CPF Payouts At Age 70, Let Willing Citizens Enjoy “Tangible Benefits” Of Higher Interest

An elderly man’s question about the age he could receive CPF retirement sum payouts, has warranted yet another round of clarifications from our government.

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This time, in the form of a lengthy explanation from Minister for Manpower Josephine Teo on Monday (18 Feb) in a Parliament session. She clarified the government’s rationale for making the minimum CPF payout age of 65 an opt-in requirement, instead of a default age.

No action is required if a member chooses to begin payouts at 70.

Here are the 8 reasons she listed, to justify the measure. You can view her full 45-min parliamentary response on Channel NewsAsia.

1. It’s “not assumed” members want payouts at 65, as there are “benefits”

The government doesn’t want to assume that every Singaporean wishes to begin their retirement payouts at early at 65, said Minister Teo according to TODAYonline’s report.

An infographic published on The Straits Times echoed this sentiment.

“It is not assumed that every member wants to start his payouts at 65 as there are benefits to deferring payouts.”
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This could ‘deprive them‘ of the chance to clock higher “risk-free” interest of up to 6% per year, if they were to leave their payouts within their accounts longer.

Members are allowed to inform the CPF Board if they wish to receive payouts once they turn 65.

2. Default payout age won’t be set at 65, opt-in still required

As of right now, CPF members on the Retirement Sum Scheme (RSS) can choose 1 of these 2 options:

  • Start monthly CPF payouts at 65
  • Begin them anytime between 65-70 years old

No action is required if one wishes to withdraw it by 70, instead of the minimum age of 65.

After the online debacle – which stirred the sentiment that CPF payouts should be issued automatically at 65 by default – 9 Members of Parliament (MPs) posed questions on possibly amending the payout age system, reported The Straits Times.

Minister Teo clarified that no such amendment will be carried out.

3. Making a “sudden change” in policy is confusing

She goes on to explain that making a “sudden change” in our CPF policy may cause confusion in members.

In her own words,

This has been the longstanding instruction. Every time there is a change, it takes a long while for people to get used to it.

This is due to Singaporeans already being “told for years” that payouts begin when they inform the CPF Board.

4. Up to 6% “risk-free” interest/year when payouts start later

The government or CPF Board has no vested interest in wanting CPF members to defer payouts beyond 65, according to Mrs Josephine Teo.

She claims that members could in fact reap “tangible benefits” in the form of risk-free “higher interest” – up to 6% per year – by leaving their money within their accounts.

The rate of interest CPF Board is offering is apparently “well above market rates”.

5. CPF members cannot defer payouts past 70

For CPF members turning 70 from 2018, your payouts may not be deferred past 70.

This was a rule introduced for members who didn’t activate their payouts even when they reached 70.

Apparently, some Retirement Sum Scheme (RSS) members who passed away, still had CPF savings left in their accounts — a situation the government is looking to avoid.

6. CPF Board should update members clearly

She acknowledged that more can be done to get the message across effectively to CPF members, and avoid misunderstandings.

Referring to an elderly man’s viral Facebook post alleging that the payout age had been raised to 70, Minister Teo asserted that the miscommunication could have been avoided.

She added that there was “much room for improvement”, in the way the CPF Board informed members about when payouts began.

7. Common reasons for deferment

Minister Teo also added that 60% of eligible members who reached retirement age in 2017, didn’t ask to begin their payouts.

She cited at least 5 common reasons for deferment:

  1. Have other savings to draw from
  2. Still in the workforce
  3. Want to earn higher interest
  4. Didn’t know they can start earlier
  5. Didn’t inform CPF Board

8. Face-to-face CPF consultation available

The CPF Board will be trying to improve communication with its members, by relooking letters informing members of their upcoming retirement plans.

A new ‘in-person’ consultation service will be launched, so CPF members may seek answers to burning questions.

Minister Teo encouraged all members to visit CPF service centres to receive personal clarifications on their situations.

What do Singaporeans want?

Minister Josephine Teo has made an effort to clarify the government’s rationale regarding the age for CPF retirement payouts.

While we understand the “tangible benefits” of clocking higher interest when receiving CPF payouts at 70, we’re not sure if improving communication between the CPF Board and members would be enough of a solution to this conundrum.

Perhaps it’s time to consider setting the default age at 65 – without having to “opt-in” – especially if most Singaporeans agree that we wouldn’t mind receiving payouts earlier.

Let us know which age you’d prefer to begin receiving your CPF retirement payouts.

Featured image from GovSingapore on YouTube.