Why There Are 3 CPF Retirement Sums

The 3 CPF Retirement Sums

Singaporeans who turn 55 years old enjoy an exciting milestone because it marks the first time we can withdraw cash from our CPF accounts (and not just use it for our housing repayments or medical bills). The CPF Retirement Sum is an important number we need to keep track of as it determines how much we can withdraw from our CPF accounts.

For Singaporeans turning 55 years old in 2024, this is $102,900 for the Basic Retirement Sum (BRS), $205,800 for the Full Retirement Sum (FRS) and $308,700 for the Enhanced Retirement Sum (ERS).

So, why are there 3 Retirement Sums and why do they increase every year?

CPF Retirement Sum Only Kicks In At Age 55

When we turn 55 years old, a new CPF Retirement Account (RA) is created for us. The monies from our Special Account (SA) and Ordinary Account (OA) will be used to fund our RA, capped at the Full Retirement Sum (FRS). From 2025, the Retirement Account will replace the Special Account.

The amount in our RA will continue to earn interest until it is put into the CPF Life Scheme when we turn 65 years old. We can delay this contribution – and delay our CPF LIFE monthly payouts – until we turn a maximum of 70 years old. Our RA savings is used to determine our CPF Life monthly payment.

To ensure that Singaporeans are saving adequately for retirement, CPF sets 3 different amounts that we should meet to be prepared for retirement: Basic Retirement Sum, Full Retirement Sum and Enhanced Retirement Sum.

Thus, the Retirement Sums are threshold targets and they do not determine our actual CPF Life payouts nor the savings in our Retirement Account.

What Is The Basic Retirement Sum (BRS)?

For the majority of Singaporeans, the most valuable asset we own is our property (and it is also the asset that we spent most of our CPF monies on). CPF recognises this, and we can opt to pledge a property that we own and set aside only the Basic Retirement Sum (BRS) instead of the Full Retirement Sum. The BRS is half of the FRS.

Those who turn 55 and meet the BRS ($102,900) in 2024 will enjoy an estimated lifelong monthly payout of $900 in their retirement.

By pledging our property, we can potentially withdraw more from our CPF accounts. We can withdraw any amount that is above the BRS that comes from our mandatory contributions. Our Retirement Sum Topping Up Scheme (RSTU) contributions are excluded and do not count towards our BRS. For examples of how this is calculated, you can read our article on how much you can withdraw at age 55.

The downside of the BRS is that being half the amount of the FRS, our eventual CPF Life monthly payouts are also almost halved (BRS: $900 vs FRS: $1,670). Assuming that we choose not to sell or rightsize our property, we may have to adapt to a less comfortable retirement lifestyle.

What Is The Full Retirement Sum (FRS)?

The Full Retirement Sum (FRS) is meant to safeguard our retirement adequacy and is the maximum amount that will be automatically transferred into our RA at age 55 and the maximum we can top up our SA before the age of 55.

Those who meet the FRS ($205,800) in 2024 will be able to enjoy an estimated lifelong monthly payout of $1,670 in their retirement.

Once we have met the FRS, we can choose to withdraw any amounts above it from our CPF OA and SA at 55. We can withdraw any amount that is above the FRS.

For example, if we have accumulated $250,000 in our CPF (across our CPF OA and SA) at age 55 and the FRS for our cohort is $205,800, we can withdraw up to $44,200 ($250,000 – $205,800).

What Is The Enhanced Retirement Sum (ERS)?

The Enhanced Retirement (ERS) is a little different from the BRS and FRS as it represents the upper limit of what we can top up our Retirement Account (RA) and the upper limit of our CPF Life payouts. We can only top-up our RA to the ERS after we turn 55.

The ERS for 2024 is set at 3 times the BRS and the CPF Life payouts are correspondingly much larger. From 2025, the ERS will be raised to 4 times the BRS – in conjunction with the move to close of CPF Special Accounts for those who turn 55 from 2025.

For those of us who have excess funds that we intend for our retirement, putting the monies into our RA to meet the ERS has its merits. Those who meet the ERS ($308,700) in 2024 will be able to enjoy an estimated lifelong monthly payout of $2,450 in their retirement.

From 1 January 2025, those who meet the new ERS of $426,000 (worth 4 times the BRS instead of currently 3 times the BRS), can look forward to receiving higher estimated lifelong monthly payouts of $3,330 – instead of $2,530 based on the current ERS (3x BRS).

The Retirement Sums Increase Every Year

Unlike the Basic Healthcare Sum which is announced every year, CPF has a schedule of Retirement Sums for Singaporeans turning 55 years old every year. This is to help us better plan for our retirement.

For those turning 55 from 2017 to 2022, the BRS increased by about 3% every year. This is to account for long-term inflation and improvements in the standard of living. Correspondingly, the FRS is set at two times the BRS, while the ERS, presently set at three times the BRS, will be raised to four times the BRS from 2025.

The increase of about 3% was determined at the recommendation of the CPF Advisory Panel in 2016. The panel examined the historical long-term rates of several indices, including the All Items (or headline) inflation and Core Inflation. According to the report, lower-middle retiree household expenditure grew at an average of about 5% annually over the past ten years.

During Budget 2022, the BRS increments was raised for cohorts turning 55 from 2023 to 2027. This increase is about 3.5% a year, compared to the previous rate of increase of around 3%.

The increase in BRS is expected to result in higher CPF payouts for members in their retirement years. Correspondingly, the FRS and ERS will rise in tandem, at 2x BRS and 3x BRS (and eventually to 4x BRS from 2025), respectively.

While the Retirement Sums may seem restrictive, they actually represent certain retirement milestones. With the FRS, we can expect a monthly income through CPF Life payouts to provide for an adequate retirement lifestyle. With the BRS, we may have to consider downsizing our property to fund our retirement. With the ERS, we most likely can live off our CPF Life payouts during our retirement.

Regardless, the monies in our CPF account can be any amount and we should adjust our retirement expectations accordingly if we fall short of the Retirement Sums.



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