S’poreans above 55 took out $2.5b from CPF savings in Q1; OA balances fall

SINGAPORE – Central Provident Fund (CPF) members withdrew $3.3 billion in retirement funds from their accounts in the first quarter of 2023, with the majority attributable to withdrawals made by those over the age of 55.

The remainder comprised monthly payments under retirement schemes such as CPF Life, the annuity scheme that gives payouts for life.

CPF members over 55 made 217,277 withdrawals amounting to $2.5 billion in the three months to March 31, working out to around $11,500 for each transaction.

That was a jump of more than $2,000 from 2022, when the average withdrawal was around $9,250.

Updated data from the CPF Board also showed that balances in Ordinary Accounts (OA) dropped 1.8 per cent from 2022 to around $180 billion in the first quarter of 2023.

There could be many reasons for the decline: There were more CPF members over 55 who took out their excess savings, some were using their funds to buy Treasury bills (T-bills), and others were drawing down for home loans.

CPF members over 55 can take out excess CPF savings if they have set aside their cohort’s Full Retirement Sum (FRS) in their Retirement Account.

They can fulfil their FRS requirement with cash from their Special Account (SA) and their Ordinary Account (OA).

Members who do not meet the FRS requirement can still withdraw excess CPF savings if they set aside the Basic Retirement Sum (BRS) and have a property in Singapore with a remaining lease that will last them until they are at least 95 years old. 

The FRS for those turning 55 in 2023 is $198,800 and the BRS is $99,400.

Mr Alfred Chia, chief executive of financial services provider SingCapital, is concerned that CPF members will not have enough money for their retirement if they set aside only the BRS and own a property.

“Many of us would rely on CPF Life as a foundation of our retirement income. If you cannot fulfil FRS, you cannot even have the minimum retirement living standards when you turn 65,” he added.

The Straits Times asked the CPF Board for a breakdown of the number of members who fulfilled their FRS with cash and those who met the requirement with their BRS and a property.

In reply, it pointed to the latest CPF data, which does not provide a breakdown of how many CPF members set aside their FRS in cash and how many set aside only their BRS and owned a property. The data dated back to 2021.

In 2021, 65 per cent of active members set aside the FRS in cash or used their BRS and a property they owned.

A written reply to a parliamentary question in February gave a figure for 2022: 67 per cent of active CPF members set aside their FRS in cash, or in cash and property. 

That proportion is expected to jump to 76 per cent over the next five years, noted the parliamentary reply.

The CPF Board told ST that members can withdraw their CPF savings down to their BRS if they own a property because “property owners do not need to worry about rent during their retirement”.

But it added that “withdrawing now will affect a member’s future monthly payouts”, so members should “weigh their short- and long-term needs carefully”.

“CPF members do not have to withdraw the full sum in one go, and can make as many withdrawals as they like from their withdrawable savings,” it added.

Mr Chia said CPF members should set aside their FRS and even their Enhanced Retirement Sum, which is the maximum amount to which a member can top up his Retirement Account.

“This is the only retirement account that can pay you 4 per cent interest risk-free,” he added.

“When you turn 65, you are on the CPF Life scheme. There are three plans for you to choose – basic, standard and escalating. You will draw a monthly income for as long as you live.”

Mr Chia also noted that his clients have asked him whether they should use their OA savings to buy T-bills.

“For this period of time, it makes sense because T-bills give you 3.8, 3.9 per cent, compared with 2.5 per cent from your OA.” 

Mr Chia added that some CPF members also used their OA to pay down their housing loan because mortgage rates are higher than the CPF OA rate of 2.5 per cent.

CPF Board data showed that around $25 billion from Ordinary Accounts was invested into CPF Investment Scheme (CPFIS) approved investments.

T-bills, fixed deposits, and other investment products like unit trusts, insurance products, bonds and shares are approved investments under CPFIS.

The data also showed that the net amount taken out in the first quarter for housing was around $3.9 billion – $2.3 billion for public housing, and $1.6 billion for private properties.