The government announced that it has decided to introduce two new CPF schemes: CPF Life with escalating payout feature and the Lifetime Retirement Investment scheme.
CPF Life with Escalating payout
There will be a new CPF Life plan in which its payout increases at 2% per annum. Below is an illustration on how the CPF Life with Escalating Payout looks like:
The blue color is the CPF Life Standard Plan. The red color is the CPF Life with Escalating payout. According to the CPF Advisory Panel report, the escalating payout will start at approximately 20% lower compared to the CPF Life Standard Plan. However, the payout increases at 2% per annum. By age 87, the CPF Life with Escalating payout is 20% higher than the Standard Plan.
If you want the escalating payout to start at the same amount as CPF Life Standard, you can either top-up about an additional 30% into the CPF or defer the payout by 4 years.
CPF Lifetime Retirement Investment Scheme
Given that majority of the CPF Members did worse than the guaranteed interest earned by CPF (see The Tragic Liberalization of the CPF Investment Schemes ), the government has agreed to setup simplified funds that promised to be super low cost and passively managed. These funds do not need CPF investors to actively rebalance. To prevent investors from trying to time the market or churn their investments, there will be procedure in place such as minimum investment period and limited switches.
Download the CPF Advisory Panel Report
If you want find out more, may I invite you to download the Full Report on CPF Life with Escalating Payout and Retirement Investment Scheme. The report is available to existing subscribers.
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