Interest earned from CPF Life is shared among members, cannot be bequeathed

The interest earned goes to all CPF Life members.

Joshua Lee | April 2, 09:49 pm


The interest earned from CPF Life will not be bequeathed once a member passes on.

Instead, CPF Life members will always get back their premiums (the amount they put into CPF Life) in full – be it in monthly payouts or bequests to nominees.

This was Manpower Minister Josephine Teo’s reply to Workers’ Party’s Png Eng Huat in Parliament.

Png had asked how many CPF members have foregone their earned interest upon their demise and if they are aware that interest under CPF Life does not come under their estate.

He also requested for information regarding the total amount of foregone interest earned under CPF Life.

What is CPF Life?

CPF Lifelong Income For The Elderly (CPF LIFE) is a life annuity that provides one with a monthly payout from age 65 (the current payout eligibility age as of 2019) until the day one passes on.

It is mandatory for Singapore residents born in and after 1958 and have S$60,000 in his or her CPF Retirement Account.

This amount will generate up to 6 per cent interest each year which will be pooled into a Lifelong Income Fund.

Bear in mind that he or she will receive a monthly payout depending on the amount he or she put into CPF Life (known as the premium).

This payout does not stop even when his or her premium runs out.

Members can continue to draw out a monthly payout thanks to the pooled interest.

Teo said:

“Each member’s premium is used to provide him with monthly CPF LIFE payouts. However, when the premium is exhausted, the member will continue to receive monthly payouts by drawing on the pooled interest. For example, if a member commits $60,000 to CPF LIFE under the Standard plan and starts payouts at 65, his premium will be exhausted at the age of 79 and he will then continue to receive payouts from the pooled interest for as long as he lives.”

Pooled interest shields members from outliving their savings

The Manpower Minister explained that by pooling all of CPF Life members’ interests, they are effectively shielding themselves from the risk of outliving their savings.

Teo also said that the interest is not “foregone” as Png described because all members have a chance to draw from the pooled interest for as long as he or she lives:

“Mr Png is incorrect to describe the pooled interest as “forgone” because as I explained, every CPF LIFE member has a chance to draw on it once his own premiums have been fully paid out. He could even draw more from the interest pool than he put into it.”

Teo added that in the long run, more CPF members are expected to draw payouts from the pooled interest. According to CPF Board, one in two members aged 65 today are expected to live until 85.

She also assured Png that this is communicated to CPF Life members in application forms, yearly CPF Life payout statements, and through efforts by the CPF Board like offering CPF Retirement Planning Service to all members reaching 55 years old.

To understand how CPF Life and pooled interest works, you can head over here.

Top image by Joshua Lee. 



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