A couple of weeks ago, I made an appointment to visit the CPF office at Maxwell to ask some questions about the sorry state of my retirement funds sitting with the institution. It doesn’t help my CPF balance that I have not been working for a year now and also have a mortgage to pay. I’m not in dire straits yet and there’s always Johor Bahru.
I armed myself with questions and also asked around if anyone had questions. The CPF people have been on a mission to educate Singapore about how they can fund their housing, retirement and education needs via the 20% + 17% of their salary that goes into the immense pot of cash the government invests to eventually pay out when we’re 65 and older.
1. Minimum sum - I’m 50 this year and the CPF minimum in 2025 is $213k. What’s the minimum sum going to be in 5 years?
Context - There is a set minimum sum the CPF board requires individuals to meet so that they qualify for the Full Retirement Scheme (FRS).
Response - There’s no fixed number the FRS minimum sum goes up by. It seems to be about $8k a year. So by the time I’m 55, the minimum sum will be about $213k + $32k = $245k.
Will I hit this number? It seems with the 4% annual interest rate on my SA balance, I think I might!
2. Turning 55 - what happens I turn 55?
Context - Fear of the unknown
Response - One needs to meet the FRS minimum sum at age 55 with funds from one’s Ordinary Account (OA) and Special Account (SA) which are combined to form the Retirement Account (RA) on that special birthday.
In all likelihood, most of the money I will have in my CPF when I turn 55 will go into the RA. I will be able to withdraw $5k as a “you’ve come over the hill” gift.
If there is more than enough money to meet the FRS minimum sum, the extra goes back into the OA and can be withdrawn. The CPF allows for a minimum of $5k to be withdrawn as a 55 year old birthday present. If there isn’t enough money to meet the FRS minimum sum, you’ll still be able to take out $5k.
3. Retirement schemes - can I 'downgrade' to the BRS instead sticking to the FRS?
Context - In addition to the FRS, there’s also the Basic Retirement Scheme (BRS) and the Enhanced Retirement Scheme (ERS).
The minimum sums for each are also different. The amount required for the BRS is half that of the FRS, so $106k in 2025. The amount for the ERS is twice that of the FRS, so $426k in 2025.
The impact of these schemes is two-fold. One, the amount of cash the government will send into your bank account when you turns 65 is tied to each scheme. Quite simply, the more you have in your retirement account at 55, the more money you'll receive, capped at the ERS maximum.
The estimated monthly payouts under each scheme in today's dollars are:
BRS - $900
FRS - $1600
ERS - $3200
Two, the BRS minimum sum is half that of the FRS, so instead having $213k required this year, one needs $106k. Once this is met, the remaining balance can go into the OA for withdrawal to a maximum of $120k.
So if you have $200k when the RA is set up, you can opt to join the BRS and have a (200-106) 94k sum to do as you see fit when turning 55. A friend commented that if one is able to make more money vis-a-vis $900 a month from investing on one's own, it's not a bad idea.
Response - One can choose to go on the BRS scheme. Two qualifiers:
- The request must be done in person at a CPF office.
- One must pledge one's property. This means validating that you have a home to stay in till you're 95 years old (check that HDB lease!) and that all owners of the property agree to this pledge.
4. CPF for property - Do my CPF funds used for property purchases go to any minimum sum calculation?
Context - Most adults use a good part of their CPF for housing.
Response - No, sorry not sorry. But one can do a Voluntary Housing Refund.
5. CPF for property - what's a Voluntary Housing Refund?
Context - All the money you used for buying a home is actually owed back to the CPF. Ironic but let's not get into that discussion. There's a section in the CPF website where you can check how much of your CPF you've used for housing and how much interest you owe yourself on this amount. Double irony I know.
Response - You can do a Voluntary Housing Refund (VHR) to return money into the OA. It can be partial. What's good about this is that
- all the money goes into the OA unlike voluntary CPF top-ups which are split into OA, SA and Medisave.
- the top-up can be used to qualify oneself for FRS or even ERS.
Fact is, most of us would easily qualify for ERS if the funds for property were used for minimum sum calculation.
6. CPF payouts - Can monthly payouts start before 65?
Context - Money get sooner better right?
Response - No. Also, you need to tell the CPF to start your payouts at 65! They don't happen automatically. Mandatory distribution starts only when you're 70 years of age.
7. CPF topups - Can I top up my CPF to meet the minimum sum?
Context - You're allowed to top up your own CPF on your own.
Response - Yes. There are two kinds of top-ups:
A. Into all OA, SA and MA accounts - there's a maximum of $37,740 I can top up and this is distributed as 40%, 31% and 29% into each account respectively. Note that if the SA already meets the FRS minimum sum, any top-up will be distributed to meet the MA minimum first then the balance will go into the OA.
B. Into SA only - you can only make a top-up if your SA account if it has not yet met the prevalent minimum sum. For example, with the current minimum sum of $213k, and if you have $200k in your SA, you can top up a maximum of $13k. As the minimum sum goes up annually, a top-up can be made in the next year.
If you're working at age 55 when the RA is set up, you will continue to make contributions into your OA and MA. (SA closed to set up the RA.) You can move your OA funds into your RA as a top-up.
Remember also that you can also make a Voluntary Housing Refund anytime to return funds into your OA then transfer into our RA to meet ERS requirements.
8. SRS - Can the money I put into the SRS be counted as part of the minimum sum?
Context - You can put a maximum of $15,300 a year into the Supplementary Retirement Scheme, and also claim a tax relief for the same amount in that tax year of assessment. See this IRAS webpage.
Response - No. As long as the money isn't the SA it doesn't count towards the minimum sum.
9. Turning 55 - When can I withdraw my CPF, birthday or birth year?
Context - Money get sooner better right?
Response - Birthday. No sooner.
10. CPF topups - After I turn 55, is the top-up to the ERS minimum sum based on the year I turned 55 or the current year?
Context - Since payouts are based on what's in the RA, the more money in your RA means you get higher payouts. You can top-up your RA whenever you like after 55 and to whatever amount you can spare.
Response - Based on current year of top-up, not when you turned 55. Also, you can only top up your RA to meet the ERS minimum sum after you turn 55.
11. Buying a HDB flat - Can I use my CPF to buy a HDB flat after the RA has been set up?
Context - Some people might want to downgrade to a smaller flat when older.
Response - Only allowed to buy 3-room flat or smaller direct from HDB. Check the Home Ownership Dashboard to figure out how much is available.
12. Other nuggets of information
- You can't reverse out a top-up into the RA.
- If at 55 years of age, you took out the balance in your OA and later sold your home which you used your CPF to pay for, you'll need to pay back whatever you took out at age 55.
- Once you meet FRS minimum sum requirements, any additional funds added to the RA will enrol you to the ERS. ERS total allowed maximum is 2 times that of FRS minimum sum.
- Daily withdrawal limit from your OA is $50k but you can go have a chat with a CPF person to explain your needs.
- You can only top up your RA to meet the ERS minimum sum after you turn 55.
- You don't get the $8k tax relief if your RA balance exceeds the FRS minimum sum.
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I do hope I am accurate about the information presented here. I am happy to entertain comments and questions.
