I have a question regarding interest earned by my CPF monies after joining CPF LIFE. Is it true that our beneficiaries will NOT receive the interests accumulated and that this interest goes back to the common fund for other CPF LIFE annuitants?
Recently, there has been some confusion online on this issue, with some Singaporeans feeling shortchanged.
First of all, we need to understand what happens to our CPF Retirement Account (RA) monies:
At age 65 onwards, our RA monies will be used to “buy” into the CPF LIFE annuity scheme as premium payment. This money is pooled in the Lifelong Income Fund, which is used to provide payouts to all CPF LIFE members.
At no point in time did the CPF Board give any indication that interest earned by monies in your CPF Retirement Account goes into your account and can be left to your beneficiaries.
This has been how the CPF Board has always explained bequests for members on the CPF LIFE Scheme:
In fact, this is one of the differences between the Retirement Sum Scheme and CPF LIFE. In the old Retirement Sum Scheme, interest is paid into our Retirement Account Balances, and this amount is gradually drawn down during our retirement until nothing is left, and payouts stop.
The key thing to remember, is that the original promise of CPF LIFE is still upheld. If we pass on early, our beneficiaries will be receiving at least the amount we put into CPF LIFE, minus the payouts we already received. If we outlive our initial Retirement Account balances, we will still be assured of monthly payouts for as long as we live.
And it is the pooled interest earned from the Lifelong Income Fund is what makes this valuable feature possible.