When it comes to finance planning, some of us are guilty of ignoring important government schemes which matter to our financial well-being. This include policies such as CPF LIFE, Retirement Sum Scheme, CareShield Life and ElderShield.
The past few weeks have seen some Singaporeans voicing their displeasure over how the CPF Retirement Sum Scheme (RSS) is being carried out. We won’t go into the details of this again but it’s worth noting that the virality of the issue has led to CPF coming out with its own infographic to explain the situation. You can also read more about our thoughts on this issue here.
It pays to be informed about the various schemes that impact us as Singaporeans, and to decide for ourselves which choices we want to make for our own financial well-being, rather than to remain ignorant about these schemes, make the wrong decision because of a lack of understanding, or worse, be involved in unnecessary fear-mongering.
Commencement Of CPF Payout Once You Reached Payout Eligibility Age
Regardless of your personal view of when you think the CPF Board should commence automatic monthly CPF payouts to its members, you should still understand what the default choice will be if you choose not to do anything, whether deliberate, due to forgetfulness or ignorance.
Members who are under CPF LIFE or the Retirement Sum Scheme (there are subtle differences between the two) can commence CPF payouts from age 65, for those were born in 1954 or later. Those who are older will have an earlier Payout Eligibility Age (PEA).
While the earliest PEA is 65, members are able to defer their monthly payouts until the age of 70. They can also choose to commence their payouts anytime in between the age of 65 to 70.
You must also decide which CPF LIFE plan you want to choose before you commence your payout. There are three different CPF LIFE plans today, inclusive of the CPF LIFE Escalating plan which was introduced in 2018.
What happens if you choose not to do anything?
The CPF Board will not commence your payouts until it receives instruction from you to do so, or until you reach 70, whichever is earlier. If you choose not to do anything, your payouts will automatically start at age 70 and you will be enrolled under the CPF LIFE Standard Plan.
Do note that in the past, CPF members under the Retirement Sum Scheme could defer their monthly payouts indefinitely, as there was no automatic start age for payouts. This option no longer applies today for those turning 65.
Retirement Sum Scheme Or CPF LIFE?
While the majority of Singaporeans will find themselves automatically enrolled in CPF LIFE, there are three main groups of people who will find the Retirement Sum Scheme relevant to them today.
The first group are those who were already making withdrawals on their Retirement Sum Scheme in 2009, before CPF LIFE was introduced.
The second group of people are those who were born before 1958, but had not yet begun their Retirement Sum Scheme withdrawals. This is because CPF LIFE was launched with an auto-inclusion criteria that required only those born in 1958 or after to mandatorily join the CPF LIFE scheme, if they are able to.
The third group are those who were born in 1958 or after, but who fail to meet the CPF LIFE auto-inclusion criteria as stated on the CPF website:
– You are a Singaporean Citizen of Permanent Resident born in 1958 or after; and
– Have at least $60,000 in your Retirement Account six months before you reach your payout eligibility age (PEA)
This group of people will automatically be enrolled into the Retirement Sum Scheme when they turn 65.
What happens if you choose not to do anything?
If you are on the Retirement Sum Scheme, you will receive a monthly payout from your Retirement Account (RA) until it’s exhausted. However, you still retain the option of joining CPF LIFE if you want to. You can do so by using the remaining savings in your RA to join CPF LIFE before you turn 80.
Opting In (Or Out) Of ElderShield/CareShield Life
While this scheme is not yet in place and the option to opt in/opt out can’t be carried out yet, it’s worth understanding the various permutations that will be relevant once CareShield life is introduced, rather than to be caught off-guard in the future.
It’s a little confusing because each age groups highlighted below have different options to consider. The options which are available to your parents may not be available to you. There is no need to be confused though. Simply follow your age group below and we will explain all you need to know.
Cohort 1: Born between 1980 to 1990 (Age 30 to 40 In 2020) or after – Auto-inclusion into CareShield Life. Newer cohorts will be automatically covered once they reach 30. CareShield Life is compulsory for all Singaporeans and PRs who will be between 30 and 40 years old in 2020 and thereafter, the scheme will also be compulsory for Singaporeans and PRs once they turn 30.
Cohort 1: What happens if you choose not to do anything? Nothing. It’s compulsory so no actions are required on your part.
Cohort 2: Born between 1970 to 1979 (Age 42 to 51 in 2021) – Auto-inclusion into CareShield Life in 2021 for those who are on the ElderShield 400 Scheme and not severely disabled. There is an opt-out choice from CareShield Life for this cohort. If you are not on ElderShield, or are severely disabled, you will not be automatically enrolled into CareShield Life and will need to apply for it on your own, if you qualify.
Cohort 2: What happens if you choose not to do anything? You will be covered under CareShield Life instead of ElderShield from 2021 onwards. You have until 31 December 2023 to opt out of CareShield Life if you want. If you opt out from CareShield Life, you will revert back to ElderShield coverage, which you can also opt out from if you want. If you are not covered, you can also opt back in to ElderShield, or choose to enrol yourself into CareShield Life, if you still qualify for it.
Cohort 3: Born before 1970 (Age 52 or above in 2021) – No auto-inclusion into CareShield Life in 2021. You will remain on your existing ElderShield plan, if you still have it. You can choose to opt in to CareShield Life if you want and still qualify for it. You can also opt out of ElderShield if you wish.
Cohort 3: What happens if you choose not to do anything? You will continue to be covered under ElderShield, if you are still on it. You can opt out of ElderShield and choose not to be insured by either ElderShield or CareShield Life. You can also opt back in to ElderShield, or choose to enrol yourself into CareShield Life, if you still qualify for it.
Know off some other schemes that we should include? Drop us a message at firstname.lastname@example.org if there are any important schemes in Singapore that you think deserve to be mentioned and explained.
DollarsAndSense.sg aims to provide interesting, bite-sized and relevant financial articles.
Learn together with like-minded Singaporeans at the Personal Finance Discussion SG Facebook Group by discussing a range of personal finance topics.
If you have not done so, subscribe to our free e-newsletter to receive exclusive content not available anywhere else.