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by PNGMK » Wed, 16 Jan 2019 9:04 am
From my insurance advisor:
1) Upon reaching age 55, CPF board will set up a retirement account (RA) for you up to the full retirement sum (FRS) of $176,000 (current sum). The money comes from your special account (SA) and ordinary account (OA) (if the SA is insufficient to meet the FRS. The FRS in the RA will start to pay you a monthly income from age 65 for life. You only need to decide on basic, standard or escalating option at age 65 (so for PR can ignore this issue until 65 safely).
2) When you cancel your SPR and decided to close your CPF account, the unused CPF Life premium (without interest) will be returned to you together with balance in your OA, SA and MA (if available). Assuming you are 55 now with FRS of $176,000, the first $30k will earn 6% interest, next $30k earn 5% and balance earn 4% interest until age 65.
If you choose basic option at age 65, approximately 20% of the RA will be paid into CPF Life premium. If you close the CPF account at age 70, the balance in your RA plus the unused CPF life premium (without interest) plus OA, SA and MA will be returned to you. If you choose standard option at age 65, the whole RA will be paid into CPF life premium. If you close the account at age 70, the unused CPF life premium (without interest) plus OA, SA and MA will be paid to you. Basic option pays you slightly monthly CPF life but higher bequest because the 20% RA paid into the CPF life premium is used to buy an annuity that starts from age 90.
In summary there is no real issue getting MOST of the money back when PR cancelled after 65 but it will less the interest lost for the portion used for CPF life premium hence use the basic option to minimize this. In short you need to decide at 65 if you plan to stay or leave to maximise CPF payout. One reason to keep CPF however is that it is very hard for a third party (such as a bankruptcy or divorce court overseas) to gain access to those funds. I know PR's who have cancelled PR and left the money in CPF knowing it was unreachable.
I not lawyer/teacher/CPA.
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