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I thought CPF Life Annuity gave a high 8.5% return, perhaps I am wrong

Calculations from the CPF Life Payout estimator show that a male Singaporean who turns 55 from next month and has the CPF Minimum Sum of $155,000 will get a monthly payout ranging between $1,200 and $1,350 if he opts for the Standard plan. For a woman, the monthly payout will roughly vary from $1,100 to $1,250 as she is expected to live longer.

At 1100, the original thinking is that (1100×12)/155000 > 8.5%. That’s bloody splendid. You wouldn’t be able to find a more secured institution giving you such a high returns. In US, this will be known as some scam. The 4% out of the 8.5% comes from bonds, and the rest will depend on how many of the pool of annuity payers stay alive.

Take a Singaporean who reaches 55. As a CPF member, he must set aside a Minimum Sum in his Retirement account from money in his CPF Ordinary and Special accounts. From next month, the Minimum Sum will be $155,000. Currently, about half of them meet this requirement.

Once he reaches 65, he will get a fixed monthly payout for about 20 years from the savings set aside in his CPF Retirement account. Between 55 and 65, the money in his Retirement account will enjoy an interest rate of up to 5 per cent per annum – which is far higher than what the banks are offering for fixed deposits.

The 10 years from 55 to 65, when the pay out actually started, a full $100k would be gotten at a risk free rate provided by the government.

The first year yield will now be (1100×12)/252000 > 5.2%

That’s much more realistic, coming from majority 3% yielding bonds and the rest from the annuity pool.


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Saturday 7th of February 2015

Pls do take note of the "up to" clause. The rate of 5% is given to the FIRST 60k in the savings.. and NOT the full amount. When was the government so generous to us? The "up to" is just a marketing strategy, where you are invited to sales with "up to" 90% discount and our government then provides a perception of being generous with the interest rate.


Monday 11th of August 2014

According to my calculations, CPF Life Annuity only gives 1.93% return. You can see how I derive at this figure at:

Let me know if I made mistake in my calculation. Thanks!


Sunday 17th of August 2014

You have to understand that the purpose of an annuity is seldom about calculating returns, but the purpose of ensuring that you do not outlive your money.

It goes to say that the biggest benefits of an annuity is to start drawing down as early as possible and remain as healthy as possible


Tuesday 3rd of June 2014


How many repeated mistakes are going to make! CPF has already disclosed that the effective yield will be between 3.75% and 4.25% for the entire CPF Life scheme.


Tuesday 3rd of June 2014

Ah i wasn't aware of that.

financial merdaka

Monday 2nd of June 2014

well done! i must confess i never really think through interests rates for teh annuity but i have not reached that stage yet. i noticed the peope my age (early 30s) are mostly up in arms over the fact that their monies are kept locked away from them and they cannot choose to spend it if they wish to.


Monday 2nd of June 2014

This is just trying to clarify my original thoughts that the cpf life is actually much better than what the market offers

Wilson Nugraha Citra

Monday 2nd of June 2014

It's actually worse than that, haha.. remember it's annuity, you shouldn't take into account only the interest, it eats into your capital too..

Btw, here's what I got


Monday 2nd of June 2014

i think you can't just compare an annuity that way. that is my understanding. Because i did a calculation like that before and my thoughts are if you live 10 years its gonna be very luggy.

At the end of the day you are suppose to channel part of it, transfer the risk to the insurer for a PREDICTABLE SUBSISTENCE amount.

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