Adequacy of CPF Basic Retirement Sum in View of Prolonged Period of High Inflation Rate
Ministry of ManpowerSpeakers
Summary
This question concerns the adequacy of the CPF Basic Retirement Sum (BRS) amidst prolonged inflation, as raised by Mr Shawn Huang Wei Zhong. Minister Tan See Leng explained that the BRS is indexed to retiree expenditure and long-term inflation, providing monthly payouts of approximately $1,000 for the 2027 cohort. He noted that eight in 10 active members are expected to meet this sum, with options to increase payouts through the Enhanced Retirement Sum or CPF LIFE Escalating Plan. Government measures like the Silver Support scheme and 2022 relief packages further assist by offsetting inflation-driven cost increases for lower-income and retiree households. The Government is also reviewing retirement needs through the Forward Singapore Exercise to ensure the BRS remains sufficient for Singaporeans’ basic expenses.
Transcript
44 Mr Shawn Huang Wei Zhong asked the Minister for Manpower in view of the high inflation rate that is expected to be prolonged, whether the current CPF Basic Retirement Sum will be adequate for retirement.
Dr Tan See Leng: The Basic Retirement Sum (BRS) is meant to provide CPF members with lifelong payouts that cover a basic level of retirement expenses. For this purpose, the BRS is set by taking reference from the lower-middle retiree household expenditure and factoring in long-term inflation as well as some increase in the standard of living.
From age 55, members can withdraw their CPF savings in excess of the Full Retirement Sum (FRS), which is two times the BRS if they own a property.1 If a member sets aside only the BRS, his payout will be close to $1,000 per month for the cohort turning 55 in 2027, up from around $850 per month for the cohort turning 55 in 2022.2 Eight in 10 active CPF members turning 55 in 2027 are expected to have enough savings to receive at least the BRS payout. If a member sets aside the FRS, his payout will be close to $1,850 per month for the cohort turning 55 in 2027.
We understand that some members may want to receive larger CPF payouts in retirement. They can do so by setting aside more CPF savings for retirement. A member who turns 55 in 2027 can receive close to $2,700 per month for life by setting aside the Enhanced Retirement Sum.3 Members can also choose the CPF LIFE Escalating Plan, which will see payouts increase by 2% every year.
While CPF is important for seniors to fund their retirement, many seniors are likely able to rely on a combination of other means such as private savings and family support. The Government has also introduced schemes to boost seniors’ retirement income. For example, eligible seniors can receive up to $900 a quarter under the Silver Support scheme.
To directly help Singaporeans cope with higher inflation and cost of living concerns, the Government has rolled out a comprehensive series of measures last year. The packages, announced in February, June and October 2022, seek to provide immediate and targeted relief, with more support for the lower-income and more vulnerable groups. This includes a Cost of Living Special Payment of up to $500 cash for eligible adult Singaporeans, and additional CDC Vouchers for all Singaporean households. Taken together, the support measures introduced since Budget 2022 will on average fully cover the inflation-driven increases in cost of living for lower-income and retiree households in 2022, and more than half of the inflation-driven increases in cost of living for middle-income households.
We will continue to review the BRS keeping in mind the long-term retirement needs of Singaporeans. As part of the Forward Singapore Exercise, we are also taking a deeper look at what more needs and can be done to help Singaporeans meet their basic retirement needs.