Wednesday, February 13, 2008

CPF Members To Choose Lifelong Income Scheme Packages At Age 55

Source : Channel NewsAsia, 13 February 2008

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

Couple Say CPF Life Is Fair, Applaud Flexibility To Choose Income Payout Age

Source : Channel NewsAsia, 12 February 2008

SINGAPORE; The National Lifelong Insurance scheme, now called CPF Life, is set to affect families like the Lims.

Sales engineer Edwin Lim is 35 years old and does not have the Minimum Sum of $40,000 in his CPF account right now. His wife, Sharon, is a homemaker and no longer makes CPF contributions.

The Lim family

But the parents to two boys said they are not worried about financing their old age now, even though they do not have private annuity policies.

"I will not consider it right now because 20 years down the road, I will not know what will happen to me. Probably, near to the age, about 55, then I will consider," said Sharon.

When Edwin and Sharon turn 65 years old, their children, Nicholas and Nigel, will be in their 30s.

But the couple believe they cannot and should not rely on their sons for financial support in their old age.

They feel the new CPF Life is fair and especially applaud the flexibility to choose the lifelong income payout age.

Edwin said that if he had to choose, he will pick 70 as the age to start receiving his CPF Life monthly payout, with two factors in mind.

"I would actually look at my health - how healthy I am at the moment - and secondly, inflation. I would consider buying other private annuities, mainly because I do not think that the government recommendation is enough when I reach that age," he said.

Meanwhile, the labour movement says the CPF Life will make CPF contributions more important than ever.

It also says the CPF Life proposed by the National Longevity Insurance Committee is more attractive than when the scheme was first announced.

The CPF Life has an option of allowing premiums to be refunded, and the monthly payout is also larger.

"Now the CPF (contributions) become even more important than before. Before, CPF Minimum Sum is for 20 years until age 85, now it's going to be a lifelong income, so it's becoming a much more important social safety net. So people must make sure that they regularly contribute to the CPF," said NTUC Deputy Secretary-General Halimah Yacob.

That is why the NTUC has been working for the last one year to encourage the self-employed and contract workers to contribute to CPF.

So far, it has managed to attract 6,000 of such workers to do so. But some 100,000 of them are still not on the CPF scheme.

So what's the advice for those below or above 50, when they look at the CPF Life scheme?

"For those below 50, prudence is still something that one should observe, in terms of using CPF money for housing. For those above 50...., although you're not automatically included (in the CPF Life), the immediate reaction should be, 'I want to be included because it's important, because this is a source that's going to provide me with income lifelong, not just until the age of 85'," said Madam Halimah.

When asked, Madam Halimah said she will opt for refundable premiums with payouts to begin from the age of 80.

The labour movement will explain the new scheme to union leaders on Wednesday. - CNA/ir

IMF Sees Significant, Prolonged US Slowdown

Source : The Business Times, 12 February 2008

(MUMBAI) The economic slowdown in the United States will be significant and will last for some time, the chief of the International Monetary Fund yesterday.

The slowing of the US economy has worried investors and policymakers and concerns have also surfaced that the US downturn is spreading to the 15-nation euro zone economy.

IMF managing director Dominique Strauss-Kahn told a conference in the country's financial capital that decoupling between emerging markets and developed economies was a 'misleading idea'.

'US slowdown will be both significant and will last for some time,' he said in a speech. 'Decoupling is a very strange idea, very misleading idea.

'The linkages between the financial and real sector, developed and emerging markets, are much more complex than they were before.'

Last month, the IMF cut its forecast for world growth this year in the face of continued stress in global credit markets, and warned that economic activity could slow even further.

It lowered its global 2008 growth projection to 4.1 per cent from 4.4 per cent, reflecting a marked slowdown from the 4.9 per cent pace achieved last year.

It has also cautioned that the main risk to the global outlook was ongoing turmoil in financial markets, which would further reduce domestic demand in advanced economies and create more significant spillovers into emerging markets and developing economies.

Mr Strauss-Kahn is on a three-day visit to India.

The Group of Seven has warned of further financial-market turmoil, which may lead to more rate cuts and tax reductions to prevent a slowdown of the global economy.

Finance ministers and central bankers ended a weekend meeting in Tokyo with a statement that 'downside risks persist', including the US housing slump and tighter credit conditions.

Without proposing specific remedies, the group pledged 'appropriate actions, individually and collectively'.

