Under the new CPF Life scheme, CPF members aged 50 and below will have their minimum sum cash balances divided into two portions when they turn 55. One part goes to the Retirement Account, which will be used for monthly annuity payouts, while the other, Refundable Premiums (RP) portion, will be used to pay for the premiums of the scheme.
Manpower Minister Ng Eng Hen assured Singaporeans that the new compulsory annuities scheme, administered by the Central Provident Fund (CPF) Board, which operates a more favourable interest rate structure than commercial annuity providers, will offer more attractive returns than similar products offered by the private sector. Those who opt for the scheme will enjoy payouts based on a minimum guaranteed interest rate of 3.5 per cent, which is higher than the 2 per cent rate of return that most commercial annuity providers guarantee.
From Jan 1, the Government has floated the interest rates for the Retirement, as well as the Special and Medisave accounts, and pegging them to 10-year Singapore Government Securities (SGS) rates. In order to help members adjust to the floating rate, the Government has guaranteed a minimum pay out of 4 per cent on such accounts for the next two years, after which all CPF accounts will attract a floor rate of 2.5 per cent. An additional 1 per cent interest will also be paid out on the first $60,000 of all accounts, with up to $20,000 in the Ordinary Account.
Other issues raised include the certainty that those who will live long enough will stand to receive the higher payouts. Singaporeans are free to sign up annuities plans with commercial providers and be exempted from the national scheme.
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