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Would you consider the CPF Annuity scheme as a pension optio

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Would you consider the CPF Annuity scheme as a pension optio

Postby PNGMK » Thu, 31 Jul 2014 12:23 pm

I am not going to be able to get a pension in my home country nor from my employer.

I was looking at my CPF balance today and I tried the online CPF Life Annuity calculator. It offered a $1500 to $1600 payout for life per month on a starting balance (at 65) of $200,000 (in fact I estimate I would have closer to $300,000 by 65 if I continue to work and contribute to 65 which pays $2000 pm - in fact thinking about if - if I sold my Singapore property and paid by the CPF contributions it's probably a lot more).

I thought this would be a reasonable pension (it actually beats the OAP in Australia which is roughly $1000 pm I think) - assuming you have a paid off house and no debts and live in a low cost economy (Thailand, rural USA) it's not an unreasonable option, particular as we will have other assets and cash on hand.

Any thoughts?

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Postby Beeroclock » Thu, 31 Jul 2014 2:52 pm

On the surface a yield of 9% seems quite good, but I haven't done the maths of the principal drawdown / life expectancy etc to work it out against a DIY approach with bonds etc.

One other thought, I personally would prefer to hold such an investment in my home country / home currency (i.e. where you are planning to retire). If I am right in understanding your objective is a low risk / pension income stream, so I wouldn't want the FX risk, overseas regulatory risk (e.g. if SG changes the policy on CPF in future), hassle of transferring money, etc.

BTW, are you even eligible to stay in the CPF Life scheme if you are living abroad and your PR expires/ could not renew REP ?

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Postby sundaymorningstaple » Thu, 31 Jul 2014 4:42 pm

I know people who are holding CPF accounts who contributed 30 years ago when EP holder were required to contribute. Those accounts are still drawing the same interest as everybody else it. There is nothing to stop you from purchasing an annuity from them and I doubt that holding PR or Citizenship is a requirement. In fact, I'm pretty sure they would much rather have you withdraw it a little bit at a time rather than a full withdrawal if you give up your PR or Citizenship (You are not required to withdraw your CPF even if you do give up your PR or Citizenship).

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Postby Beeroclock » Thu, 31 Jul 2014 4:58 pm

sundaymorningstaple wrote:I know people who are holding CPF accounts who contributed 30 years ago when EP holder were required to contribute. Those accounts are still drawing the same interest as everybody else it. There is nothing to stop you from purchasing an annuity from them and I doubt that holding PR or Citizenship is a requirement. In fact, I'm pretty sure they would much rather have you withdraw it a little bit at a time rather than a full withdrawal if you give up your PR or Citizenship (You are not required to withdraw your CPF even if you do give up your PR or Citizenship).

Ah okay thanks SMS. I guess it's a small risk that they change the rules, but my other points still hold. They way I think of this kind of investment is you want negligible risk / set and forget / fixed monthly payments. So all things being equal I would much rather structure this in my country of retirement. However if the CPF annuity rate is superior by a big enough margin then of course it might be worth taking on

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Postby sundaymorningstaple » Thu, 31 Jul 2014 5:14 pm

Well, I'm looking at a country who, despite the rest of the world's financial shambles, still holds a triple AAA rating. This shows me prudence in not just printing more and more money like my country is doing. I reckon, investing in an annuity here is likely to be worth more and more as I don't see the SG$ going into the crapper, but just the opposite. In fact, in spite of all the measures to cool it off, it continues to grow stronger. I'm worried more about my Social Security in the US than I would be about any CPF annuity here. (in fact, I expect that socialist barsteward in the whitehouse to try to take it away from those of us who qualified all those decades ago, but haven't contributed in the past 20~40 years. (Small, though it is, it's still mine).

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Postby sundaymorningstaple » Thu, 31 Jul 2014 5:24 pm

Beeroclock wrote:Ah okay thanks SMS. I guess it's a small risk that they change the rules, but my other points still hold. They way I think of this kind of investment is you want negligible risk / set and forget / fixed monthly payments.