The US Congress has passed and sent to President George W Bush a US$168 billion stimulus package, seeking to end a housing slump that threatens to push the world's biggest economy into recession.

The US Federal Reserve reduced its key rate twice by a total of 1.25 percentage points in nine days through Jan 30.

The Bank of England also lowered its benchmark interest rate by a quarter-point to 5.25 per cent last week, as predicted by 59 of the 61 economists surveyed by Bloomberg News.

But Axel Weber said yesterday that the European Central Bank has not relaxed its view on inflation risks, suggesting he does not see an interest rate cut on the agenda.

Asked by the Frankfurter Allgemeine Zeitung (FAZ) whether the ECB was any closer to cutting interest rates in the euro zone, the ECB governing council member said: 'My view is different. It would be an exaggeration to say that we are facing a weakening in growth that by itself would slow inflation in such a way as to cause a rapid easing.

'Our primary mandate is price stability,' said Mr Weber, who is also head of the Bundesbank. 'There is no sign of a relaxation in the ECB council concerning price risks, quite the opposite.' - Reuters, Bloomberg

A Good Plan To Retire On

Source : The Straits Times, Feb 13, 2008

THE Government-initiated insurance plan for retirees, released yesterday, has been retooled to gain broad acceptance. Two aspects of the original formulation which drew the loudest objections - capital sums to lapse upon a CPF member's death and the late access age for payouts - have been confirmed amended in the report of the Lim Pin committee. First, the amounts remaining will revert to members' heirs. It should have been proposed at the start to avoid muddying the waters, as annuities are not a concept readily understood here. Second, a range of starting ages is offered for members to choose from, as to when they wish to begin receiving the money. This concession does not invalidate the statistical profile of Singaporeans' lengthening life span, but it does satisfy a primal urge in people. That the plan will be managed by the CPF Board, another recommendation, was never in question. There was little chance of the proposal carrying if a private company were to run it. Members will insist on a state guarantee for the investing and management of their savings, more so in an age of bolder and riskier investments by global finance houses. It has nothing to do with the CPF's better interest yield compared with a commercial provider designing annuities on the assumption of lower rates of investment returns.

All told, this is a plan that ought to sell itself. Retirement planning for a non-welfare state, with its trademark absence of taxation-funded old-age pension, does not come more carefully thought out than this. The Straits Times recommends it thoroughly. The public education which the committee proposes the CPF Board carry out to acquaint members with the scheme should address issues arising, not the hard-cast features. One such is ironically the need to sign on because of creeping inflation which will erode monetary purchasing power at a faster clip henceforth. The first members, now aged 50, will draw on their annuities in 15 years' time if they choose the age-65 access plan. (The access range goes up at five-year intervals to a rather ambitious 90.) These monies are not inflation-indexed.

How much a notional monthly payout of $600 at today's prices can buy 15 years from now will make for lively speculation. Premiums and payouts and their underlying investments will be reviewed periodically in accordance with actuarial change and economic cycles. This is the minimum assurance against monetary inflation. One trusts the Board to be fair to members. One other educating job is getting those outside the plan's actuarial scope - those older than 50 this year - to join up by opting in. These individuals should be making their own calculations. They will see the merits readily.

Flexible Annuities Scheme To Start In 2013

Source : The Straits Times, Feb 13, 2008

WORKERS aged 50 and below are set to get a steady retirement income for life under a new annuities scheme to be run by the Central Provident Fund Board.

They will have 12 types of annuity plans to choose from, and can decide whether to start their payouts as early as age 65 or as late as age 90.

They can also opt to give their families a refund of their annuity premiums if they die early, before they get it all back in monthly payouts.

The new scheme is the result of a redesign of the old compulsory annuities plan proposed some six months ago to much public criticism.

A committee with members drawn from the unions, the civil service, companies, and academia was then set up to recommend an alternative better suited to Singaporeans' needs.

They unveiled their new scheme, which the Government has accepted, yesterday.

To be called CPF Life, the scheme will roll out in 2013.

The first batch of workers to come under it are those who turn 50 this year. There are about 35,000 of them.

Depending on how much they have in their Minimum Sum cash balances at age 55, they can expect a lifelong income of between $350 and $1,100 a month.

That is, if they opt for the standard CPF Life plan that starts their annuity payouts at age 80. The majority of them - 60 per cent - can expect monthly payouts of $600 or more for life.

