SeedlyTV EP06 - Seedly

SeedlyTV EP06

CPF 101 With Mr Soh Chin Heng, Deputy Chief Executive of CPF

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Unsure what the CPF system is about? Have burning doubts and questions about CPF that you want answered? Here it is! SeedlyTV EP06 presents CPF 101 with Mr Soh Chin Heng, Deputy Chief Executive, Services, from the CPF board. You can check out what was covered here!

  • Introduction of Mr Soh Chin Heng, Deputy CEO of CPF Board-- 2:05-3:00
  • Why was CPF created in the first place?-- 3:20-5:05
  • Short history of CPF and What CPF is about-- 5:40-7:40
  • What kind of attitude should we adopt for retirement or retirement planning?-- 7:45-13:00
  • Why does CPF change over the years?-- 13:10-14:40
  • What can you do with all the money you have saved for retirement?-- 14:45-15:58
  • Rule of 72-- 16:00-17:20
  • What are some common CPF hacks that Singaporeans should take advantage of?-- 17:40-20:00
  • Retirement sum top ups-- 20:03-21:55
  • Why is it important to save?-- 22:30-23:20
  • (Q&A) Will the BRS and FRS keep increasing as we age and hit 55 years old?-- 23:40-25:37
  • (Q&A) Why do we have to return accrued interest for CPF monies used for housing, but not for CPF monies used for investment in CPFIS?-- 25:40-28:10
  • (Q&A) What is your advice for retirement planning? ERS or just FRS?-- 28:15-30:35
  • (Q&A) Will CPF open up to more investment options such as Dimensional Funds, low cost global diversified ETFs? -- 30:49-32:27
  • (Q&A) What happens when we don’t hit our CPF full retirement sum by age 55? Will we still be getting payout?-- 32:20-34:50
  • (Q&A) We hear that CPFIS will soon be removed/changed into an enhanced scheme. What can we look forward to?-- 34:58-36:20
  • (Q&A) In a hypothetical situation, if everyone withdraws all their CPF today, will CPF have enough cash or liquidity for that?-- 36:25-39:20
  • (Q&A) At 55 years old, after meeting the retirement sum, will the excess funds continue to remain in the OA/SA or will it also be channeled to the RA?-- 39:35-42:05
  • (Q&A) I'm self-employed. Why do I still have to make compulsory Medisave contributions when I already have a full comprehensive integrated shield plan? Shouldn't there be a choice?-- 42:25-44:50
  • (Q&A) As lifespans increase, and as more people start drawing upon CPF Life payouts, will there come a point where it all becomes unsustainable and the payout has to decrease?-- 45:12-47:37
  • (Q&A) Can we get tax relief for top ups above $7K?-- 47:40-48:23
  • (Q&A) 4% Is an attractive interest rate. But how does CPF earn this interest rates to pay us?-- 48:35-48:51
  • (Q&A) Many seem to recommend transferring money from CPF OA to SA for higher interest rates, what kind of people should do that?-- 49:25-53:15
  • (Q&A) People often say that the Govt is losing money hence they are withholding our CPF savings. What’s the more accurate way of explaining what’s happening with our monies before 65 yrs old?-- 53:48-55:15
  • (Q&A) Giveaway details-- 55:49-56:45

Speakers: 
- Mr Soh Chin Heng (Deputy CEO, CPF Board)
- Xin Yi Lum (Content Strategist, Seedly- Moderator)

This is a Seedly organised event

NOTE: SeedlyTV is a series which will be covering topics via LIVE video and QnA on the Seedly platform. We will be inviting speakers to cover relevant topics in personal finance: Insurance, Debt, Saving, Spending and Investing.

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CPF

SeedlyTV EP06

It depends a lot. But if you use it, and then top it up for tax relief advantages, yes it makes sense. if not, use your credit card.

