CPF Life eats all your % if you die early? How many know this?

cpf

August 23, 2018

Do you know that CPF Life eats up all you accumulated interest if you die early?

An old schoolmate from RI (Raffles Institution), CK, alerted me to the following:

“3.         What happens to the premium if I pass away?
A bequest is the amount of money that you leave for your beneficiaries when you pass on. If you are on CPF LIFE, the bequest refers to the unused annuity premium and Retirement Account savings, if any, after death. This will be paid to your beneficiaries along with your remaining CPF savings.

However, the interest earned on annuity premiums does not form part of the individual member’s bequest as it is paid into the Lifelong Income Fund to provide lifelong monthly payouts to all members under CPF LIFE.

As with all annuity products, CPF LIFE works based on the concept of risk pooling. In order to provide lifelong monthly payout to all CPF LIFE members, the interest earned on the annuity premium has to be pooled. The pooled interest will then be used to pay the monthly payout to all surviving members in the scheme. Therefore, the interest earned on the CPF LIFE annuity premium will not form part of the individual member’s bequest upon death.”

https://www.areyouready.sg/YourInfoHub/Pages/Views-Top-7-things-you-need-to-know-about-CPF-LIFE-CPFB.aspx

If you follow the links to CPF Life in the CPF web site, you will find “CPF Life – Details – Understand – Will I lose all my money if I pass away early? –

You and your loved ones will always get back at least the amount that you have put into CPF LIFE, in the form of payouts and/or bequest, no matter what age you live to.”

Life payouts you received during your lifetime together with your bequest you leave behind for your loved ones will always be larger or equal to the principal amount you have put into CPF LIFE.

https://www.cpf.gov.sg/Members/Schemes/schemes/retirement/cpf-life

Don’t you find that the above explanation in the CPF web site may be somewhat misleading as “will always get back at least the amount that you have put into CPF LIFE, in the form of payouts and/or bequest, no matter what age you live to”, may give the impression that you may get more than what you have put into CPF Life if you pass away early, whereas the fact of the matter is that “the interest earned on annuity premiums does not form part of the individual member’s bequest”?

Are there any national pension schemes in the world that eats up all your accumulated interest when you die early – only pays your beneficiaries the difference between your upfront premium and your total monthly annuity payouts received – and nothing at all if the total payouts exceed the premium?

Is this the national pension scheme with the lowest bequests in the world?

How many Singaporeans are aware of this?

Uniquely Singapore!

Leong Sze Hian

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About the Author

Leong
Leong Sze Hian has served as the president of 4 professional bodies, honorary consul of 2 countries, an alumnus of Harvard University, authored 4 books, quoted over 1500 times in the media , has been a radio talkshow host, a newspaper daily columnist, Wharton Fellow, SEACeM Fellow, columnist for theonlinecitizen and Malaysiakini, executive producer of Ilo Ilo (40 international awards), Hotel Mumbai (associate producer), invited to speak more than 200 times in about 40 countries, CIFA advisory board member, founding advisor to the Financial Planning Associations of 2 countries. He has 3 Masters, 2 Bachelors degrees and 13 professional  qualifications.