SINGAPORE: After the Singapore Budget 2024 announcement that there will be no more Special Account for CPF members 55 and above in 2025, a Singaporean took to social media and asked, “Should we plan to retire by 55yo?” and said:
“In the latest round of budget, SA is announced to be closed for those aged 55 and above. In my opinion, the biggest implication is not in removing shielding itself but that we no longer have liquidity to maintain our retirement funds with 4% interest that beats inflation.
Now, if we are past 55 with FRS achieved, one needs to decide what to do with their original “SA” funds, and with the ERS being increased, it seems convenient to let this amount go to RA instead. EXCEPT that the interest earns in RA will go to the common pool instead of your own account.”
Other Singaporeans responded with their own advice
One Singaporean suggested, “If you not happy that interests on your own money goes to the common pool, choose basic plan for CPF Life scheme. the least amount of money goes to pay cpf life annuity.”
Another shared, “Perhaps do one thing: Calc the monetary difference of that 1.5% compounded 10 years. Could be ard 41K. Divide that over 10 yrs, that the amount a 55yr retiree will need to make up with other income streams. i.e. keep working albeit part time?
Personally, I know CPF rules can and do change, Im so paranoia, I actually plan for it to change until RA 2.5%, drawdown goalpost shift to 70 yrs old. It’s call policy-risk (pardon me if im using wrong term). Then better have a backup for tt policy-risk scenario in case it happens.”
Another shared that one can plan to retire at any age, sharing, “Cpf life is to be a baseline income for you at age 65, you can always prepare funds to provide you an retirement income at 50 or 55.”
One Singaporean shared his own understanding of how the new CPF changes work. He shared, “I thought from 55 to 65 (or whenever you choose to start CPF Life), the interest goes towards increasing your monthly payout.
You’re still getting that money back. It’s only if you die after the principal is depleted, then your beneficiaries don’t get to inherit the remaining interest (which I really don’t care about).
But on the plus side, if you live past life expectancy, you are “profiting” from the common pool. I am much more worried about outliving my retirement planning so CPF Life is great for allaying that worry.”
How do the CPF changes work?
The CPF board explains on YouTube that before 55, there were three accounts—Ordinary Account, MediSave Account, and Special Account. At 55, a Retirement Account is created.
“Savings in your Special Account and Ordinary Account were transferred to your Retirement Account up to your full retirement sum to provide you with monthly payouts in retirement.
Retirement Account is now the main CPF account for your retirement after age 55. If you worked after age 55, you would have received CPF contributions in your Special Account.
Special Account savings are intended to help you meet your full retirement sum. Part of these savings will also be withdrawable,” the CPF board explained.
According to the CPF Board, starting in 2025, some Special Account savings will move to the Ordinary Account, while the remainder will go to the Retirement Account.
“Your Special Account will then be closed, and you will only have three accounts—Ordinary Account, Retirement Account, and Medisave Account. This ensures that CPF savings earn interest rates that are aligned to the nature of the savings.”
“What if I’m still working?”
The CPF board says, “If you are still working, your CPF contributions will go into your Retirement Account instead of your Special Account so that you can set aside your full retirement sum.
Once you have met your full retirement sum, these CPF contributions will go into your Ordinary Account and can be withdrawn.”
If you want to earn more interest and get higher payouts, the CPF board advises you to “transfer savings in your Ordinary Account to your Retirement Account, up to the Enhanced Retirement Sum (raised from 3 times to 4 times of the current basic retirement sum from Jan 2025).”
For more information, visit cpf.gov.sg/CSAFAQs. /TISG