As Singapore progresses economically, so does the aspirations of its people. Today, Singaporeans are enjoying higher living standards, living longer and are also more likely to stay in their own homes. In tandem with this, there is a need for the Central Provident Fund (‘CPF’) to evolve and keep up with the changing times. That is especially important as CPF plays a significant role in major aspects of our lives – whether in retirement, home ownership or healthcare protection.
1. CPF LIFE Provides Income for Retirement Needs
As we enjoy higher living standards, the often-asked question is how much do we really need for retirement? In a recent study done, the number came up to be $1,379 a month, for a senior citizen aged 65 and above. For couples aged 65 and older, the study states that they need $2,351 a month since there are some savings derived from economies of scale. With this in mind, let us study how CPF helps meet the retirement income that Singaporeans and Singapore Permanent Residents (‘SPR’) need for their living expenses in old age.
CPF introduced the CPF Lifelong Income For the Elderly (LIFE) scheme in 2009 to ensure monthly retirement payouts from CPF for life. As Singaporeans are living longer, this ensures that Singaporeans will not run out of savings during their retirement years. If a person sets aside the Full Retirement Sum* in his or her Retirement Account (‘RA’) when he or she turns 55 years old, the monthly payout that he or she can get from age 65 under the CPF LIFE Standard Plan would be between $1,350 to $1,450*. Therefore, it is reassuring to know that a retiree can at least depend on CPF LIFE for as long as he or she lives.
*Note that the Full Retirement Sum is $176,000 for members who turn age 55 in Year 2019. The amount is fixed when members turn age 55 and will not change thereafter. Payouts are estimates under the CPF LIFE Standard Plan and computed as of 2019. Payouts may be adjusted to account for long-term changes in interest rates or life expectancy. Such adjustments (if any) are expected to be small and gradual.
2. Updating Use of CPF Funds for Housing
In 2018, nearly 1 million Singaporeans used CPF to pay for their housing needs (Source: CPF Annual Report 2018). Indeed, the ability to afford and own homes has been made easier with the use of funds set aside in our CPF Ordinary Accounts. While CPF has greatly supported access to home ownership, it is important to safeguard the housing needs of Singaporeans and SPRs in old age.
In a pre-emptive measure, there are now new rulings on the amount of CPF savings that can be used for a house with remaining lease that cannot cover the youngest buyer until at least the age of 95. Here is a summary of the key changes that became effective after 10 May 2019.
Diagram 1: Use of CPF Funds For Property- Before And After 10 May 2019
In benchmarking the leasehold coverage to age 95 of the youngest buyer, the government is guarding against the risk of home-owners outliving the leases of their properties. Statistically, since Singaporeans are now living longer than before, this measure of prudence will be appreciated in the long run. For those without a lease that will cover them until age 95, this would help ensure that they set aside some CPF savings for their housing needs in old age. Overall, the improvement in this policy will also benefit older home-owners who wish to purchase properties with shorter remaining leases.
3. MediSave Expands to Provide More Coverage for our Healthcare needs
As revealed by Prime Minister Lee Hsien Loong during the 2017 National Day Rally, Singaporeans spend an average of 8 years in ill health. This has far-ranging effects beyond the affected individuals. For instance, caregivers and family members would be emotionally burdened. Most importantly, patients will incur more medical expenses and MediSave will be critical in defraying some of these medical expenses.
MediSave helps Singaporeans set aside part of their working income to pay for their healthcare insurance premiums and medical expenses. The Ministry of Health has constantly tweaked the uses of MediSave to expand on its coverage, such as the following:
- Since June 2018, the MediSave withdrawal limit for chronic diseases increased from $400 to $500. It now covers more chronic conditions such as ischaemic heart disease and diabetes-related consumables under the Chronic Disease Management Programme
- The minimum age to use Flexi-MediSave was lowered from 65 to 60 in 2018. This means more people can now use their MediSave for outpatient medical treatments at Specialist Outpatient clinics and polyclinics in the public sector and general practitioner clinics under the Community Health Assist Scheme
- Additional support for long-term care needs – cash withdrawal of up to $200 per month for those with severe disability, in addition to approved uses at community hospitals, day rehab centres, day hospices and home palliative care
In keeping up with changing needs, CPF members can have more confidence in meeting their healthcare needs even as they live longer.