Another 15 per cent will get between $350 and $600.

The remaining 25 per cent will be exempted from the scheme as they will have less than $40,000 in the CPF Minimum Sum cash balances at age 55 - not enough for payouts to last a lifetime.

The committee has called on the Government to offer 'one-off assistance measures' to those with insufficient CPF retirement funds to help them take part in the scheme.

Manpower Minister Ng Eng Hen is expected to make an announcement on that issue today, when he responds to the committee's report.

Exemptions also apply to those who are seriously ill and those on pension or approved private annuity plans.

The CPF Life scheme is a key piece in a comprehensive plan to tackle the problem of an ageing population, with people's retirement savings not keeping pace with longer life spans.

The Government is also putting in place measures to help Singaporeans work longer, enhance the returns on CPF savings and make these savings last a lifetime.

In a letter thanking the 18-member committee, Dr Ng hailed its proposal as 'a landmark report that will significantly strengthen our CPF system'.

The committee had collected feedback from some 600 members of the public before drawing up its 55-page report.

Yesterday, with his work done, a smiling Professor Lim Pin, the committee's chairman, said: 'We've designed a product which we think reflects the diverse needs of Singaporeans. We're confident it will go down well with the public.'

The scheme is not cast in stone, he added, and will be reviewed periodically, in line with new data and feedback.

Financial experts and Members of Parliament said it was an improvement on the old annuities plan as it tackled the main concerns of Singaporeans over lack of flexibility and refunds.

But critics pointed to the needy folk who would not be covered by the scheme.

CPF Annuities Scheme Will Offer Members 12 Options

Source : The Straits Times, Feb 13, 2008

ONCE they turn 55, Singaporeans can choose from one of 12 annuity plans available to them under a new scheme unveiled yesterday.

But they will be unable to change their decision thereafter, even if their circumstances change.

Explaining why, National Longevity Insurance Committee chairman Lim Pin said:

'Once you opt, then it (the premiums) will go into a pool, and that pool has to be fixed because the pooling is very important for the whole scheme.

'If you come in one day and go out another, the pool becomes variable, you cannot calculate how much money to pay out. It's a danger. It's an administrative problem. It's a kind of contract, a kind of insurance policy contract.'

It is the one immovable point in the scheme, of which flexibility is a hallmark.

Indeed, Singaporeans can choose to start receiving their annuity payouts from as early as age 65 or as late as age 90.

They can also decide whether or not to have the premiums refunded to their families should they die early.

In all, there will be 12 annuity options to choose from, to meet public calls for a flexible scheme.

'The committee recognises that different members have different retirement and bequest needs,' the committee noted.

Its report, released yesterday, detailed how the scheme - which kicks off in 2013 - will work.

That is when the first group of Central Provident Fund (CPF) members - about 35,000 who turn 50 this year - will come under the annuities scheme.

By that year, the Minimum Sum amount that this group is supposed to have is $134,000. This can be either fully in cash, or partly in cash and partly in the form of a property pledge.

Under the annuities scheme, the Minimum Sum cash balance will be divided into two parts: a portion that remains in the Retirement Account; and a Refundable Premiums (RP) portion.

The sum in the Retirement Account is used for monthly payouts to the member, starting at age 65, until the age at which he opts to start receiving payouts from the annuities scheme.

The RP portion, on the other hand, is used to pay the premium of the scheme.

At 55, the member will have to choose at which age he wishes to start receiving payouts from the scheme.

This can start at any one of six ages - 65, 70, 75, 80, 85 or 90 - and the payouts will continue for the rest of his life.

The earlier the starting payout age, the higher the premiums will be.

This means there will be less money left in his Retirement Account - and thus less money for his beneficiaries, as he loses out on the interest otherwise accrued on the amount in that account.

He does not get the interest from his RP, as it is pooled to fund the scheme.

For each of the six ages that the payouts can start at, a member can also specify if he wants a refund of the capital sum - which is paid out in premiums - if he dies before reaping them back.

These six options are named Refund 65, Refund 70, Refund 75, Refund 80, Refund 85 and Refund 90.

If he opts instead for the non-refundable plan, he will then pay relatively low premiums and get relatively higher payouts.

These plans are known as No Refund 65, No Refund 70, No Refund 75, No Refund 80, No Refund 85 and No Refund 90.

Take a hypothetical case of a male CPF member at age 55 who has half the required Minimum Sum, or about $67,000 in cash.

