CPF Basic, Full and Enhanced Retirement Sum: How do they affect you?

Every salaried employee in Singapore makes CPF contributions each month, but the CPF system is understood by few.

There are more fun things to do with those precious post-work hours than to spend it on the CPF Board's website trying to decipher government-speak.

One of the most confusing aspects of the CPF system is that there are three different types of CPF retirement sums, namely: Basic, Full, Enhanced Retirement Sums.

Apparently, it's not enough to worry about whether we'll have enough money to retire. We now need to worry about which of the 3 Retirement Sums we should meet!

Here's a quick guide to understanding the three Retirement Sums and how they affect us.

1. CPF retirement sum: Basic, full, enhanced

There are three types of CPF Retirement Sums according to the CPF Board. From lowest to highest, they are:

• Basic Retirement Sum (BRS)
• Full Retirement Sum (FRS) = BRS x two
• Enhanced Retirement Sum (ERS) = BRS x three

Ok, what are they for? And why am I being forced into this compulsory savings by the government? According to CPF, here's what the three retirement sums are for:

• Basic Retirement Sum: Gives you some monthly payout when you retire, can cover your basic living expenses
• Full Retirement Sum: Gives you higher monthly payouts when you're retired, can cover basic living expenses + rent
• Enhanced Retirement Sum: Gives you even higher monthly payouts when you're retired, can cover your desired lifestyle

2. CPF retirement account: Opens when you turn 55 years old

The year you turn 55 will be a big year…not because you get to stop working, but because the money in your CPF Ordinary Account and Special Account will merge to form your Retirement Account.

You will also be able to finally withdraw some money from your CPF account.

But of course, the government would never let you withdraw everything.

How much can I withdraw from my CPF at 55 years old?

The CPF Retirement Sums will tell you.

3. CPF Withdrawal at Age 55: I Own A Property

You are 55 years old. If you own a property with a lease that's valid until you turn 95 years old (and beyond), the government thinks that you are financially safe for the rest of your life.

Thus, the requirements for your CPF Retirement Account balance will be more relaxed.

How much you can withdraw depends on how much money you have in your CPF Ordinary Account (OA), Special Account (SA), and Retirement Account (RA)…and if they hit the current Full Retirement Sum (FRS).

Here is a summary of how much you can withdraw from your CPF Account at age 55 and you own a property that can last you till 95 years old:

I heard I can pledge my property to withdraw more money from CPF. Is it true?

Yes, if you're age 55, own a property (last you until age 95), and only want to keep the $96,000 (Basic Retirement Sum) in your CPF, you need to pledge your property to withdraw the extra CPF.

I pledged my property to CPF. I can withdraw:

(Total CPF OA + SA) - $96,000 (BRS) = More CPF Withdrawal

I do not want to pledge my property to CPF. I can withdraw:

(Total CPF OA + SA) - $192,000 (FRS) = Less CPF Withdrawal

But… should you decide to sell off your property in the future, you must return the proceeds (or your share of them, if you co-own the home) to your CPF. And you must top up so your CPF reaches the Full Retirement Sum.

In the latter case, although you withdraw lesser money from your CPF, your subsequent CPF LIFE payouts will be higher.

4. CPF withdrawal at age 55: I don't own property

In a nutshell, for those who don't own property, the government wants to make sure you have at least the Full Retirement Sum in your CPF account.

However, as a consolation prize, they will allow you to withdraw at least $5,000 no matter how much or how little you have.

How much money do you have in your CPF OA & SA?	I can withdraw from my CPF…
$0 – $5,000	Everything
$5,000 – FRS	$5,000
Above FRS	$5,000 or Excess savings in your SA & OA above FRS, & All extra savings in your Retirement Account

5. CPF retirement sum vs CPF Life

Singaporeans born in 1958 and later will be automatically placed on the CPF Life scheme. However, you must have at least $60,000 in your CPF Retirement Account when you reach 65 years old.

At this juncture, CPF LIFE replaces the previous CPF Retirement Sum programme.

The CPF Retirement Sum scheme that we just talked about earlier pegs your monthly payouts to the retirement sum that is in your CPF accounts. The monthly payouts will end:

• when your CPF RA got no more money
• when you turn 90 years old (like term life)

But CPF Life guarantees monthly payouts for life, and pro-rates payouts based on the exact sum of money in the account. CPF Life is different from CPF Retirement Sums because:

• you need to transfer a lump sum premium from your CPF RA to CPF Life
• you get monthly payouts (like whole life)

How much monthly payouts will I get from CPF Life? Unfortunately, there isn’t an accessible CPF Life Calculator. The closest thing you can get is the CPF Life Estimator which only allows seniors aged above 55 to use.

Ok…so if I’m in my 30s or 40s now, I’m confirm enrolled in CPF LIFE lah. I don’t need to think about CPF BRS, FRS, ERS etc. right?

No. There is still one important reason why you need to know about the CPF Retirement Sum programme. When you turn 55 years old, the CPF Retirement Sums will affect how much money you can withdraw from your CPF account that year.

Now, let’s dive into each of the 3 different types of CPF Retirement Sums in greater detail.

6. CPF basic retirement sum (BRS)

The most recent BRS amounts are as follows:

Year (If you turn 55 in this year…)	Basic retirement sum
2020	$90,500
2021	$93,000
2022	$96,000
2023	$99,400
2024	$102,900
2025	$106,500
2026	$110,200
2027	$114,100

The government updates the BRS every year, but does not divulge figures more than one year in advance.

