Singapore's Minister for Manpower Josephine Teo laid to rest some misconceptions about CPF payouts in Parliament on Feb. 18.
Fielding a number of questions from MPs, she confirmed the following:
- The CPF Payout Eligibility Age (PEA) has not been raised from 65 to 70 years old, and
- There has been no change in the policy for CPF members to come forward in order to start their retirement payouts.
If a CPF member wants to start taking out their money from age 65, they must apply for them proactively — if no action is taken, despite reminders from CPF, he or she will automatically receive monthly payouts only from age 70.
Payout Eligibility Age was not raised
Teo said that the eligibility age had been set at 65 since Jan. 1, 2018.
"It is still 65 today. We have not shifted the PEA from 65 to 70, as was alleged by a spurious online post. Members can start their retirement payouts any time from 65."
She was perhaps referring to a Facebook post that circulated online on Jan. 15.
It alleged that the retirement payout aged had been "moved quietly" to 70 years, and that in order to receive payouts at age 65, members had to "opt out".
Teo said there was a "long-standing practice" that CPF members were allowed to inform the CPF Board to begin the payouts any time after they've reached the age of eligibility, i.e. 65.
She pointed out that in fact, there is no advantage to the CPF Board for members to defer receiving their payouts.
If a member did decide to defer his payout, he would simply receive higher interest on his CPF savings.
CPF members do not need to come forward to start payouts, unless they want them from 65
About six months before a CPF member reaches 65 years of age, he or she will receive a letter from the CPF Board informing them that they can start receiving monthly CPF payouts as part of the Retirement Sum Scheme (RSS) – for those born before 1958 who didn't opt into CPF LIFE — anytime from their 65th birthday.
He or she will have to fill up and mail a form attached to the letter to CPF to start the payouts. Alternatively, members can apply on the CPF website, or do so at the CPF service centre.
And if they still forget, members are additionally reminded through their annual Statements of Account.
Automatic payouts kick in at age 70 if no action is taken
Teo said the CPF Board will start payouts regardless of what happens when the member turns 70 years old, what they're calling the "latest payout start age".
She explained that the CPF Board had encountered a few cases where some RSS members had died without withdrawing the savings in their CPF account, which was "unsatisfactory".
"It is a way to ensure members get to enjoy the benefit of their CPF savings by 70 at the latest."
But she emphasised again that members do not need to wait until they turn 70 to begin the payouts.
Can automatic payouts start at 65?
Some MPs asked if the automatic payouts could begin at age 65 instead, including ex-PAP MP Inderjit Singh, who had earlier commented on this on Facebook.
But Teo said there were "tangible benefits" for CPF members to defer their payouts, as they could enjoy "risk-free" interest rates that were well above the rates they can otherwise get in the market.
With every year that their payouts are deferred, CPF savings will earn interest of up to 6 per cent a year, which includes the extra interest of 1 per cent for the first S$60,000 and additional extra interest of 1 per cent for the first S$30,000.
For members on CPF LIFE, for every year deferred, the payouts go up by up to 7 per cent. For five years of deferral until age 70, that is up to 35 per cent.
Teo acknowledged there could be several reasons why CPF members did not draw the payouts they were entitled to.
Some, she notes, could have deliberately done so, because they had no need of them. Others, however, might not have been aware that they could begin their payouts earlier.
To improve this, Teo said that the CPF Board will work on its outreach efforts. It will:
- Review its letters to prevent any misunderstandings.
- Invite members reaching their PEA to attend a CPF Retirement Planning Service, which will be face-to-face and offer personalised guidance.
- Work with other agencies, such as the Social Service Offices and the Silver Generation Office to communicate with their members about CPF.
Top image from Gov.sg YouTube Channel and CPF Board's Facebook page.