https://www.straitstimes.com/business/interest-earned-on-cpf-balances-and-retirement-payouts-hit-new-highs-for-2023
2024-07-02
SINGAPORE - Central Provident Fund (CPF) members earned a record amount of interest on their CPF balances in 2023, with the figure crossing $20 billion.
Retirement payouts also exceeded $3 billion to hit a new high, with 513,000 CPF members receiving a monthly income.
The CPF Board said in its 2023 annual report that it paid out $21 billion in interest on CPF balances, an increase of 6.1 per cent from $19.8 billion in 2022. This comes as CPF members’ balances rose by 4.8 per cent to $571 billion.
Mr Bryan Chan, senior solutions specialist at wealth advisory firm Providend, said the average interest rate works out to 3.68 per cent, derived from expressing the total interest of $21 billion paid in 2023 as a percentage of the total CPF balances of $571 billion for the year.
He added that the average interest rate in 2023 is slightly higher than the 3.63 per cent derived from the 2022 figures. This might be because the interest rates on the Special Account (SA) and MediSave Account balances rose above the floor rate of 4 per cent for the first time in 2023, he noted.
The rates are reviewed every quarter and went up to 4.01 per cent during July to September, before rising another 0.03 percentage point to 4.04 per cent in the October-December quarter.
The year also saw a total of $3.4 billion disbursed to CPF members as retirement payouts, up 21.4 per cent from $2.8 billion in 2022.
This works out to a simple average of $552 a month for each of the 513,000 CPF members eligible for payouts.
This is up from about $532 per month in 2022 and $441 in 2021.
Ms Yong Ying-I, chairwoman of the CPF Board, said in the report that, since June 2023, the minimum monthly payout for seniors on the Retirement Sum Scheme had been raised from $250 to $350 per month.
These seniors, who had previously received less than $350 a month, have thus been getting higher payouts from June.
A CPF Board spokesperson said the Retirement Sum Scheme was further enhanced in 2023.
Cohorts born before 1948 have, since June, started to receive their payouts automatically every month. The policy was introduced in 2018, covering members who reached the age of 70 at that time (cohorts born on or after 1948).
Ms Yong added that, since October 2023, the CPF Board has automatically converted any savings in the Ordinary Account (OA) and SA into monthly payouts.
This process of automatically annuitising CPF savings applies only to CPF members who have not met their required retirement sum (RRS).
They may have continued to receive additional contributions to their CPF accounts – for example, if they are seniors who are still working.
Those who have set aside the Full Retirement Sum in cash, or who have a property and the Basic Retirement Sum in cash, are deemed to have met the RRS.
For those who do not meet the RRS, the annuitised savings can be used to provide them with higher monthly payouts for life.
About 7,000 members who are on CPF Life have benefited from this initiative, and many more will benefit in the future, Ms Yong said.
CPF Life provides monthly payouts to CPF members for as long as they live, even after the savings in their Retirement Account have been depleted.
The report noted that, in 2023, 32.4 per cent of active CPF members had not met their RRS, an improvement over 2022’s 33.3 per cent who failed to do so.
It is also a better outcome than in 2021, when 35.5 per cent of active members did not meet the target retirement sums.
An active CPF member refers to a person who is an employee and has at least one CPF contribution for the current month or any of the preceding three months. The self-employed are not considered active members.
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While the CPF is primarily meant for retirement needs, it is also designed to serve people’s housing and healthcare needs.
OA savings can be used for the down payment on property – both public and private housing – and for the payment of monthly loan instalments.
In 2023, $25.6 billion was used for housing purposes, up 16.9 per cent from $21.9 billion in 2022.
Mr Chan said while more OA savings are being used, the number of members who have tapped their OA for housing has risen too.
In 2023, 1.019 million CPF members dipped into their OA for housing, up from 987,000 in 2022.
This could mean more Singapore residents will own their homes and may not need to pay rental, thus requiring less retirement income in the future, Mr Chan added.
He also said part of the increase in OA usage may be due to rising property prices.
This just means property owners have more home equity to tap in retirement if they eventually decide to monetise their homes, Mr Chan said.
Home owners can do so through government schemes like the Housing Board’s Lease Buyback Scheme, which is applicable for public housing; or DBS Bank’s Home Equity Income Loan that allows private property owners to borrow against their property to boost their retirement income.
They can also downsize to a smaller home and free up the extra cash for their retirement needs.
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