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Sharing Wisdom (7th March 2012)

Sharing Wisdom (7th March 2012)

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Published by Winston Wisdom Koh
CPF Life will be simplified to two plans from next year onwards. This is definitely a good initiative by the government but Singaporeans cannot rely on CPF alone for their retirement! (Winston)
CPF Life will be simplified to two plans from next year onwards. This is definitely a good initiative by the government but Singaporeans cannot rely on CPF alone for their retirement! (Winston)

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Published by: Winston Wisdom Koh on Mar 06, 2012
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03/06/2012

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SharingWisdom(7thMarch2012)
AsimplerCPFLifeannuityplanfromnextyear
6
th
March2012TheBusinessTimesByCHUANGPECKMING
FromJan1,majorityofthoseturning55willjoinit:Tharman
(SINGAPORE)ReassuringyoungerSingaporeansthattheywillhaveenoughCentralProvidentFund(CPF)savingstomeettheirbasicneedsinretirement,DeputyPrimeMinisterTharmanShanmugaratnamyesterdayunveiledasimplerCPFLifeannuityplanthatalmostallwhoturn55fromnextyearmustjoin.'2013willbeamilestonefortheCPF,'saidMrTharman,whoisalsoMinisterforFinanceandManpower.'FromJan1,2013,themajorityof(CPF)membersturning55willjoinCPFLife,insteadoftheMinimumSum(MS)Scheme.'Singaporeanswithbalancesofabove$40,000intheirRetirementAccount(RA)willbeautomaticallyincludedinCPFLife.Thosewithlowerbalancesmayoptin.CPFboardestimatedthatabout58,000SingaporeansintheCPFschemewillturn55in2013.CPFLife,intendedtoreplacetheMSScheme,wasfirstofferedtoolderSingaporeansontheCPFschemeinSeptember2009whentheyweregivenachoicetoswitchfromtheMSSchemetooneoffourplansunderCPFLife-Balanced,Plus,BasicorIncomePlans.ExceptfortheIncomePlan,theplansofferdifferentvariationsofmonthlypayoutsandbequests.TheIncomePlanleavesnobequestsforbeneficiaries.FromJan1,2013,therewillbeonlytwooptionsforthosewhoturn55:anewStandardPlanthatcombinesthebestfeaturesofthetwomostpopularexistingplans-BalancedandPlusPlans;andtheexistingBasicPlan.
 
SharingWisdom(7thMarch2012)TheIncomePlan,whichistheleastpopularamongexistingplans-only3percentofCPFmembersoptedforthis-willbedropped.TheStandardPlanprovideshighermonthlypayoutswhilestillallowingSingaporeanstodipintotheRAtopayforhousinguntiltheyare65yearsold.SingaporeanscanleaveabequesttobeneficiariesundertheStandardPlan,whichisalsothedefaultplan.TheBasicPlanisretainedforSingaporeanswhopreferlargerbequestsandlowermonthlypayouts.TheplanalsoallowsSingaporeanstheflexibilitytousetheirRAsavingstopayforhousingafter65.Some73,000olderSingaporeanshadchosentomovefromtheMSSchemetoCPFLifeinthepasttwooddyearswhentherewerefouroptions.TheymayremainontheirexistingplansorswitchtothenewStandardPlan,buttheymustexercisetheirchoicebyDec31,2013.ThoseontheMSSchemecancontinuetostayonit.ButwithSingaporeanslivinglonger,MrTharmancautionedthatagrowingnumberofretireeswilloutlivetheirCPFsavingsiftheywereontheMSScheme.WhiletheMSSchemeprovidespayoutsforslightlyover20years,CPFLifeprovidesSingaporeanswithanincomeforlife.'CPFLifeisthereforebothanimportantandtimelyevolutionoftheMSScheme,'MrTharmansaid.ThetransitionforSingaporeanswhoturn55nextyearwillbesmooth,heassured.'WealreadyhaveaMSSchemethateveryoneisusedto,wheremonthlypayoutsbeginatthedraw-downageof65,andabequestisleftformembers'beneficiariesattheirdemise,'MrTharmansaid.'ThiswillcontinueunderCPFLife.WhatCPFLifedoesistoextendtheMSSchemetolastforlife,withminimalreductioninmonthlypayouts.'OlderSingaporeansareasset-richbutcash-poor,hesaid.ButyoungerSingaporeans-especiallythoseinthemiddleandlower-incomegroupsthattheCPFsystemservesmainly-havesignificantlyhigherCPFsavingstoprovideforretirement'atalevelcomparabletothemedianforthedevelopedcountries,evenwithouttakingintoaccountthefactofhigherhomeownershipinSingapore'.MrTharmansaidtheMS-$132,000today-isnotexcessive,andthepercentageofactiveCPFmemberswhomeettheirMSat55hasbeenimprovingovertheyears,from36percentin2007to45percentlastyear.

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