CPF proposals: Advisory panel recommends lump sum withdrawals of up to 20%

Central Provident Fund (CPF) members should be able to withdraw up to 20 per cent of their savings when they become eligible for monthly payouts at 65, the panel reviewing the scheme has recommended. -- PHOTO: ST FILE
Central Provident Fund (CPF) members should be able to withdraw up to 20 per cent of their savings when they become eligible for monthly payouts at 65, the panel reviewing the scheme has recommended. -- PHOTO: ST FILE

SINGAPORE - Central Provident Fund (CPF) members should be able to withdraw up to 20 per cent of their savings when they become eligible for monthly payouts at 65, the panel reviewing the scheme has recommended.

This provision would be backdated to the cohort that turned 55 in 2013, the CPF Advisory Panel suggested on Wednesday, when announcing its recommendations for enhancements to the national savings plan.

Any lump sum withdrawals would lower future monthly payouts, so the panel also proposed providing non-withdrawal incentives and financial counselling.

The panel, which is chaired by National University of Singapore President Tan Chorh Chuan, recommended allowing members to defer the start of their monthly payouts up to age 70, in order to receive higher payouts for life.

When implemented, the withdrawal rule will apply only to members who turned 55 from 2013 onwards, taking into account previous cohorts which were able to withdraw at least 20 per cent of their savings. The panel suggested that those who turned 55 in 2012 be allowed to take out 10 per cent, to top up the 10 per cent they can already withdraw under existing rules.

The 20 per cent cap will include $5,000 that can currently be withdrawn from age 55.

This means, for instance, that if a CPF member has $20,000 in his savings at age 55 and does not top up his Retirement Account (RA) after withdrawing $5,000, he will not have the option of making a further lump sum withdrawal at age 65 - as the $5,000 is more than 20 per cent of his RA savings at age 65.

Using those who turn 55 in 2016 as example:

  Sum required at 55 Monthly payouts at 65
Own property Basic Retirement Sum: $80,500 $650-$700
Own property but choose not to pledge Full Retirement Sum: $161,000 $1,200-$1,300
No property Full Retirement Sum: $161,000 $1,200-$1,300
Want higher monthly payouts Enhanced Retirement Sum: $241,500 $1,750-$1,900

Source: CPF Advisory Panel

“This will ensure that members with very low balances do not deplete their retirement savings further,” the panel noted in its report.

CPF members could also have an option of raising their CPF Life payouts, by starting them later.

They would still be eligible for payouts from what is currently known as the drawdown age - the age at which members can start drawing monthly payouts - but can defer them any number of years until age 70. For every year the payouts are deferred, they increase by 6 to 7 per cent for life.

“This will help more members with low CPF balances to receive the basic payout,” said the panel.

To make this choice clearer, the panel wants to rename the drawdown age the “payout eligibility age”, which would be 65 from the year 2018 onwards.

The payout start age will be flexible.

Some older workers may not need to begin drawing CPF payouts at their payout eligibility age, noted the panel - around four in 10 residents here between the ages of 65 and 70 still earn income from work.

The panel's recommendations were accepted by the Government on Wednesday.

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