CPF Retirement Account

Your Central Provident Fund (CPF) savings up to the age of 55 are divided into 3 accounts: Ordinary Account (OA), Special Account (SA) and Medisave Account (MA). A fourth account, the Retirement Account (RA), is created on your 55th birthday. The longer we live, the more money we would need to support us in our old and unemployed years. The goal of retirement account is to set aside savings specifically for retirement income.

Why Is Retirement Account Significant?

Retirement Account is created on your 55th birthday by taking a portion of your savings from Special and Ordinary Accounts. If there excess money in the Medisave Account after the Basic Healthcare Sum is met, you can choose to move the remaining amount to the RA and boost your retirement savings.

The amount that will be transferred to the RA depends on your Enhanced Retirement Sum (ERS), Full Retirement Sum (FRS), or Basic Retirement Sum (BRS). While BRS is the minimum amount that needs to be in your RA in case you have housing loans to pay off from the Ordinary Account, FRS and ERS are the amounts to be transferred to the RA if you do not have any loans to pay off. ERS was introduced from January 2016 for those who wish to set aside a higher amount in the Retirement Account. The amount is specified by the CPF Board and differs from year to year.

Depending on the amount you set aside in your retirement account – BRS or FRS – you will receive monthly payouts under different schemes you enlist in through the RA. The higher the savings kept aside, the more monthly income you will receive after retirement, i.e. currently 65 years if you were born in 1954 or later. Let us understand this with 2 examples.

  1. Ling, who turn 55 in 2017, has taken a housing finance from an HDB and has reserved OA savings for paying off the home loan. So when the retirement account is created for her, the amount transferred will depend on her total balance in OA and SA. The Basic Retirement Sum applicable for Ling is S$80,500, and the Full Retirement Sum for her is S$161,000. If the amount remaining in her SA and OA after reserving money for home loan is S$105,000, then her RA will be created with the minimum BRS amount of S$80,500. Her Retirement Sum Scheme will be opened with this amount, and her monthly income from the retirement age of 65 years could be as low as S$336 per month {S$80,500 ÷ (20 years × 12 months)}, assuming that no top-up is made to the account. Usually, though with accumulated interest and further monetary additions to the account, with a simple CPF Life plan, Ling will earn between S$660 and S$720 every month in her golden years.
  2. Steven turned 55 in 2014 and had no pending housing loans or other commitments on the ordinary or special accounts. His cumulative balance in SA and OA at the time of RA creation was S$200,000. The FRS applicable to him was S$155,000, and since his accounts had the requisite balance, the RA was created the Full Retirement Sum instead of the Basic Retirement Sum. The minimum monthly payout Steven can get after retirement would be S$646 {S$155,000 ÷ (20 years × 12 months)}, assuming that no top-up is made to the account. With collected interest and other additions to the account, he can get between S$1,220 and S$1,320 per month.

Of course, if you choose to make a withdrawal from your account at the age of 55, the money available for RA will go down further.

CPF Retirement Account Interest Rate:

The current interest rate for the RA is 4%. In addition to this, there is 1% extra interest for the first S$60,000 in the total CPF balance, and another 1% interest for the first $30,000 of the combined account balances for those aged 55 and above. This means that the interest collected for the first S$30,000 for members aged 55 or more is 6%, while the next S$30,000 earns a 5% interest and the remaining balance will accumulate a 4% interest.

The interest rate on RA is reviewed by the government every year. You need not fear for the safety of the money as the savings are used to invest in government bonds and securities, and is not subject to violent fluctuations or the stock market.

CPF Retirement Account Schemes:

There are 3 retirement schemes that fall under your retirement account plans:

  1. CPF LIFE: CPF Lifelong Income for the Elderly (LIFE) scheme is compulsory for a Singaporean or Singapore Permanent Resident born in or after 1958, and if their RA balance at the time of retirement is over S$60,000. This scheme allows to you get higher monthly payouts for as long as you are alive. You can join the CPF LIFE scheme voluntarily too. You can also top-up the RA with more money than is transferred from OA/SA, thereby increasing your monthly post-retirement income. You can also buy life Annuity plans with the CPF LIFE amount in order to get more money every month.
  2. Retirement Sum Scheme: This scheme guarantees you monthly payouts for around 20 years from the month of retirement, or until your RA balance is reduced to nought. The income will depend on whether you have chosen the Basic Retirement Sum, Full Retirement Sum, or Enhanced Retirement Sum, and on the actual balance in the RA before you start receiving monthly payments. You can add savings to the retirement account through the Retirement Sum or Minimum Sum Topping-Up Scheme.
  3. CPF Withdrawals At 55 Years: At the age of 55, you have an option to withdraw a part of the CPF savings, after setting aside the BRS or FRS required in the RA.

Difference Between RA And Other CPF Accounts:

The key differences between RA and other accounts are:

  • Retirement Account is created at your 55th birthday, while the other 3 accounts are created from the moment your CPF membership is activated.
  • This account is primarily meant for ensuring a fixed income every month after you stop working. Ordinary Account is used mainly for housing, education, insurance and investment; Special Account for investment in financial products through CPF Investment Schemes; and Medisave account for hospital expenses and health insurance premium payments.
  • RA draws an interest of up to 6% – 4% regular interest + 1% extra interest for the first S$60,000 in the total CPF balance + 1% additional interest for the first $30,000 of the combined account balances once you turn 55.

Between January and June 2016, the total balance of CPF members in their RA accounts stood at S$40,307.6 million. Withdrawals under Retirement Sum Scheme stood at S$269.1 million during the same period, while withdrawals under CPF LIFE scheme was S$244.5 million.

Central Provident Fund
CPF Accounts
CPF Schemes
CPF Withdrawals
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