Highlights of CPF SA closure and CPF LIFE

By Lorna Tan

If you’ve only got a minute:

• For CPF transfers of your existing CPF savings from your account to yourself or your loved ones, the transferred savings will start earning interest in the receiving account from the month of transfer.
• Cash top-ups to SA/RA will start earning interest from the following month.

• A change of CPF LIFE plan type is possible under certain terms and conditions.

The Central Provident Fund (CPF) Special Account (SA) closure took place on 19 Jan, affecting 1.4 million CPF members who are age 55 and above. Before it happened, I took a screenshot of the retirement dashboard in the CPF Mobile app, and silently bid farewell to my SA. After all, the SA has served me and many CPF members well, generating 4% return, compounded annually.

Earlier this year, I topped up my Retirement Account (RA) to the prevailing Enhanced Retirement Sum (ERS) of S$426,000. So, when my SA was closed, all my SA savings of about S$230,000 went to my Ordinary Account (OA). As I have no pressing liquidity needs, I intend to keep them in my OA and invest some under CPF Investment Scheme (CPFIS) to earn potentially higher returns than the OA interest of 2.5% pa. If I find viable investment options outside of CPFIS, I can withdraw a portion of my OA anytime.

There are still many questions about the CPF SA closure and CPF LIFE scheme. Here are several FAQs that you should know.

CPF SA closure

Q. I am aged 55 and above. What will happen when my SA is closed and what is the rationale for doing so?

From 19 January 2025, if you are aged 55 and above, your SA will be closed to better align CPF interest rates to the nature of CPF savings in each CPF account. Here’s what will happen:

 SA savings will be transferred to your RA, up to your Full Retirement Sum (FRS). These savings will continue to earn the long-term interest rate.

If you have set aside your FRS, whether fully in cash or with a mixture of property and cash, any remaining SA savings will be transferred to your OA, where they remain withdrawable and will earn the short-term interest rate.

This change ensures that only savings that cannot be withdrawn on demand should earn the long-term interest rate, and savings that can be withdrawn on demand should earn the short-term interest rate.

You will receive a hard copy notification, as well as an email/SMS where applicable, after your SA is closed. You can also check your latest CPF balances and transaction history by logging into CPF Board portal or CPF Mobile app via Singpass.

You can choose to transfer your OA savings to the RA at any time, up to the prevailing ERS to earn long-term interest rates and receive higher retirement payouts. Once transferred, the RA savings can only be streamed out to you in retirement payouts when you turn 65. With the raised ERS from 1 January 2025, more than 99% of the members aged 55 and above today would be able to transfer all their SA savings, that were channelled to the OA due to the closure of SA, to the RA.

Q. I am aged 55 and above. How much interest will I earn on the SA savings that are transferred to my RA and OA when my SA is closed?

As CPF interest is computed monthly, your SA savings (excluding contributions and refunds received in the month) that are transferred to your RA, up to the FRS, will earn RA interest for that month. The RA interest rate is the same as the SA interest rate.

Remaining SA savings that are transferred to your OA will earn OA interest for that month. If you wish to earn the RA interest rate on these savings and receive higher retirement payouts, you may transfer your SA savings that were channelled to your OA, to the RA up to the current year’s ERS, after your SA has been closed. The amount transferred to your RA (excluding any new contributions and refunds received in the month) will earn the RA interest rate in the month of transfer. For example, if you transfer your OA savings to your RA in January 2025, the amount transferred will earn the RA interest from January 2025.

Please note that CPF transfers are irreversible, and the savings are set aside to boost your monthly payouts in retirement. In general, online transfers from OA to RA are processed within the same day. However, a longer processing time may be required for certain transfers, such as first-time transfers to loved ones, as checks to verify relationships will need to be conducted. The processing time for such scenarios may take five working days upon receipt of application or longer if the volume of applications is high.

Q. When will the top-ups received in my CPF Special/Retirement Account start to earn interest?

If you receive a cash top-up this month, it will start earning interest in the next month.

