Yes. CPF has messed up again. Wow, this headline is definitely TRS-approved. CPF has definitely messed up again no thanks to a letter that was recently circulated across multiple social media about CPF that seems to confirmed that retirement age has been “increased” to 70.
That letter caused multiple confusions, debates and of course it started the wheels of rumour-mongers moving. All these further creates confusion.
In this article, we will clear up the mess, explain where has CPF messed up. We will also discuss about the challenge of Minimum Sum as well as how you can easily hit Minimum Sum in a follow-up article.
How has CPF Messed Up?
CPF messed up once again in their communication channels. What exactly is the topic that have many Singaporean (and some Australian) talking about?
Recently, the picture of a letter by CPR was circulated online to confirm what seems to be an “increased” in retirement age by CPF to 70. This move seems to have been done “secretly” and “quietly”, much to the furore of citizens and the delight of rumour-mongers.
The issue in contention is actually the Payout Eligibility Age, where the letter seems to imply that the retirement age has automatically been raised to 70 from the current age of 65.
This is NOT TRUE.
Leading to CPF having to clarify this at here and below.
So here it is, CPF has messed up again. Turning what is suppose to be a well-thought out policy into huge negative publicity and confusing the masses.
CPF already has a thousand and one policies with a thousand and one different criteria for them. Further confusion doesn’t helps.
What is CPF? Why 70?
To clear up the confusion, let’s start with CPF. CPF stands for the Central Provident Fund, essentially, it is the retirement pension fund for Singaporean in which it is funded by employees and their employers.
Although it is for retirement, Singaporean can use the money to pay for medical bills, insurance, university fees and house. Which is why there are 3 accounts in CPF, Ordinary Account (OA), Special Account (SA) and Medisave Account (MA).
That being said, always remember that CPF is FOR RETIREMENT.
Retirement is why the CPF Board has the “Minimum Sum”. Minimum sum is the minimum amount of money that one has to have for retirement.
Any money more than the minimum sum can be withdrawn at age 55.
After which, age 65 is the next to look out for as it is the age in which retirement payout can start.
HOWEVER, CPF holders can CHOOSE the age that they want to start receiving their payouts. Therefore, if the CPF holder wishes to, they can CHOOSE to withdraw their monies at age 70.
Currently, what CPF is trying to say over the letter circulating over social media is that the default payout age is 70. If anyone wishes to start their payout at age 65, they would have to submit a request to let CPF know. After which CPF will start paying out as per your request.
The question is, why 70?
This “change” applies to both the Retirement Sum Scheme and CPF Life, which means with an extra 5 years, it actually allows compounding to work longer for, thereby, benefiting everyone.
It is actually a positive action. Compounding is really powerful, 5 years of compounding of $176k (2019 minimum sum) at 4% will see your minimum sum increase by more than 20%.
Although realistically speaking, not everyone wants the extra 5 years of compounding. But the compounding effect for age 65 to 70 is really powerful.
In everyone’s mind, 65 years old is the retirement age. It is the age where the payout starts. By changing the default payout start age to 70 with an option to change it earlier is simply irking and confusing everyone. But hey, wait, that is not true, CPF DID NOT CHANGE the default payout age.
It has always been 70, CPF members has always had to apply to get their payout earlier.
If that is the case, how come so many people thinks otherwise?
Well done CPF, well done, looks like nobody actually knew about your stuff.
CPF Life is simply an annuity, it allows CPF holders to choose when they want to start their payout, by default, it will start at 70, and it will pay out for Life. Starting at 70 allows you to get a higher payout while starting at 65 will give you a lesser payout. The decision is for all to make.
Let’s look at another annuity.
Taken from the AIA Retirement Saver (III) brochure. This annuity allows you to choose how early you want to start your retirement. It also allows you to choose the amount you wish to receive.
Same meaning. Different Effect.
Therefore, CPF has messed up by turning something positive into something negative.
In conclusion, the retirement age has not changed, it is still 65, the big hoo-haa is that many are mis-led to believe that the retirement age is been changed to 70, which is NOT TRUE.
The retirement age is still 65, it’s just that our payout age is set to 70 by default and to change it earlier, we have to submit a request separately.
Which to be honest, is a huge nuisance? For what go through all the trouble?
And it seems that, with all the good intentions of CPF, their good intentions have always somehow turned into “bad intentions” in the minds of the public.
Therefore, it seems that CPF really has to buck up on how they want to deliver the message across to the public. As for the public, as with investing, it is important to differentiate between news and noise, verify the information first.
There are already multiple Singaporean platform and Australian platform (and maybe more) that are actively trying to mislead and toxic the public for unknown reasons. We don’t need more confusion.
One huge concern is the seemingly impossible cap of Minimum Sum, however, that is for another article for another day. Where we will show that, the “Minimum Sum” is not unattainable for the average man.