The National LIFElong Income Scheme

CPF LIFE is a new scheme that will provide lifelong income for our elderly in their retirement. All CPF members are required to put aside the Minimum Sum (MS) at age 55 for their retirement needs. The MS can be made up all in cash, or part cash and part property, with the property forming up to 50% of MS. From the cash MS and the interest it earns, members receive a monthly income from the draw-down age, but only for up to 20 years, when the MS is exhausted.

As Singaporeans are living longer, this system is inadequate. Many members may run out of income support while still living.

The Government will therefore improve the CPF system. A new interest rate framework will pay higher interest on members' balances. The CPF Board will also set up the new LIFE Scheme. Through this scheme, the full MS, including the property pledge, will provide participants with an income from age 65 for as long as they live. They can look forward to a steady income, the amount of which depends on their CPF savings, up to the full MS.

How do I join the LIFE scheme?

The LIFE scheme will start in 2013 and will include CPF members, aged 50 or younger this year when they reach 55. CPF members with at least $40,000 in their MS will be automatically included¹ in the Standard Plan. Members who have less than $40,000 in their MS can opt-in, if they wish to do so.

How much will it cost me?

The scheme will be affordable with flexible options for you to choose the option that best suits your needs.

How much will I get and for how long?

The LIFE scheme is fair. You will receive a steady stream of income, the amount of which will depend on your CPF savings up to the full MS at age 55, for as long as you live. Those who have put more into their CPF to achieve a higher MS, will get higher payouts. The actual amount will also depend on the Special, Medisave and Retirement Accounts interest rate over your retirement period. Payouts will range from about $350 per month at the entry level to $1,100 per month for those with the full MS.

Check out the CPF LIFE Payout Estimator for an estimate of the lifelong income payouts.

How does this compare with what I would have received under the old system?

Remember that you will now be getting an extra one percent on the first $60,000 of your CPF money. Because of this extra interest, your monthly income from the Standard Plan will be about the same compared to the old system. But the most important advantage of the new scheme is that you will receive a steady monthly income from the LIFE scheme from age 65 for as long as you live, unlike the old system where your payments stop completely after 20 years.

Based on our projections, 60% of active members aged 50 today will have at least $67,000 (half MS) cash in their Minimum Sum at age 55, when they join the LIFE scheme. In the old system, $67,000 would have paid out about $600 each month, but only for 20 years.² Under the new Standard Plan, members will also receive about $600 each month,³ but the big difference is that this will now continue for as long as they live.

Property pledge will provide more income

In addition, about 85% of active members own HDB flats or private property, which they can pledge towards the MS.⁴ Their HDB flat will provide them with a roof over their heads, and a potential stream of rental income. If they sell their HDB flat later, the pledged money from the sale will be paid into their CPF, and also be used to provide an additional stream of income for life.

HDB Lease Buyback

If you are eligible for this scheme and shorten your HDB lease, the proceeds will be used to provide an income for life.

For more details, please click here.

Why does the LIFE scheme pay a same dollar amount for life?

Understandably, some CPF members may want the LIFE scheme to protect them fully against inflation during their retirement. This could be done but it would be expensive, and require higher premiums to fund the scheme. Your monthly payments would also have to be significantly smaller in the earlier years.

The LIFE scheme is designed to provide a basic, steady stream of income for life, so the monthly payments are not adjusted for inflation. However, the scheme will still offer some protection against inflation. This is because if we experience a period of higher inflation, nominal interest rates are likely to go up too. If the actual interest rates are higher than expected, you will get bonus payments on top of your income from LIFE.

Your property will also provide protection against inflation

The LIFE scheme is only one part of your provision for old age. Your property is another very important part of your retirement savings. With inflation, the value of your property is likely to go up, both in selling price and rental value.

Can I choose my plan? How do I decide?

Yes, you can choose. The CPF Board is providing choices because LIFE participants have different needs.

The Standard Plan provides a balance between what you will receive for life and how much would be left to your beneficiaries. Any unused Minimum Sum will be paid to your beneficiaries.

However, if you have specific needs, you may choose from other plans with these features:

Check out the CPF LIFE Payout Estimator an estimate of the lifelong income payouts.

Footnotes

1.	Exemptions under the LIFE scheme can be aligned with those under the current MS Scheme. The specific circumstances are as follows:
	a.	physically or mentally incapacitated -
		i.	from ever continuing in any employment; or
		ii.	in such other manner as the Minister may approve;
	b.	of unsound mind;
	c.	suffering from a medical condition leading to a severely impaired life expectancy;
	d.	suffering from a terminal illness or disease;
	e.	receiving a pension, annuity or other benefit as may be approved which will provide him with a monthly income of not less in value than his MS payout, which is either irrevocable or recoverable by CPF in the event of termination.
2.	Assuming an interest rate of 4%.
3.	Males are expected to receive about $610 per month, while females about $570 per month.
4.	An estimated 85% of active members who turned age 55 in 2006 owned HDB flats or private property. 70% of active members who turned aged 55 pledged their property towards MS in 2006.