CPF Retirement Sum Scheme to be capped at age 90 for higher payouts

CENTRAL Provident Fund (CPF) payouts under the Retirement Sum Scheme (RSS) will now last up till the age of 90 at most, down from 95 previously, Manpower Minister Josephine Teo said in Parliament on Monday.

The move was made in response to feedback and after a review of the scheme by the MOM and CPF Board. It will allow for higher payouts for some members, while no one will see their payouts reduced, she emphasised.

The RSS is the main CPF retirement income scheme today, before the first cohort of mandatory CPF Life members reaches payout eligibility age in 2023. Even for that first cohort, those who do not have at least S$60,000 in their Retirement Account at age 65 will not be put automatically on CPF Life, and will be on RSS.

The RSS base payout generally lasts 20 years from the payout eligibility age of 65, till age 85. In 2008 and 2016 respectively, extra interest and additional extra interest - earned from age 55 onwards - were introduced. This is used to extend payouts beyond the 20-year period, to age 95 at most, "to protect members from outliving their RSS payouts".

The government received feedback from members who felt the duration up till age 95 was too long. The RSS payout rules will thus be changed.

All extra interest earned from age 55 till payouts start will now be used to increase the payout amount. Extra interest earned after payouts start will be used to extend the duration, up to age 90 at most.

Mrs Teo gave the illustrative example of a 65-year-old who is starting RSS payouts today and would have a monthly payout of S$470 for 30 years under current rules. Under the new rules, his payout will increase to S$520 but end at age 90, after 25 years.

All RSS members who turn 65 from July 1, 2020 will be on the new payout rules. For older members already receiving payouts, the new rules will apply from Jan 1 if the resulting payout is higher than their current one. Around 60,000 older members will see their payouts increase as a result.

Based on 2018 statistics, about a third of CPF members are expected to live beyond 90, and a fifth beyond 95. Those who prefer a longer payout duration have the option of joining CPF Life before age 80, guaranteeing payouts for life.