The costliest plan will be if he wants his payouts to start at the earliest age possible - 65 - and also wants the refundable option.

His premiums will cost 100 per cent of his Minimum Sum. In return, he will receive $650 a month in annuity payouts for as long as he lives. But if he opts for the No Refund scheme, then he will receive $690 a month.

If, on the other hand, he chooses to delay his payout age to age 90, his premiums will cost just 6 per cent of his Minimum Sum. In return, he will get annuity payouts of $560 a month.

The corresponding payout range for women is lower - $540 to $590 - as they generally live longer.

These figures are indicative, as they may vary. And the factors are: the balance that an individual has in his Minimum Sum; changing mortality rates, and the CPF Board's investment returns on the pooled premiums.

But committee chairman, Professor Lim Pin, noted that no matter what, the payouts will be calculated based on a minimum guaranteed interest rate of 3.5 per cent, which is what the Government offers to CPF members.

Merrill To Continue Growing S'pore Presence

Source : The Straits Times, Feb 13, 2008

DESPITE writing down billions of dollars linked to the United States mortgage crisis, financial giant Merrill Lynch has no plans to stop hiring and investing in Singapore.

The bank's chairman for the Asia-Pacific, Mr Raymundo Yu, gave the assurance in his first interview after its disastrous losses.

Some of Merrill's global operations are based in Singapore.

The bank's big write-downs triggered fresh capital injections from the likes of Temasek Holdings, which invested US$4.4 billion (S$6.2 billion) in Merrill.

Temasek has an option to buy another US$600 million worth of shares by March 28 next year, as long as its ownership does not exceed 10 per cent of Merrill's total outstanding common shares.

But in the interview with The Straits Times yesterday, Mr Yu squashed market talk that Merrill was cutting back on expansion plans in Singapore due to the debt crisis.

For example, he pointed out that one of Merrill's key operations in Singapore - the global services centre for its private banking and global markets businesses - is still scheduled to move into its new six-storey HarbourFront office building by the beginning of next year.

The building, which will take up 200,000 sq ft of space, will also house a training academy that will equip staff with skills to perform back- end functions such as the handling of global computer systems, cash management and transaction accounting.

It aims to have at least 1,000 staff there by then. Currently, the bank's 700 global services staff operate out of the 55,000 sq ft support centre at Harbourfront Centre next door.

'We continue to improve on what we have. The market is very fluid and continues to move, so what we need to do is to be sensitive to the marketplace and our client needs,' he said.

Mr Yu said that in Singapore, Merrill is still hiring in areas such as investment banking, fixed income, wealth management, and its commodities business.

'We're very pleased with the pace of recruitment. We continue to hire competitively,' he said, dismissing notions of a hiring freeze.

Merrill now employs about 1,500 staff in Singapore across a range of functions, from private banking to equity research.

'Having Temasek as a large shareholder can only be good for Merill,' said Mr Yu, as he elaborated on how Temasek, a 'savvy investor' that has invested widely in banks across the region, is a 'very good name in the marketplace'.

While there have been predictions by several private bankers that sooner or later, the Singapore market will be saturated and there will be a consolidation of sorts, Mr Yu disagreed.

'Singapore is not only marketing to high net worth individuals in Singapore. It is now a base for regional non-resident Indians, and there is some Middle East money as well, so I think there is still room in Singapore,' he said on the private banking industry in the Republic.

Some Small Property Launches But Most Still Hold Back

Source : The Straits Times, Feb 13, 2008

Developers selling projects abroad first before launching them in Singapore

PROPERTY developers are starting to gingerly test the volatile market with a few launches now that the festive season is behind them.

Those dipping their toes into the choppy waters, however, are mostly offering smaller projects away from the prime areas, said property agents.

Home seekers may have to wait a bit longer for major launches, with the earliest set for next month or April.

MAJOR LAUNCH: Prices of units at Frasers Centrepoint's Martin Place Residences could range from $1,800 to $2,300 psf. -- PHOTO: FRASERS CENTREPOINT

Meanwhile, developers waiting for the market to regain momentum are selling Singapore projects overseas before launching them locally, said Mr Ku

Swee Yong, director of business development and marketing at Savills Singapore.
'Developers are still waiting for the stock market here to settle down,' said Mr Ku.