For CPF transfers of your existing CPF savings from your account to yourself or your loved ones, the transferred savings will start earning interest in the receiving account from the month of transfer. However, if the transferred savings are fresh injections (e.g. working contributions credited in the current month), it will start earning interest in the receiving account from the next month.

Illustration: $1,000 is transferred in January from OA to SA or RA of the recipient (self or loved ones).

(A) If the $1,000 is existing OA savings (e.g. giver did not have new working contributions in January), it will start earning SA/RA interest in the recipient's SA/RA from January.

(B) If the $1,000 is January working contributions from OA savings, it will start earning SA/RA interest in the recipient's SA/RA from February.

Q. How does the closure of SA affect my voluntary top-ups to my 3 CPF accounts?

If you are below age 55, your voluntary top-ups to 3 accounts will continue to be allocated to the OA, SA, and MediSave Account.

If you are aged 55 and above, the portion of voluntary top-ups that goes to your SA currently will be allocated to your RA, up to the FRS. Once you have set aside the FRS in your RA, it will be allocated to your OA.

 

CPF LIFE scheme

When we reach our payout eligibility age of 65 at the earliest, we get to select 1 of 3 CPF LIFE plans. Here are some considerations.

• For the CPF LIFE Escalating Plan, the initial monthly payouts are lower than that of the Standard Plan by 20% and they rise by 2% each year, thereafter. It will take about 23-25 years for the cumulative payouts of the Escalating Plan to catch up with that of the Standard Plan.
• CPF LIFE Basic Plan’s monthly payouts are relatively lower than that of the Standard Plan while its bequest amounts are higher but up to a certain age. This is because the Basic Plan is structured in such a way that only 10-20% of your RA savings will be deducted as CPF LIFE premium when you join the annuity scheme. Under the Basic Plan, your monthly payouts will be paid out from your RA till it is depleted at about age 90, after which the payouts will come from the CPF LIFE pool.
• For the Standard and Escalating Plans, 100% of your RA savings will be deducted as CPF LIFE premium when you join CPF LIFE.

Q. Can I change my CPF LIFE plan type after I have joined CPF LIFE?

You can request to change your CPF LIFE plan type within 30 days from the date of letter sent to you when your original CPF LIFE plan was first issued. If you wish to do so, please write to CPF Board.

 A change of CPF LIFE plan type beyond the 30 days grace period is possible if

1. You are on these CPF LIFE plans of Basic, Balanced, Plus, or Income, and wish to change to the Standard or Escalating Plan; or
2. You wish to change from Standard to Escalating Plan.

Otherwise, changing of CPF LIFE plan after the grace period is not allowed as this will affect the payouts of other members on the scheme.

As changing of CPF LIFE plan is irrevocable, do consider your options carefully.

Q. Does my CPF LIFE premium continue to earn interest?

Yes, your CPF LIFE premium will continue to earn CPF interest rates with the floor rate of 4%, and up to 2% extra interest on the first $60,000 of your combined CPF balances. The interest earned is factored into your monthly payouts and you receive a higher payout from the start.

Q. What happens to the CPF interest earned on my CPF LIFE premium?

Your CPF LIFE premium will continue to earn CPF interest rates, which is factored into your monthly payouts to increase the amount you receive, compared to if there were no interests earned. These payouts continue for life, even after your initial premium is exhausted, ensuring lifelong financial security in retirement.

Q. What will happen to my CPF Life unused premium and interest when I pass away?

Upon a member's death, any unused premium is refunded to the member's beneficiaries. CPF Board does not keep any of the interest earned. Instead, it is pooled and used to ensure that remaining CPF LIFE members continue to get monthly payouts for as long as they live.

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Disclaimers and Important Notice
This article is meant for information only and should not be relied upon as financial advice. Before making any decision to buy, sell or hold any investment or insurance product, you should seek advice from a financial adviser regarding its suitability.