CPF

SeedlyTV EP06

I would recommend that you join CPF Life as it's a annuity with lifetime income till death. With the older CPF Minimum sum scheme, your monthly payouts are drawn from your RA account which means that payouts will STOP when your RA balance reaches $0 at around 85-90 y/o. leaving nothing for yourself or any bequest for your children/dependants. I personally helped my grandmother join CPF Life; The Basic plan made more sense as the total amount including bequest, would be much higher than the Standard plan albeit slightly lower in monthly payouts for the basic plan. you might want to read these 2 articles as well as the CPF site to have a better understanding to better decide if you would want to join CPF Life. https://dollarsandsense.sg/standard-basic-plan-need-understand-cpf-life-plans-deciding/ https://blog.moneysmart.sg/budgeting/cpf-life-payout-plan-minimum-sum/ https://www.cpf.gov.sg/Members/Schemes/schemes/retirement/cpf-life

CPF

SeedlyTV EP06

Both will confer tax relief benefits, so we shall not compare based on that. The important thing to note is that if you are doing RSTU, you will help yourself hit FRS faster and compounding takes care of the job there after. Also, once you hit FRS, you will not be able to contribute, and will have to turn to SRS, but hitting FRS earlier means more time for compounding. Of course, you must be comfortable with the fact that a large part of your monies are pretty much locked up in RA/SA and any changes in CPF rules will change the situation and you can't do anything about it. On the flip side, SRS will give you the benefit of knowing that you can start withdrawal at 62. However, compared to SA's 4% interest, SRS monies do not earn anything (it's bank interest, which isn't much, really) and hence you must be prepared to invest them to get better returns. I do help clients deploy SRS funds in a variety of asset classes, so if you need some ideas you can contact me.

Retirement

CPF

SeedlyTV EP06

The SA floor interest is reviewed yearly so you are right to say that it can change in future. I would instead look at the approach of looking at your assets and determining how much you would project to have in both guaranteed and variable asset classes by your retirement age. Let me share a little more about my own plan. If you are comfortable to have your monies locked up in CPF, then CPF SA top ups can be one option to help you reach FRS faster. I am doing this myself as I am also looking at the tax savings and banking on the compounding effect of contributing more when I am still young. Seperately I do have a private annuity as I retain control of when I receive my retirement income, as well as for how long. This will not be impacted by any changes to CPF regulations. I am also ensuring that I have additional long term care coverage as my annuity has that feature build in. (Careshield life might not be enough for me) These two items form the cornerstone of my guaranteed income sources in retirement. Based on my calculations with provisions for inflation they will more than adequately provide for my needs. For my wants, I have stocks and UT, but as there are no guarantees on those, I won't elaborate too much, other than to say that even if I make wrong investment decisions, I still have CPF and my annuity to fall back on. If you'd like to get an opinion on your strategy of efficiently deploying your funds into the various asset classes, feel free to reach out to me at [email protected]

SeedlyTV EP06

CPF

Takingstock @
Takingstock @

()

Level 5. Genius
Updated on 01 Jul 2019
revised answer My first guess is the related to either the database / processing speed, or system limitation. My second guess is maybe keeping interest calculations separate from the transaction balance would make it easier, in case parliament passes something like an incentive to some folks, and have it dated retrospectively, eg from the beginning of the year, even if it was say approved in parliament in april. Tested simulation using my own cpf OA 2015 transactions, and I got an answer that was only 59 cents lower than the interest shown (889.05 vs 889.64) on the 2015 statement. So I found - the good news is the interest is compounded monthly. - the bad news is the interest appears to be possibly calculated on the lowest balance figure of the month The calculation logic I used was - derive full year interest on beginning balance - derive 11/12 annual interest on jan change to balance - derive 10/12 annual interest on feb change to balance.... Etc So hope this answers your question - there is monthly compounding. Also, going by this logic then there might be an unexpected impact between timing of transaction and the amount of interest earned in a year.

Insurance

Retirement

CPF

SeedlyTV EP06

Beside ILPS, right now, mainly you can get integrated shield plan and increase your elder/care shield benefits via CPF accounts. Moat companies will have such products. Only a few companies do not offer the care/elder shield benefits options

Investments

Property

CPF

SeedlyTV EP06

HDB BTO

I personally find it useful to look at interest rates. If the interest rate of the renovation loan is lower than that of my investment/savings returns, than one might choose to set aside a portion to invest, while taking a renovation loan. E.g. If i/r of renovation loan is at 2% and investment/savings returns is at 3%, I might choose to set aside a sum for investments/savings instead as the returns would cover the cost of the loan and still allow me to earn a little. Hope this helps!