Savills is dispatching a large sales team to Dubai next week to market Skypark at St Thomas Walk, CapitaLand's condo on the Silver Tower site in Cairnhill, and the units Kuwait Finance House bought in Reflections at Keppel Bay and Goodwood Residences last year.

For local buyers, one project likely to be launched within weeks is the 47-unit Cosmo at Guillemard Lane. Prices could be $1,100 to $1,200 per sq ft (psf), said Mr Patrick Oei, associate group director for Huttons Real Estate, which is marketing the project.

Another upcoming launch is that of the 108-unit Verve Residences near Jalan Rajah, with prices likely to range from $900 to $1,100 psf.

These prices are similar to recent transactions in each area, showing that levels are still holding steady.

Homebuyers also picked up a few units in three freehold boutique projects launched in Telok Kurau recently. One is the 28-unit Costa Este, which is selling at $663 to $980 psf. The others are Palm Galleria and Espira Spring, launched during the Chinese New Year weekend with average prices of $850 to $870 psf.

Generally, smaller projects have done well, even in shaky market conditions, said Mr Oei, citing Casa Fortuna in Balestier and Wilkie 80 in Wilkie Road. Both were sold out within three days of their launches late last year. The 106-unit Casa Fortuna sold at about $1,000 psf, while Wilkie 80's 50 units were taken up at $1,500 to almost $1,800 psf, Mr Oei said.

As for bigger projects, the first phase of Waterfront Waves at Bedok Reservoir will be officially launched this weekend. Prices for the 60-odd units still unsold will rise marginally from the current average of $750 psf, said Ms Kellie Liew, a project director at HSR Property Group.

The next brand-new launch may be Frasers Centrepoint's Martin Place Residences in Kim Yam Road, due next month. Staff previews for the 302-unit condo started last month, at $1,800 to $2,300 psf.

Other launches to look out for include the delayed Marina Bay Suites and Ho Bee's project at Dakota Crescent.

Not all industry players, though, have high hopes for upcoming launches. 'The market is really quiet,' said one agent. 'Showflat crowds have thinned out to five or 10 people at a time. We're still placing advertisements, but no telephone calls are coming in.'

London Is World's Priciest Office Location

Source : The Straits Times, Feb 13, 2008

LONDON - LONDON office rents were the most expensive in the world in 2007 and are now triple the average paid by occupiers in New York's Midtown business district, research from real estate broker Cushman & Wakefield showed.

The firm's annual Office Space Across the World report on Wednesday showed London's reputation as a hub for global financial markets helped to reinforce its status as the world's most costly office rental market last year, with rents double those in Paris and four times levels in Frankfurt.

The data compares office occupancy costs in 203 key locations in 58 countries around the world.

Of these 203 locations, 79 per cent showed rental growth last year, 20 per cent showed stable rents and only one per cent showed a drop in rental values in 2007, compared with 6 per cent in 2006.

Cushman & Wakefield said a single square metre of prime office space in London's West End commanded annual rent of 2,277 euros (S$4,700) in 2007. Supply-constricted Hong Kong was named the world's second most expensive office location, with rents of 1,745 euros per square metre.

Moscow rose two places in the 2007 ranks, breaking into the top five for the first time. India's Mumbai market leapfrogged both Paris and Moscow to take fourth position, with rents said to be 1,214 euros per square metre.

Prime office rents in Singapore rose 78 per cent last year in local currency, helping Asia Pacific to achieve the strongest regional growth, with overall rents rising 23 per cent in 2007.

But Singapore's growth was eclipsed by Istanbul, where rents in the prime Levent district soared 95 per cent in local currency terms in 2007 on the back of a Turkish economic boom.

Cushman & Wakefield said rents had risen by an average 40 per cent in the world's top 10 office locations in 2007 but said the pace of growth could drop off in 2008 as the United States battles to fend off recession and Europe's biggest banks assess staff numbers in the wake of the subprime mortgage crisis.

London West End rents rose 30 per cent in local currency terms in 2007 but uncertain occupier demand and an increase of supply could curtail growth this year, spelling tougher times ahead for landlords, particularly those in the nearby City financial district.

Some market experts believe a wave of London skyscraper developments planned by UK real estate investment trusts (Reits) such as Land Securities and British Land will put heavy pressure on rental growth beyond 2009.

