In 2020, CPF members’ balances hit a new record high of $462.1 billion with a record $16.8 billion paid to members in interest. This suggests that Singaporeans are saving more for retirement in 2020 – the year of the COVID-19 pandemic that affected many aspects of our lives, including how we plan and save for retirement.
Yet, this is not the only change to our CPF monies and how we plan and save for retirement. We take a deep dive into CPF Annual Report 2020 to find out how our CPF usage has changed in 2020.
#1 More Members Are Topping Up Their CPF Accounts
As more Singaporeans become aware of the benefits of CPF, more CPF members are topping up their CPF accounts. In 2020. 140,000 CPF members made use of the Retirement Sum Topping-Up Scheme to top up a total of $3 billion. This is a 39% increase in the amount of top-ups made in 2019 ($2.15 billion).
More than 30% of these were making top-ups for the first time. This can be possibly attributed to CPF Board’s increased efforts to engage with the public. This includes new platform channels like Telegram and podcasts to reach out to our members, reaching 14.4 million engagements via online and social media platforms in 2020.
#2 Contributions To CPF Balances Have Increased
This increase in top-ups also contributed to the overall increase in contributions to overall CPF balances. Members’ contributions added $38.4 billion in 2020, an increase from $37.4 billion in 2019. This includes the mandatory CPF employee and employer CPF contributions as well as top-ups.
Additionally, government grants also added $2.45 billion in 2020, an increase from $2.30 billion. This includes CPF Housing Grants, MediSave Top-Ups, Workfare Income Supplements, MediSave Grant for Newborns and Post-Secondary Education Account top-ups.
#3 Housing Withdrawals Have Declined in 2020
As contributions increased, withdrawals have decreased from $21.4 billion in 2019 to $20.7 billion in 2020.
Notably, housing withdrawals have decreased. $10.5 billion was withdrawn by 741,000 members for their HDB flat purchases in 2020, a drop from the $11.0 billion withdrawn in 2019. Likewise, the amount withdrawn for private housing has decreased from $6.8 million to $6.7 million.
While this may seem at odds with the rising property market in 2020, this decline in housing withdraws could be due to a combination of larger cash down payments and low-interest rates for housing loans which could reduce the CPF outlay for housing.
#4 Members Are Receiving More Payouts Under Retirement Sum Scheme Instead Of CPF Life
While CPF Life is the current default retirement annuity scheme for CPF members, this wasn’t always the case. The CPF Life scheme was only introduced in 2009, this means that the Retirement Sum Scheme is still the main payout plan for those born before 1958.
Currently, the payouts for Retirement Sum Scheme (RSS) are larger than the payout for CPF Life, suggesting that there are many elderly CPF members who are still on the RSS. In 2020, the payouts under Retirement Sum Scheme increased from 0.94 billion to 1.37 billion while the payouts for CPF Life increased from 611 million to 731 million.
As more cohorts start reaching the age of 65 and receiving their CPF Life payouts, we can expect to see more CPF Life payouts while RSS payouts decline before eventually ceasing.
Withdrawals For Healthcare Use Has Increased in 2020
While the withdrawals under MediSave for approved medical expenses decreased slightly from $1.094 billion in 2019 to $1.015 billion in 2020, the overall withdrawals for healthcare have actually increased.
Members’ withdrawals (after deducting any refunds made) actually increased for MediShield Life, Private Medical Insurance (i.e. premiums for Integrated Shield Plans) and CareShield Life and ElderShield. Withdrawals for MediShield Life increased from $1.33 billion to $1.39 billion, Private Medical Insurance withdrawals increased from $0.88 billion to $0.90 billion while CareShield Life and ElderShield withdrawals increased from $475 million to $631 million.
This shouldn’t be surprising when we consider that healthcare inflation has outstripped the general inflation rate in Singapore. The cost of healthcare has increased 57.5% since 2000 while the cost of health insurance has increased 15% since 2004.
About $67.5 Million In CPF Monies Are Unclaimed
About $67.5 million in CPF monies are unclaimed in 2020. This is an increase from $63.8 million in 2019. This amount forms the general money of CPF and is transferred from members’ balance when the monies are unclaimed. This amount is also refundable if the eligible members or nominees apply. Only $19,000 were claimed in 2020.
The unclaimed monies happen usually because a deceased CPF member does not make a nomination and there is no will and no distribution from the estate. This can be easily avoided as we can ensure that our CPF monies are bequeathed to our loved ones (even non-next-of-kin) by making a nomination.
With the introduction of Online Nomination Service in 2020, CPF members are now able to make nominations fully online. 54,000 or about half of the nominations done in 2020 were carried out online.
Additionally, making a nomination also reduces the waiting time for our nominees to receive bequeathed CPF savings. If a CPF nomination has been made, the nominee can generally expect to receive the payment within 4 weeks after they have completed the application form to withdraw the deceased member’s CPF savings.
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