SeedlyTV EP06

CPF

CPF IS

Albert Tan
Albert Tan, Fin Lit Trainer at MoneyOwl

()

Level 4. Prodigy
Answered on 15 Jul 2019
Lifelong Retirement Investment Scheme (LRIS) was briefly mentioned alongside the announcement of CPF LIFE Escalating payout plan. It was meant to be an in between option for people who were not quite satisfied CPFOA interest rates, but were too averse to CPFIS risk. The focus was on a low cost, long term, passive instrument. However it fizzled out subsequently. The difficulty lies in the implementation and sustainability. It's not difficult to find low cost instrument these days. The ability to provide a guarantee of at least 2.5% returns p.a. is a liability few want to undertake in the long run. It seems CPFIS will remain with 0% sales charge for the foreseeable future.

SeedlyTV EP06

CPF

CPF Board
CPF Board
Top Contributor

Top Contributor (Jun)

Level 6. Master
Answered on 26 Jun 2019
Hi, MediSave is a national medical savings scheme which helps CPF members like you save for your own and your approved dependants’ healthcare expenses. On the other hand, MediShield Life is a basic healthcare insurance scheme that helps pay for large hospital bills and expensive outpatient treatments, and an Integrated Shield Plan (IP) is a medical insurance plan which offers additional benefits on top of that provided by MediShield Life. MediSave Contributions as an SEP As an SEP, you do not receive regular MediSave contributions from employers. Even though you are covered under an IP, the IP does not cover as many medical treatments as compared to MediSave. It is therefore important to contribute regularly and make sure you have sufficient MediSave savings for your future healthcare needs. This is especially important during old age when you may have stopped working, and the need and expenses for medical treatment increases. You can use MediSave to pay for hospitalisation expenses and day surgeries. You can also use MediSave to pay for certain outpatient treatments like dialysis, chemotherapy and radiotherapy as well as treatment of a number of chronic diseases like diabetes and hypertension. Besides using MediSave for medical treatments, you can use MediSave to pay the premiums of approved medical insurance schemes which are MediShield Life, private Integrated Shield Plan and ElderShield/ElderShield Supplement. When you contribute to MediSave, you enjoy: - Up to 6% interest per annum on your MediSave savings. Savings in the MA earn 4% interest per annum, and the first $60,000 of your combined CPF balances earns an additional 1% interest per annum (with up to $20,000 from the Ordinary Account (OA)). If you are aged 55 and above, you will also enjoy an additional 1% interest per annum on the first $30,000 of your combined CPF balance from 1 January 2016. Tax relief of up to 37% of your annual net trade income (NTI), or the CPF Annual Limit of $37,740 from 2016 onwards, whichever is lower. Thus, the MediSave Scheme complements your IP coverage as its usage is generally wider. For example, MediSave can be used to pay for convalescence and palliative care in approved convalescent hospitals and hospices respectively. You can also use MediSave to pay for chronic disease treatments, outpatient scans and screening mammogram, which may not be covered under IPs. I hope this clarifies.

SeedlyTV EP06

CPF

CPF Board
CPF Board
Top Contributor

Top Contributor (Jun)

Level 6. Master
Answered on 26 Jun 2019
Hi, CPF monies are invested by the CPF Board in Special Singapore Government Securities (SSGS) that are issued and guaranteed by the Singapore Government. This arrangement assures that the CPF Board will be able to pay its members all their monies when due, and the interest that it commits to pay on CPF accounts. The Singapore Government is one of the few remaining triple-A credit-rated governments in the world. The proceeds from SSGS issuance are invested by the Government via MAS and GIC, just as it invests the proceeds from market based Singapore Government Securities (SGS). GIC is a fund manager, not an owner of the Government’s assets. It merely receives funds from Government for long-term management, without regard to the sources of Government funds. No CPF monies go towards government spending. Government borrowings, whether via SGS or SSGS, cannot be used to fund expenditures. Under the reserves protection framework enacted in 1990 in the Constitution and the Government Securities Act (enacted in 1992), the monies raised from government borrowings cannot be spent. To find out more, you can visit: https://www.mof.gov.sg/Policies/Our-Nations-Reserves/Section-IV-Is-our-CPF-money-safe-Can-the-Government-pay-all-its-debt-obligations. Hope this clarifies!
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