Assuming your CPF balance meets the Basic Retirement Sum at age 55 — if you do not have property, you will be able to withdraw $5,000.

If you own and pledge your property to CPF, you can withdraw any sums in excess of the BRS that you have in your Retirement Account.

7. CPF full retirement sum (FRS)

The FRS is double the BRS. Here are the most recent FRS sums:

Year (If you turn 55 in this year…)	Full retirement sum
2017	$166,000
2018	$171,000
2019	$176,000
2020	$181,000
2021	$186,000
2022	$192,000
2023	$198,800
2024	$205,800
2025	$213,000
2026	$220,400
2027	$228,200

If you do not have property and manage to hit the FRS, you will be able to withdraw $5,000 or any sums in excess of the FRS in your account, whichever is higher.

On the other hand, if you are a property owner and manage to hit the FRS, you’ll be able to withdraw any sums in excess of the BRS that you have in your Retirement Account.

The FRS is generally double the BRS, so you’ll be able to withdraw at least half of the money in your account.

8. CPF enhanced retirement sum (ERS)

For those on CPF Life, the ERS indicates the maximum amount of money you can keep in your Retirement Account, as well as the maximum amount of monthly payouts you can receive from age 65 onwards.

So, if you’re thinking of transferring more money to CPF in order to take advantage of the high interest rates, try not to exceed the ERS.

The ERS is 3 times the BRS. Here are the ERS rates:

Year (If you turn 55 in this year…)	Enhanced retirement sum
2017	$249,000
2018	$256,500
2019	$264,000
2020	$271,500
2021	$279,000
2022	$288,000
2023	$298,200
2024	$308,700
2025	$319,500
2026	$330,600
2027	$342,300

9. Does CPF retirement sum increase every year?

Increases in the BRS, FRS and ERS are made by the CPF Board according to their analysis of long-term inflation and rises in the standard of living.

While there is no way to predict the future, looking to the past, the past five years’ Retirement Sums were as follows:

Year (If you turn 55 in this year…)	Basic retirement sum	Full retirement sum	Enhanced retirement sum
2017	$83,000	$166,000	$249,000
2018	$85,500	$171,000	$256,500
2019	$88,000	$176,000	$264,000
2020	$90,500	$181,000	$271,500
2021	$93,000	$186,000	$279,000
2022	$96,000	$192,000	$288,000
2023	$99,400	$198,800	$298,200
2024	$102,900	$205,800	$308,700
2025	$106,500	$213,000	$319,500
2026	$110,200	$220,400	$330,600
2027	$114,100	$228,200	$342,300

In the past, there has been an increase of about three per cent each year.

From 2023 to 2027, the Retirement Sums will increase by 3.5 per cent per year.

To estimate the Retirement Sums when you turn 55, you can thus base your calculations on a 3.5 per cent year-on-year increase, bearing in mind that that might change depending on Singapore's financial future.

10. I can't even hit basic retirement sum

It's perfectly OK to not hit any of the three Retirement Sums above. There is no penalty for not hitting the Basic Retirement Sum.

Not hitting the BRS only means you'll only be able to withdraw $5,000 from CPF at age 55. Your retirement payouts will not be affected.

In the past, the old CPF Retirement Sum scheme did peg retirement payouts to whichever Retirement Sum you hit. Back then, failing to meet BRS might have been a cause for concern.

But the current CPF Life scheme is fully pro-rated based on the exact amount of retirement savings you have.

So whether you hit BRS or not, your lifetime payouts will be calculated fair and square.

11. CPF top up: Retirement account

Thinking of topping up your CPF so you can withdraw more money at age 55 to travel the world? It's not gonna work.

CPF top-ups do not count towards the Basic/Full/Enhanced Retirement Sum (insofar as they're used for calculating the amount of money you can withdraw at age 55).

For that matter, government grants and earned interest also do not count.

But CPF top-ups do count towards your retirement savings. The more you top up, the higher your CPF Life payouts. So you're still encouraged to top up to boost your retirement savings.

FYI, if your parents have not met the BRS, you can get dollar-for-dollar matching on voluntary CPF top ups through the CPF Matched Retirement Savings Scheme. More details in the following article.

12. How to grow my CPF retirement account

To recap, the Retirement Sum in your account will determine how much of your CPF savings you can withdraw after your 55th birthday.

Your CPF top-ups will not count towards the amount you withdraw at age 55.

But it's still a good idea to grow your retirement savings anyway. After all, withdrawing money at age 55 is a one-time event, while CPF Life payouts are for as long as you live.

There are generally two methods to boost your retirement income from CPF:

1. Top up your Retirement Account – The Retirement Sum Topping-Up Scheme lets you transfer cash to your CPF SA or RA. This not only boosts your monthly payouts and entitle you to tax relief, but also enables you to enjoy CPF's SA and RA interest rates, which are currently at a base rate of four per cent. You can top up your account to the ERS to maximise your payouts.

2. Invest your cash and top up CPF account later on – Not everyone is comfortable with locking money in their CPF account(s). One alternative is to invest your cash when you're younger and have a higher appetite for risk. Then when you're older, funnel some of your portfolio into CPF to earn risk-free interest rates, and to get higher monthly payouts for CPF Life.

This article was first published in MoneySmart.