Conclusion
Times have indeed changed, and so will our retirement needs. To ensure that we do not run out of savings during our retirement, it is important to start planning and saving today. To find out if you are making the most of your CPF savings, take this short, interactive quiz and find out how to be better prepared for your future.
Disclaimer: This article is written in collaboration with CPF but the views expressed here are entirely from Heartland Boy.
Wake wake up heartlander!
1) retirement fund? Think they the government had their field day investing and returning quality for themselves with the peanuts they are sharing with Singaporeans after using CPF and tax payers monies on investment.
2 What medishield /eldershield or care shield.
Mind you.. The total collections of 3 over billions from eldershield with payout on totally disabled. Come on is a peanuts of 13 3millions or so . Not even 5% of what was collected.
Any ideas what’s gonna happen to the surplus?
Heartlander, are you a Pro-PAP or you are salaried paid working for in the PAP Team or you are on a Long Term Pension Payout or Lump-Sum Pension Payout from the PAP Civil Service whom entirely don’t mind even there is Totally No CPF Payout for you ?
Do you know how many hundreds of thousands Native Born Singaporeans out here who are in the Elderly Group above the age of 55 or 60s are lowly educated or are illiterate ? And how much income they are receiving each month ? So what CPF Money are you talking about for them when comes to retirement ?
So is this PAP Government going to give each one of them S$1,350 each month to survive ? Can you answer my this question ?
Hi Weng Key,
I belong to neither of the groups that you have described. It is true that a significant portion of elderly do not have enough CPF funds to meet the FRS. I have a relative of mine who has done very well with his CPF sums and I am just inspired to be like him.
Hi Heartlander/Alison_Liew,
Apart from what Roth Pay had mentioned, I am in the opinion and in fact all of us are in the opinion that this PAP Government is OBLIGED TO and really Owes all these Elderly Native Born Singaporeans a Living..!!
As that I’ve mentioned earlier and you agreed to that Majority which you choose using this a weaker word as “significant” portion of the elderly do not have enough of CPF Funds to meet the FRS in view of the Fact that this pool of Elderly Native Born Singaporeans are either Lowly Educated or Illiterate that disqualifies from entitling to high profiles jobs with higher wages which in return allows them to have a larger sum for savings in their CPF for Retirement account.
In this instance for you quoting : ” a relative of mine who has done very well with his CPF sums and I am just inspired to be like him”, I’m with the assumption that you are taking reference your relative may have utilized his/her to Invest which can be Bonds, shares or whichever and were fortunate enough to obtain or received their gains (a scenario contrary to that we can see in the case of Hyflux and many others).
However, however you need to appreciate that (1) Being Lowly Educated or Illiterate for these Elderly, are they well verse to know which product worth them taking this risk to invest..? Neither do they or can they understand what is called “investment”.. To rely on these Con Man Brokers in the street throwing all their hard earned blood sweat savings to invest in Hyflux..? Lol.., Lol.., Lol…
(2) The investment capital in building up Singapore as of today since the day if Independence did not come from LKY or the PAP or even from Lim Yew Hock who was the first Prime Minister..!! All the Money came from the Tax Payers regardless they are from the Taxable income group or from the Non-Taxable Low Income group WHICH actually for the aforesaid group, they are also paying High Taxes in view of all these daily consumables that they need to pay for.
Even for this Team of Millions Dollars Ministers, their wages and remuneration packages came from the Tax Payers Money. Therefore it doesn’t make sense that only those in the Current Cabinet Team are entitled to enjoying the luxurious privileges BUT Native Born Elderly Singaporeans are deprived from it..!! Surely the latter group cannot be the ones to crack their brain on how to let ends meet after they have retired in view of their age, physically unfit, sickness and etc etc.
It has to be the duty (compulsory duty) of a Responsible Government to take good care of these Elderly in a timely manner in term of livelihood, healthcare, medical and so forth. And for this Government to kick of with giving out a S$1,350 each month to every each one of these aged elderly, subject to an increase to a higher amount will depend on the outcome of the costs of living should be the Right Approach.
It is Really Absurd each time when some negligible benefits are announced and given out to these Elderly, Ministers in this PAP Team always quote : “So that this System/Policy is Not Abused”..!! And these PAP Ministers never were they aware of that these Elderly Singaporeans are living in Dignity and most of them kept Silent even they don’t have enough food to eat or doesn’t have the money to pay their medical bills or collect their long term medication and etc etc. Thank you.