From 2013, CPF members eligible for the new Lifelong Income (LI) Scheme, which is now called CPF Life, will have to make two major decisions when they turn 55.
Firstly, they will have to decide how much of their Minimum Sum will go into the LI Scheme.
This because their Minimum Sum cash balances will be split into two parts - a larger part that remains in the Retirement Account (RA), and a smaller part, the Refundable Premium (RP). The RA pays a monthly income from age 65 to the LI payout age, which the member chooses. The RP continues the same monthly payouts from the LI payout age as long as the member is living.
If the member dies after the LI payouts start, the RP less the sum of LI payouts given will be returned to his beneficiaries.
LI scheme participants will also have to decide when they want the lifelong income payouts to begin - at age 65, 70, 75, 80, 85 or 90.
The plans with refundable premiums are thus named - Refund 65 (R65), Refund 70 (R70), Refund 75 (R75), Refund 80 (R80), Refund 85 (R85) and Refund 90 (R90).
If participants do not choose the LI age, they will be placed into the default "Refund 80" Plan with LI starting age at 80.
To illustrate, a member at age 55 has $67,000 in his Minimum Sum.
If his LI payout age starts at 65, his entire Minimum Sum will go towards CPF Life, giving him $650 a month for life.
But if the LI payout age starts at 80, 24% of his Minimum Sum will go into CPF Life.
He will get $610 every month.
If the member delays his LI payout age to 90, only 6% of his Minimum Sum will be locked in.
But the payouts will be lower -- $560 each month.
The National Longevity Insurance Committee says women will pay higher premiums and receive lower payouts because they live longer than men.
Upon a member's death, the remainder of his Retirement Account and Refundable Premium will go to his beneficiaries.
But he can also decide to forego the refund of his premium in place of a higher payout each month.
Once options are exercised, no changes can be made.
"I won't even know what's going to happen tomorrow. So, how will I know what's going to happen in the next 40 years?" asked an Indian woman.
"What if I make a decision at age 55, and then at age 56, I get a stroke or my health deteriorates? I think it's good if the government can provide at least one provision or one amendment in life," said another woman.
"Maybe, a few years down the road, I think I made the wrong choice. I want to relook, re-evaluate. There should be some, maybe, five years, to renew or re-evaluate the plan again," said a man.
"Once you opt, you will come into a pool and that pool has to be fixed. The pooling is very important for the whole scheme. If you come in one day and go out another, the pool becomes variable and we cannot calculate how much money to pay out. That is an administrative problem. So we cannot allow people to shift from payout 65 to payout 90. The shifting age is not feasible once you agree," said National Longevity Insurance Committee chairman, Professor Lim Pin.
But while payout ages are fixed, members can raise the payout amount by topping up their Minimum Sum after age 55.
The top-ups can come from the pledging of property, continued employment and the withdrawal of CPF investments. - CNA/ir
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