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How does CPF life and cancelling PR work?

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PNGMK
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How does CPF life and cancelling PR work?

Postby PNGMK » Tue, 08 Jan 2019 10:42 am

1. At what age are (post 1961 born) individuals required to buy a CPF life annuity?

2. If a PR has a CPF life scheme how is that scheme cancelled or cashed in when the PR cancels his/her PR with ICA?

There is talk that when a person turns 55 they have to buy CPF life but I don't think that's the case. As a PR I may use CPF life but I don't want to make that decision until I am finished with full time work here.
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PNGMK
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Re: How does CPF life and cancelling PR work?

Postby PNGMK » Tue, 08 Jan 2019 11:03 am

Findings so far:
1. CPF Life is automatic for SPR after 55. An RA will be created and annuity purchased.
2. Of the three plans I think the sensible one for a PR who plans to withdraw his CPF if the "CPF Life Basic" partly because the IRR is likely to be higher than Standard Plan and also because CPF Life Basic is more transparent.

For CPF Life Basic, 90% of the money is still residing in the CPF Member's CPF Retirement Account. The CPF Member can see for himself all the transactions and interests earned in that account.For the CPF Life Standard Plan the entire CPF-RA is deducted and invested into the annuity pool. Obviously for a PR we don't want the entire RA account locked up.

It is important to note that the CPF Life Standard is the default plan. This means if the CPF Member do not do anything, the CPF Member will be automatically opt-ed into the worst of the two plans.

Outstanding questions:

1. If annuity is cancelled when a SPR cancels PR will there be a refund?
2. How much is the annual premium for CPF Life Basic?
3. When do the annuity premiums begin (appears to be 55?).
I not lawyer/teacher/CPA.
You've been arrested? Law Society of Singapore can provide referrals.
You want an International School job? School website or http://www.ISS.edu
Your rugrat needs a School? Avoid for profit schools
You need Tax advice? Ask a CPA
You ran away without doing NS? Shame on you!

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PNGMK
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Re: How does CPF life and cancelling PR work?

Postby 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.
You've been arrested? Law Society of Singapore can provide referrals.
You want an International School job? School website or http://www.ISS.edu
Your rugrat needs a School? Avoid for profit schools
You need Tax advice? Ask a CPA
You ran away without doing NS? Shame on you!

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Wd40
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Re: How does CPF life and cancelling PR work?

Postby Wd40 » Fri, 25 Jan 2019 1:34 pm

I don't think too many people are knowledgeable about stuff like this on this forum. Head over to Hardware zone money mind forum and look for BBCwatcher. He used to contribute on this forum in the past.

Sent from my Redmi Note 4 using Tapatalk

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PNGMK
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Re: How does CPF life and cancelling PR work?

Postby PNGMK » Fri, 25 Jan 2019 7:54 pm

I have pretty much found everything. Thanks thou for telling us where he ended up!
I not lawyer/teacher/CPA.
You've been arrested? Law Society of Singapore can provide referrals.
You want an International School job? School website or http://www.ISS.edu
Your rugrat needs a School? Avoid for profit schools
You need Tax advice? Ask a CPA
You ran away without doing NS? Shame on you!


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