for the rest of his life.

It helps to understand that you can still make a withdrawal later. So if you do not need the money, you need not withdraw your CPF savings at 55 years of age.

There is no limit to the number of times you can withdraw in a year for those who are eligible to do so. So you can still make a withdrawal at a later date, or withdraw only part of your savings.

A version of this article appeared in the print edition of The Sunday Times on April 09, 2017, with the headline 'Something to plan for when you're 54'. Print Edition | Subscribe