According to UK property services firm Savills, up to 13 million square feet of office space is due to come onto the London office market in 2008 and 2009. -- REUTERS

10 Things You Need To Know About CPF Life

Source : The Straits Times,Feb 13, 2008

Workers aged 50 and younger who pay CPF will come under the new annuities scheme that starts in five years' time in the year 2013

1 How much do I pay? How much do I get?

You will pay for your CPF Life premium with your CPF Minimum Sum. You will not have to pay more out of your own pocket.

CPF Life is the new name for the annuities scheme.

How much premium you pay depends on the annuity you choose. How much income you get monthly depends on how much you have in your Retirement Account at age 55, and on your annuity option.

2 What choices do I have?

You will have 12 options to choose from.

You can choose the age at which you want to start receiving payouts from your CPF Life.

You can ask for your payouts to start at age 65, 70, 75, 80, 85 or 90.

For each of these six options, you have a further choice of whether you want your family to receive a refund of the CPF Life premium, should you die early.

Once you have made your choice, you cannot change your mind.

So if you want your payouts to start at age 65, you can either choose option Refund 65 or option No Refund 65.

The default option is Refund 80.

The earlier you want your payouts to start, the larger the premium you will have to pay. But you will also receive a bigger payout every month.

Let's take an example of someone with a CPF Minimum Sum of $67,000 when he turns 55.

If he chooses Refund 65, 100 per cent of his CPF Minimum Sum will go into paying the CPF Life premium. He will receive a monthly payout of $650 from age 65 until he dies.

But if he chooses option Refund 90, only 6 per cent of his Minimum Sum in the Retirement Account will be used to pay for the CPF Life premium.

He, too, will receive a monthly payout from age 65 until he dies, but it will be $560. This payout is from the remaining amount in the Retirement Account.

The payout from the annuity will start from age 90.

If he opts not to have a refund, his payout will be higher.

The payouts for women will be lower because they are expected to live longer than men.

3 If I die early, does my family get a refund?

Yes, if you choose any one of the six options that gives a refund. The refund amount will be equal to the CPF Life premium minus the CPF Life payouts you would have received.

4 Am I covered by the new scheme?

The CPF Life scheme starts in 2013, five years from now.

You are covered by CPF Life if you are aged 50 and younger, working and contributing to your CPF account.

You are exempted if you have less than $40,000 in your Retirement Account at age 55, but you can still opt into the scheme.

The Government is expected to announce today incentives to help people in this group take part. Those over 50 can also opt in.

You are also exempted if you are on a pension or have bought a private annuity that pays you an equivalent benefit; have a terminal illness; are of unsound mind; have a mental or physical condition that leaves you unable to work; or a medical condition that severely impairs your life expectancy

5 Is it compulsory?

Yes, it is compulsory unless you are exempted.

Allowing people to opt out would have an adverse impact on this national scheme, and make it less viable.

6 What happens to my CPF money when I turn 55?

When you turn 55, the money in your CPF Ordinary and Special Accounts is moved to your Retirement Account.

You are required to leave a Minimum Sum in your Retirement Account for your old age.

The sum you must leave in your account, called the Full Minimum Sum, is currently $99,600.

It will be raised gradually to $120,000 (in 2003 dollars) by 2013, the year the CPF Life scheme starts. The CPF Board estimates that after adjusting for inflation, the Full Minimum Sum in 2013 will be $134,000.

If you have more than the Full Minimum Sum, you can withdraw the excess.

At age 55, you will also be asked to choose one of the 12 CPF Life options.

The sum you have in your Retirement Account is then split into two, according to the option you choose.

One part goes to pay for the CPF Life premium. This portion is pooled together with the premiums of other CPF Life members.

The other part remains in your Retirement Account and earns interest from the CPF Board.

You start to receive an income from the sum in your Retirement Account when you turn 65.

You start to receive an income from CPF Life at the age you have opted for. For most people, that age should be 80.

7 How is CPF Life different from the current Minimum Sum scheme?

The current Minimum Sum Scheme gives you a monthly payout for 20 years from age 65.

CPF Life also gives you a monthly payout from age 65, but for the rest of your life.

The payout amount will remain roughly the same.

For example, under the current Minimum Sum scheme, if you have $67,000 in your Retirement Account at the age of 55, you get a monthly payout of $600 from age 65 to 85.

But under the new CPF Life scheme, if you choose the standard Refund 80 option, you get a payout of $570 to $610 for life.

The range in the size of payouts is to take into account interest rate fluctuations.

The standard option refers to the plan you are automatically put on if you do not make a choice at age 55.

