askST: CPF base pension amount to increase – how does this affect me?
SINGAPORE – The CPF’s Basic Retirement Sum (BRS) will be increased by 3.5% per year for the next five cohorts turning 55 from 2023 to 2027.
Finance Minister Lawrence Wong said in the budget speech last Friday (February 18) that it was to provide members of the Central Provident Fund (CPF) with higher monthly payments during their retirement years .
Here are the answers to some questions you might have about the BRS.
1. What is the Basic Retirement Sum?
This is the amount you need to set aside in your retirement account when you reach age 55 so that you can receive a monthly sum that the government says will cover your basic living expenses in retirement, assuming you don’t have to pay rent.
CPF members receive monthly payments for life through the CPF Life program after reaching the eligible age – currently 65 for those born from 1954.
Under this program, a member’s payouts depend on the amount saved in their retirement account when they join CPF Life anytime between age 65 and 70. The savings are used as a premium to purchase an annuity, which is a financial product that grows one’s savings to ensure regular payments.
The BRS for members turning 55 this year is $96,000. This translates to monthly payouts of approximately $790 to $850 at retirement, if payouts start at age 65, under the Standard CPF Life plan.
There are three types of CPF Life plans – Escalating, Standard and Basic – with different payout structures.
2. What is the full retirement capital and the enhanced retirement capital?
The full pension sum is twice the BRS, while the enhanced pension sum is three times the BRS.
When a member reaches the age of 55, the savings in his special and ordinary accounts up to the total pension amount will be transferred to his newly created retirement account.
For CPF members turning 55 this year, setting aside the full retirement sum of $192,000 will result in lifetime payouts of approximately $1,470 to $1,570 each month if payouts begin at age 65. , as part of the CPF’s standard life plan.
This level of payment is for people who do not own property and therefore may need to pay rent in retirement.
The maximum amount of savings a CPF member can use for the CPF Life plan is the Enhanced Retirement Amount, plus any accrued interest in their retirement account.
For CPF members turning 55 this year, setting aside the enhanced retirement sum of $288,000 will result in lifetime payouts of approximately $2,140 to $2,300 each month, if payouts begin at age 65. years, as part of the standard life plan of the CPF.