What is the Basic Retirement Sum and why does it need to increase?
The Basic Retirement Sum (BRS) provides CPF members with monthly payouts to cover basic living expenses in retirement.
The BRS is adjusted gradually so that payouts remain sufficient for basic living expenses for future cohorts of members. This is so that when it’s our turn to retire, our estimated monthly payouts will be in sync with the cost of living then. BRS adjustments generally account for long-term inflation and some improvements in standard of living, and is also in line with rising income levels.
How does the CPF Retirement Sum affect me?
Let’s start off by explaining what we currently have in our CPF — there’s the Ordinary Account (OA), Special Account (SA) and MediSave Account (MA).
On our 55th birthday, our Retirement Account (RA) will be created. The savings from our SA, followed by our OA, will be transferred to the RA, up to our Full Retirement Sum (FRS). This retirement sum will be used to join CPF LIFE, which is essentially a longevity insurance.
Based on the amount that you’ve set aside as your retirement sum, you will get monthly payouts under CPF LIFE for as long as you live — these monthly payouts are for life (yes, even if we live beyond 100 years old), and the more we can set aside in our RA, the higher our monthly payouts will be.
So you might want to think twice before withdrawing your CPF savings at age 55.
As a guideline (we can have any amount in between), there are 3 types of retirement sums:
- The Basic Retirement Sum (BRS)
- The Full Retirement Sum (BRS x 2)
- The Enhanced Retirement Sum (BRS x 3)
Here are the latest figures for 2020:
Type of Retirement Sum | RA savings required at 55 | Estimated monthly payout (from 65 years old) |
---|---|---|
Basic Retirement Sum | $90,500 | $750 – $810 |
Full Retirement Sum | $181,000 | $1,390 – $1,490 |
Enhanced Retirement Sum | $271,500 | $2,030 – $2,180 |
*In 2021, the BRS will be $93,000; and in 2022, the BRS will be $96,000. Compared to the 2020 cohort, members in the 2021 and 2022 cohorts who set aside their BRS will enjoy higher monthly payouts from age 65.
It seems like a lot of money now, but don’t worry! During the Budget 2020 announcement (PDF, 0.07MB), Deputy Prime Minister Heng Swee Keat said that about 70% of those turning 55 in 2021 and 2022 are expected to be able to set aside their BRS, compared to just 40% of those who turned 55 in 2010.
If you’re still worried, there are some actions you can do today to help ensure that you set aside your retirement sum and thus, the monthly payouts that you desire. But before we go onto that, let’s take a look at 3 possible scenarios:
Scenario 1: You manage to set aside more than your CPF Basic Retirement Sum
Meet Tim. He is 55 years old this year and has managed to accumulate $120,000 in his RA — above the 2020 BRS of $90,500 but below the FRS ($181,000). He co-owns a HDB flat that he bought in his 30s, and doesn’t plan to sell it, so that’s a good 70-odd years left on his lease.
Because he has a property that can last him till at least age 95, he can choose to withdraw the amount (excluding top-up monies, government grants, and interest earned) above his BRS, which is $29,500.
However, he can also choose to not withdraw this amount and set aside a higher retirement sum, so that he can receive a higher payout from age 65. With $120,000 as his retirement sum, he will receive around $1,030 per month for as long as he lives — that’s $220 MORE a month than if he had only set aside the BRS!
Tim just turned 55:
CPF BRS 2020: $90,500
Tim’s CPF RA savings: $120,000
When Tim turns 65:
Tim’s estimated monthly payout* from CPF LIFE (just BRS): $810/month
Tim’s estimated monthly payout* from CPF LIFE (with FRS: $1,030/month
*Based on the CPF LIFE Standard Plan payouts of a Singaporean male, computed as of 2020
Scenario 2: Your CPF savings go beyond the Enhanced Retirement Sum
Enter John. He is also 55 years old this year but he has managed to accumulate a total savings in his OA and SA of $300,000. This is higher than the 2020 ERS of $271,500.
As the ERS is the maximum amount John can have in his RA in 2020 (and he chooses to set aside this amount to join CPF LIFE), he will receive a monthly payout of $2,180 from 65 years old for the rest of his life.
Alternatively, John can choose to just set aside the FRS to join CPF LIFE, or any amount in between the FRS and ERS and withdraw the remaining amount. Here’s a quick comparison of the varying monthly payouts he will receive for each option:
Retirement sum John chooses to set aside at age 55 | Monthly CPF LIFE payout* (from age 65 to rest of life) |
---|---|
FRS — $181,000 | $1,490 |
John’s pick — $200,000 | $1,640 |
ERS — $271,500 | $2,180 |
*Based on the CPF LIFE Standard Plan payouts of a Singaporean male, computed as of 2020
As the retirement sums are just a gauge, John can choose to leave any amount in between and his monthly CPF LIFE payouts will be calculated based on how much he sets aside in his RA.
Estimate your own payout with the CPF LIFE Estimator.
Scenario 3: When setting aside the CPF Basic Retirement Sum is a challenge
Some of us might be self-employed, unemployed or stay-at-home-mums (for self-employed individuals, CPF contributions for all three accounts is optional, but MA is compulsory). It’s also tough for those of us who are constantly between jobs, unable to work due to a chronic illness or can only draw a lower income from part-time/ad hoc jobs.
How like that?
Enter Sam. He turns 55 this year and has less than the BRS in his RA.
It is NOT compulsory for Sam to set aside the BRS. He does NOT need to top up the shortfall with cash. He also does NOT need to sell his property to set aside the BRS. The existing amount in his RA will form his retirement sum, and he can still receive monthly payouts from his 65th birthday. These monthly payouts will be pro-rated based on what’s in his RA.
If Sam has $5,000 or less in his SA and OA — He can withdraw $5,000 from age 55. If he subsequently has savings in his RA, he will receive monthly payouts from what he has set aside as his retirement sum from age 65.
If Sam has more than $5,000 but less than the BRS in his RA — he can withdraw $5,000 from age 55, and similarly, he will receive monthly payouts from what he has set aside as his retirement sum from age 65.
Let’s say Sam has $60,000 in his Retirement Account. His monthly payouts will be around $580 (based on the CPF LIFE Standard Plan payouts of a Singaporean male, computed as of 2020).
If Sam has any new CPF contributions, government top-ups, or other refunds received after his 55th birthday, part or all of these amounts will be transferred to his RA, up to his applicable FRS when he next withdraws his CPF.
Note: CPF members who are born in 1958 or after also have the option to withdraw up to 20% of the savings in their RA as at age 65. The 20% includes the first $5,000 they can withdraw from age 55 and excludes top-ups made and any bonuses received.