We thank Mr Wayne Yeung for his letter and share his concerns about inflation. He suggested indexing CPF Life payouts (Index CPF Life payouts to combat inflation"; Nov 15).
In 2016, the CPF Advisory Panel had considered introducing a CPF Life plan with payouts fully indexed to inflation.
However, the panel concluded that this would offer less certainty to CPF members on their future payouts, as it would fluctuate yearly.
The panel also noted that not all members have expenditure patterns that fully track inflation.
The panel eventually recommended introducing the CPF Life Escalating Plan to address inflation risks over time.
This plan allows CPF members to start their CPF Life payouts with a lower initial payout, which then grows at 2 per cent a year.
This 2 per cent escalation rate takes into account historical long-term inflation rates, thus preserving long-term purchasing power.
The plan was introduced in January, in addition to the existing standard and basic plans which provide level payouts.
Members who have not selected their CPF Life plan may do so prior to the start of payouts.
Members who have chosen a CPF Life plan or started their CPF Life payouts and wish to switch to the Escalating Plan, have a one-year period until Dec 31 to do so.
Director (Retirement Systems)
Income Security Policy Division
Ministry of Manpower