Adequacy of CPF Basic Retirement Sum to Provide for Minimum Retirement Needs of Seniors and Ensure Decent Quality of Life

Mr Chua Kheng Wee Louis asked the Minister for Manpower (a) how is the 3.5% annual increase in the CPF Basic Retirement Sum (BRS) for each cohort turning age 55 from 2023 to 2027 determined; (b) what are the factors that have contributed to the raised annual increase from 3% to 3.5%; and (c) what are the long-term inflation assumptions used in the BRS annual increments.

In 2014, the Government set up a CPF Advisory Panel to study possible enhancements to the CPF system. The Panel was led by Prof Tan Chorh Chuan and comprised academics, financial industry practitioners and community representatives. The Panel was asked to recommend how the CPF system could better cater for the varied interests and needs of members. Some members wanted the ability to withdraw more CPF savings as a lumpsum, some wanted higher monthly payouts in retirement and some wanted monthly payouts that increase over time.

The Panel affirmed that the priority is for the CPF to focus on what is needed for members to receive lifelong payouts that cover a basic level of retirement expenses. For this purpose, the Panel took reference from the lower-middle retiree household expenditure and factored in long-term inflation as well as some increase in the standard of living in setting the Basic Retirement Sum or BRS.

The same factors were considered in setting the annual increase in BRS at 3.5% for members turning 55 in 2023 to 2027. These members experienced strong GDP growth during their working years. They were among the first to benefit from a mature and well-established CPF system, consistently high employment rates and strong wage growth.

The latest BRS adjustments translate to higher monthly payouts to help these members tackle the rise in expenses due to long-term inflation and higher standards of living. The BRS payout will rise to close to $1,000 per month for the cohort turning 55 in 2027, up from close to $850 per month for the 2021 cohort.

Members can receive larger payouts if they set aside more CPF savings for retirement. A member who turns 55 in 2027 and is on the CPF LIFE Standard Plan can receive close to $1,850 per month, for life, by setting aside the Full Retirement Sum, and close to $2,700 per month, for life, by setting aside the Enhanced Retirement Sum. Members can also choose the CPF LIFE Escalating Plan, which starts with lower payouts but will see payouts increase by 2% every year.

On retirement adequacy goals for seniors, it is important to note that seniors are likely to have a combination of means to fund their retirement, of which, CPF is a component. The others include private savings, family support and housing monetisation, such as the Lease Buyback Scheme and Silver Housing Bonus Scheme. Nonetheless, BRS attainment is one indicator for basic retirement adequacy. Eight in 10 active CPF members turning 55 in 2027 are expected to have enough savings to receive at least the BRS payout, up from 67% in 2021.

The Government introduced the Matched Retirement Savings Scheme in 2021 to incentivise members and their loved ones to top up the Retirement Account of eligible members who have yet to meet the prevailing Basic Retirement Sum. For seniors who require further support to meet their retirement needs, targeted assistance is available. For example, eligible seniors receive up to $900 a quarter to boost their retirement income under the Silver Support scheme.

We will continue to help seniors strengthen their retirement adequacy by enabling them to earn more and save more. In particular, the Tripartite Workgroup on Older Workers laid out a long-term roadmap to raise the retirement and re-employment ages and increase CPF contribution rates for older workers. This provides flexibility for seniors who want to work longer to do so and enables seniors to save more while they work. We will continue to review our policies to help Singaporeans strengthen their retirement adequacy.