Oh, you mean like all those Americans who invested in IRA's, Keogh & 401k plans? [-o<

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Postby PNGMK » Thu, 31 Jul 2014 10:30 pm

We would have other income streams. It seems this is an easy way to get a reasonable and secure annuity. From what I can tell residency etc doesn't seem to matter once you're 'in' the scheme.

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Postby Primrose Hill » Fri, 01 Aug 2014 4:40 pm

This is interesting. Residency doesnt present a problem, this makes it a good proposition.
My state pension in UK will be :mad: :mad: its a pittance.

I wonder if lets say I defer my retirement, can I still put money into my CPF?
Or if I park the CPF where it is and defer the withdrawal so that it can accumulate interest, will that work too?

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Postby Barnsley » Fri, 01 Aug 2014 6:19 pm

sundaymorningstaple wrote: I expect that socialist barsteward in the whitehouse .


One mans socialist is another mans Right wing looney.

:cool:

I wouldnt consider Obama a socialist on the European Scale.
Life is short, paddle harder!!

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Postby PNGMK » Sat, 02 Aug 2014 3:53 pm

Primrose Hill wrote:This is interesting. Residency doesnt present a problem, this makes it a good proposition.
My state pension in UK will be :mad: :mad: its a pittance.

I wonder if lets say I defer my retirement, can I still put money into my CPF?
Or if I park the CPF where it is and defer the withdrawal so that it can accumulate interest, will that work too?


I am not sure of the exact ages (I'm 50) but it looks as thought you could do this to maximize payouts;

1. Not withdraw CPF even if you have minimum sum in at 55
2. Continue to add to your CPF RA account post 55 by working and top ups
3. At a minimum age of 65 (not 62 - the offical retirement age - this gap has been in discussions in parliament I think) start receiving annuity payments. I don't think you can defer accepting annuity payments (i.e. from 65 to 67 for example).

If you've withdrawn your CPF or don't have much it might not make sense. However don't forget your CPF is not just what is in the accounts but also what has been withdrawn for housing and education. As I plan to sell our condo when we leave we will have at least 200K go back into my CPF account on that sale by my calculations.

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Postby Primrose Hill » Tue, 05 Aug 2014 2:14 pm

We didnt qualify for HDB housing when we received our PR, so that didnt count. Also as PR I am not eligible for any tax rebate as working mom and supporting an elderly parent either. 8-)
There are 2 things we saved is the ABSD; 5% and not 7% in UK and the lower income tax and GST.

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Postby PNGMK » Tue, 05 Aug 2014 3:21 pm

Primrose Hill wrote:We didnt qualify for HDB housing when we received our PR, so that didnt count. Also as PR I am not eligible for any tax rebate as working mom and supporting an elderly parent either. 8-)
There are 2 things we saved is the ABSD; 5% and not 7% in UK and the lower income tax and GST.


Did you use any CPF for your private property purchase in Singapore?

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Postby Primrose Hill » Tue, 05 Aug 2014 4:50 pm

Nope. We bought the SG home on condition that we get our PR. Signed on the dotted line the day we got it.
We used our London primary residence to fund the purchase here. No UK CGT.

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Postby PNGMK » Tue, 05 Aug 2014 8:05 pm

Primrose Hill wrote:Nope. We bought the SG home on condition that we get our PR. Signed on the dotted line the day we got it.
We used our London primary residence to fund the purchase here. No UK CGT.


That's an interesting 'condition of sale' :)

You should be;

Maximizing SRS
Maximising CPF voluntarry contributions (which are also a tax deduction)
Converting as much income into capital gains
Avoiding drawing down on CPF at 55 for as long as possible
Working an 'extra year' after you feel like retiring
Minimizing costs and spending
Focusing on moving your investment income, savings and assets into the currency you think you'll need for retirement to avoid any nast forex surprises (which always happen).


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