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Make Savings Last for Life Expectancy
 

More FAQs: Overview of CPF Reforms and Other Measures | Help Singaporeans Work Longer | Improve the Returns on CPF Savings | Implementation and Public Communication
 
 
1. How is the Government helping to make savings last for a members’ lifetime?
2. Why must CPF members provide for CPF LIFE?
3. Why not fund a national pension scheme from our Government reserves?
 
Drawdown Age and Deferment Bonuses
4. Who will be affected by the rise in draw-down age?
5. When will the draw-down age be increased to 67?
6. How is the Government helping affected members currently aged 50 to 57 cope with the rise in draw-down age?
7. Can members choose to forego the one-off bonus and instead draw down their CPF at age 62?
8. When will the D-Bonus be paid?
9. How was the cap at $30,000 for the D-Bonus for the various age groups determined?
10. How is the Government encouraging members to voluntarily defer the draw down of their CPF savings?
11. When will the V-Bonus be paid?
12. Can a member who voluntarily defers the draw down of part of his RA receive a pro-rated amount of V-Bonus?
13. Do members have to take any action to defer their draw-down age?
14. Will members who had previously deferred their payouts be eligible for V-Bonus?
15. How much D-Bonus will be given to those who have bought or are going to buy an annuity on their own?
16. Will Permanent Residents with CPF accounts qualify for the V-Bonus?
17. Why is the bonus credited into members’ RA?
18. Can a member make early withdrawals?
19. Will those who bought or are going to buy annuities receive the D- and V- Bonuses?
20. Can non-CPF members open CPF accounts to benefit from the deferment bonuses?
21. How much will the D- and V- Bonuses cost the Government?
22. Will the government consider allowing those who are unable to find jobs or be re-employed to start drawing down earlier than their official DDA?
23. Why must the DDA be linked to the re-employment age?
 
 
 
1. How is the Government helping to make savings last for a members’ lifetime?
   
  With rising life expectancy, many members will outlive their CPF monthly payouts. There is a need to raise the draw-down age (DDA), currently 62, so that the savings can last longer. Deferring draw down by 1 year will allow more interest to be earned and extend the draw down period by two more years.

With the introduction of the re-employment legislation the CPF draw-down age will also be progressively raised starting from 2012, to reach 65 in 2018, and eventually to 67. Re-employment legislation will kick by 1 Jan 2012 but the DDA at 65 will be in effect, six years later, in 2018. The DDA will be pushed up to 63 years in 2012, then 64 years in 2015 to reach 65 years in 2018. This will provide enough time for everyone to adjust to the changes.

Those aged 57 or younger today will be affected by the later DDA. To help the group 50 – 57 cope with the increase in DDA, a one-off deferment bonus (D-Bonus) will be given to them into their Retirement Account. Older members will receive larger D-Bonuses. Those aged 54 to 57 will receive 5% on their balances up to $30,000 in their RA, i.e. up to a maximum of $1,500. Those aged 52 and 53 will receive 4% on RA balances, up to $1,200, while those aged 50 and 51 will receive 3% on RA balances, up to $900.

The Government is also encouraging members to voluntarily defer their DDA to 65 by giving a voluntary deferment bonus (V-Bonus) for each year of deferment up to age 65. Members aged 54 to 63 this year who have not started draw-down are eligible. The V-Bonus is set at 2% interest on RA balances capped at $30,000, i.e. up to a maximum of $600 for each year deferred.

   
 
Age at 31 Dec 07 DDA D-Bonus V-Bonus Maximum Total Bonus
63 62 - 2%,
up to $600 x 1 year
$600
62 62 - 2%,
up to $600 x 2 years
$1,200
58 to 61 62 - 2%,
up to $600 x 3 years
$1,800
56 to 57 63 5%,
up to $1,500
2%,
up to $600 x 2 years
$2,700
54 to 55 64 5%,
up to $1,500
2%,
up to $600 x 1 year
$2,100
52 to 53 65 4%,
up to $1,200
- $1,200
50 to 51 65 3%,
up to $900
- $900
   
  In addition, the government is introducing CPF LIFE to help CPF members put aside enough in case they live longer than expected.

More information on CPF LIFE.
 
2. Why must CPF members provide for CPF LIFE?
   
  This is in line with the principle that CPF members should make provisions to ensure that they have an income for life. Few people can predict for sure how long they will live. Among Singapore residents aged 65 in 2006, 67% can expect to be alive at age 80 and 47% at age 85. This rising life expectancy means that about one in two CPF members would outlive their CPF savings in the old system, where payouts are given over 20 years.

With the launch of CPF LIFE in 2013, members will receive a monthly income from age 65 for as long as they live. CPF LIFE is fair, affordable and provides flexible options so that members can choose the option that best suits their needs.

More information on CPF LIFE.
 
3. Why not fund a national pension scheme from our Government reserves?
   
  Such a system would become unsustainable as Singapore is among the fastest ageing societies. It would also encourage younger people to save less if the state were to guarantee a pension when they are old.

