While CPF is a useful retirement tool, its comprehensive policies can be difficult to understand. To help increase awareness and CPF literacy on CPF, CPF has increased their efforts to connect to the people through education and communication. Based on CPF 2019 annual report, CPF has over 10 million engagement over social and digital platforms, with over 270,000 members engaging in community outreach. Recently, CPF also launched the CPF Volunteering (CPFV) app which is a volunteer-based movement to increase CPF literacy on the ground.
These efforts have started to bear fruit with more Singaporeans tapping on CPF policies to increase their retirement savings. According to CPF 2020 trend report, here are the 4 unexpected trends among CPF members that shows increased awareness and knowledge about CPF policies.
#1 40% More CPF Members Topped-up Their Own CPF Account
Aside from employees and employers’ monthly contributions to CPF, we can voluntarily top-up our own CPF accounts through Retirement Sum Topping-Up Scheme (RSTU) or CPF Voluntary Contributions. We can top-up through cash or by transferring our Ordinary Account (OA) to other CPF accounts.
In 2020, the number of individuals topping up their own CPF account increased by over 40% year on year, from 75,510 to 106,700. Likewise, the total amount of top-ups increased by 38% from $2,144 million to $2,970 million. This trend suggests that more Singaporeans are recognising the potential benefits of topping up.
For those who have yet to top-up their CPF accounts, there are two main benefits for doing so. Firstly, top-ups under the RSTU scheme and Voluntary Contribution to Medisave allow us to enjoy tax relief of up to $14,000 if we top-up for ourselves and our family members who meets the eligibility requirements. Secondly, for individuals under 55 years old, we can enjoy a higher compounding effect on our CPF savings if we choose to top-up our SA account.
#2 CPF Members Using Voluntary Housing Refunds Tripled
Another form of topping-up scheme for homeowners, Voluntary Housing Refunds (VHR) allow individuals to return the CPF savings that we have used for our property loans and purchase in cash. This amount is capped at the full principal amount including accrued interest.
By refunding our CPF used for housing earlier, we can enjoy two main financial benefits. Firstly, with a smaller outstanding principal loan, the accrued interest payable for the house would decrease. Secondly, the amount we refunded can continue to receive the 2.5% interest per annum in our Ordinary Account (OA) which we can use for future housing purchases or our retirement.
Based on the report, Singaporeans have started to recognise the benefits as the number of CPF members using VHR has tripled year on year from 5,500 to 14,980 in 2020.
#3 64% of Active CPF Members Are Hitting Their Retirement Sum Requirement
There are three different levels of retirement sum requirements in CPF. They are Basic Retirement Sum (BRS), Full Retirement Sum (FRS) and Enhanced Retirement Sum (ERS). The amount for requirement changes every year and more information can be found on CPF’s website.
In the report, the Retirement Sum Requirements (RRS) includes individuals who meet the FRS in cash or has pledged their property and met the BRS. The RSS is an important number as it determines how much we can withdraw from our CPF account.
Based on the report, 64% of active CPF members have hit the Required Retirement Sum (RRS) in 2020. This is a 5% improvement compared to the 2018 number. As the RSS is an indication of retirement adequacy, the improvement means that more Singaporeans are better prepared for retirement than before. Based on these number, more than half of CPF members can receive a reasonable monthly CPF Life payout for their retirement needs. CPF members aged 55 in 2020 can expect to receive CPF Life payouts of $1,390 to $1,490 under the Standard Plan if they have reached their Full Retirement Sum.
#4 More Than Three-Quarter Of CPF Members Who Passed Away 2020 Made Their CPF Nominations
Increasingly, people recognise the importance of making a CPF nomination with more than three quarters having nominated before passing away. Based on the report, the trend of people making CPF nomination has also increased from year on year from 75% to 78% in 2020.
In the event we did not make a CPF nomination, our CPF savings will be transferred and held by the Public Trustee before it distributes according to Intestate Succession Act. An unnominated beneficiary can approach the Public Trustee Office (PTO) any time to process the inheritance. The PTO will charge a fee for the procedure. If we have made a CPF nomination, our CPF monies will go directly to our nominated CPF beneficiary.
In summary, the trends in 2020 have shown the rise in CPF savviness among members using schemes to increase their CPF savings. However, more could be done to increase retirement adequacy in Singapore. While 64% of active CPF members have reached their Required Retirement Sum, the figure consisted of both individuals that have reached their Full Retirement Sum and Basic Retirement Sum. Those who opt to pledge their property and meet the Basic Retirement Sum would be receiving a lesser monthly payout of $750 to $810 which may not be sufficient for a comfortable retirement, without finding ways to monetise their property
While the abovementioned trends are positive signs, CPF members can do more to increase their retirement savings. This includes topping up our CPF accounts. Even though individual top-ups have increased by over 40% compared to 2019, it accounts for only 2.6% of all CPF members. There are more opportunities for the other active 36% of CPF members, who have yet to reach their Required Retirement Sum, to top-up their CPF accounts and improve their future retirement lifestyle.
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