8 Will my CPF Life payouts be indexed to inflation?

No. Otherwise, the payouts need to get bigger over time. That means the initial payouts need to be much smaller. It also means bigger CPF Life premiums and fewer members being able to afford the scheme.

9 Who will run the new scheme?

The CPF Board will.

The board offers better interest rates than most commercial annuity providers. Members of the public cited this as the main reason for preferring the CPF board over private providers. Having one operator also reduces costs through efficiencies gained from having a larger scale of operations. The public trusts the CPF Board, as it has helped manage their retirement funds since 1955.

10 What happened to my feedback?

The scheme was changed in response to feedback.

As a result, the new scheme provides for refunds and for a choice on the age people want to receive the payouts.

Scheme Gets Thumbs-Up From Experts And MPs

Source : The Straits Times, Feb 13, 2008

Most S'poreans feel all the important feedback has been taken into account

THE new annuities scheme has received the thumbs-up from financial experts, MPs and Singaporeans.

Most interviewed said the plan, to be called CPF Life, addressed the concerns of Singaporeans and is a vast improvement on the original idea.

As MP Denise Phua, a member of the Government Parliamentary Committee (GPC) for Manpower, put it: 'Major feedback on making the premiums affordable, allowing for choices and flexibility in payout ages, and refunds of premiums on earlier demise have all been taken into account.''

The compulsory scheme was first suggested by the Government last year to help Singaporeans, who are living longer, have a more secure retirement.

The initial idea was for CPF members to use part of the Minimum Sum in their Central Provident Fund (CPF) account to fund the annuity. It would give them monthly payouts when they turn 85.

But it upset many Singaporeans. Some were sceptical they would live to 85 while others baulked at losing their money should they die early.

A committee was then set up and it consulted widely before designing the scheme which the Government has now accepted.

Manager Koh Lee Peng particularly welcomed the decision to allow for the refund of unused premiums.

Said the 40-year-old: 'Even if you pass away early, your money can go to family members. The scheme looks more attractive now.'

She said she would opt for the payout to start when she hits 65 - the earliest possible - as she hopes to retire then.

When CPF Life is introduced in five years' time, people can choose to start getting their payout from one of six ages - 65, 70, 75, 80, 85 and 90.

Mr Andrew Linfoot, an actuary at the local office of Scottish Annuity & Life Insurance Company, singled out the flexible payout age as a key sweetener.

'Offering a range of options is a good way to meet the differing retirement needs of different parts of the community,' he said.

Mr Leong Sze Hian, president of the Society of Financial Service Professionals, noted that CPF Life offers a better interest rate - around 5 per cent - than the projected 4 per cent or less of private sector annuity plans.

But Mr Leong, like Dr Lim Wee Kiak, member of the GPC for Manpower, feels the man-in-the-street needs help to figure out which annuity plan among the dozen offered is best for him.

Said Dr Lim: 'The CPF Board has a huge task ahead just to communicate the scheme to the public. But the old scheme cannot compete with this one, which guarantees lifelong income.'

Currently, the payout from the CPF Minimum Sum is for 20 years, after which many have few sources of their own funds.

However, Ms Koh, like some others, worries the payouts may not keep pace with inflation.

'Twenty years on, medical bills are going to be more expensive. How to survive on $600 a month?' she said, referring to the estimated monthly payout.

Ms Phua pointed out that the annuities scheme was not meant to provide for all the retirement needs of Singaporeans.

'CPF members should know how much they would need on retirement to maintain their desired standard of living. CPF Life is only one possible stream of income.'

They could consider healthcare insurance and renting out part of their homes, she added.

But critics like Mr Joseph Chong, chief executive officer of financial advisory firm New Independent, said it may not cater to its target group: those who outlive their resources.

'Are we spending a lot on something which is a small improvement to the present scheme?' he asked.

Mr Chong feels the payout makes little difference for many well-off Singaporeans, but not for those outside the CPF system or with few funds. 'They may just fall through the cracks. The Government should top up such people's CPF accounts.''


'Even if you pass away early, your money can go to family members. The scheme looks more attractive now.'
MANAGER KOH LEE PENG, 40, who welcomed the decision to allow for the refund of unused premiums


'CPF members should know how much they would need on retirement to maintain their desired standard of living. CPF Life is only one possible stream of income.'
MS DENISE PHUA, a member of the Government Parliamentary Committee for Manpower