We should not repeat the mistakes of other countries who are now trying to move away from such schemes. For example, Italy spends 14% of its GDP on state pension alone, which is equivalent to our Government’s total budget share of GDP. The more sustainable solution is for CPF members to make provision to be self-reliant in their old age.

   
Drawdown Age and Deferment Bonuses
 
4. Who will be affected by the rise in draw-down age?
   
  Members who are currently aged 57 and below will be affected.
   
 
Age as at 31 Dec 2007 New draw-down age
56 to 57 63
54 to 55 64
53 and below 65
 
5. When will the draw-down age be increased to 67?
   
  We will first take steps to raise the draw-down age up to 65 as announced, and decide on the next steps in the next review.
 
6. How is the Government helping affected members currently aged 50 to 57 cope with the rise in draw-down age?
   
  To help affected members currently aged 50 to 57 cope with the rise in draw-down age, bonus interest in the form of a one-off Deferment Bonus (D-Bonus), will be given to them into their Retirement Account (RA).

Older members aged 54 to 57 will receive larger bonuses, up to 5% on balances up to $30,000 in their RA, i.e. up to $1,500. Those aged 52 and 53 will receive 4% on RA balances, up to a maximum of $1,200, while those aged 50 and 51 will receive 3% on RA balances, up to a maximum of $900.

 
7. Can members choose to forego the one-off bonus and instead draw down their CPF at age 62?
   
  No, the rise in draw-down age will apply to all members who are currently aged 57 and below.
 
8. When will the D-Bonus be paid?
   
  Those above age 55 will receive their D-Bonus on 1 May 2008. The rest who qualify will receive the bonus when they turn 55.
 
9. How was the cap at $30,000 for the D-Bonus for the various age groups determined?
   
  $30,000 is the balance that covers the full RA balance for the large majority of members aged 55 and above.
 
10. How is the Government encouraging members to voluntarily defer the draw down of their CPF savings?
   
  To encourage CPF members to voluntarily defer the draw down of their CPF savings, the Government will give them a Voluntary Deferment Bonus (V-Bonus) for each year of deferment up to age 65.

Members aged 54-63 at 31 Dec 2007, who have not started draw down, are eligible. The V-bonus is set at 2% interest on members’ balances up to $30,000 in their RA. A member therefore can get up to $600 for each year deferred, which means he can get up to $1,800 if he defers draw down for 3 years.

 
11. When will the V-Bonus be paid?
   
  It will be paid on your birthday month from 2009.
   
  For example, if you turn 63 in April 2008 and defer drawing down your RA savings for 12 continuous months from your next birthday, you will receive a V-Bonus in April 2009. If you further defer drawing down your RA savings till April 2010, you will receive another V-Bonus.
 
12. Can a member who voluntarily defers the draw down of part of his RA receive a pro-rated amount of V-Bonus?
   
  No.
 
13. Do members have to take any action to defer their draw-down age?
   
  Members do not need to apply to defer the draw-down age. A member’s draw-down age will be deferred as long as the member does not apply to CPFB to commence the draw down of his RA savings.
 
14. Will members who had previously deferred their payouts be eligible for V-Bonus?
   
  No.
 
15. How much D-Bonus will be given to those who have bought or are going to buy an annuity on their own?
   
  The total balance eligible for D-Bonus would be the sum of the member’s money used to purchase annuities and the remaining balance in the RA up to $30,000.
 
16. Will Permanent Residents with CPF accounts qualify for the V-Bonus?
   
  Yes, the person will qualify as long as he is a CPF member.
 
17. Why is the bonus credited into members’ RA?
   
  Crediting the bonus into the RA will enhance members’ retirement adequacy.
 
18. Can a member make early withdrawals?
   
  Yes, current rules already allow members who are permanently capacitated from working, or who have severe medical conditions that reduce their life expectancy to withdraw their CPF savings early.
 
19. Will those who bought or are going to buy annuities receive the D- and V- Bonuses?
   
  Yes. By buying annuities, they would have provided for the risk of living beyond their life expectancy. Hence, they will receive the D- and V- Bonuses if they are in the qualifying cohorts.
 
20. Can non-CPF members open CPF accounts to benefit from the deferment bonuses?
   
  If their applications to be CPF members are accepted by CPF Board, they will be eligible for the deferment bonuses.
 
21. How much will the D- and V- Bonuses cost the Government?
   
  The D- and V- Bonuses will cost Government up to $650 million and $570 million respectively.
 
22. Will the government consider allowing those who are unable to find jobs or be re-employed to start drawing down earlier than their official DDA?
   
  With rapid economic restructuring, there will be episodes when CPF members may face periods of unemployment. If they were to depend on their CPF savings earlier rather than their personal savings, they might run out of their savings when they need it for retirement. Members would also not be able to benefit as much from the higher interest because of their lower balances.
 
23. Why must the DDA be linked to the re-employment age?
   
  With increasing longevity, the DDA has to be increased in order to help members’ CPF savings last longer. To help members better cope with the increased DDA, we need to help them work longer. Therefore raising the DDA is linked with the re-employment age.
   

 Last Updated on: Thursday, June 30, 2011 at 5:48 PM
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