Monday, December 15, 2014

CPF Life Annuity is a Money Making Machine for PAP government!

I have prepared a spreadsheet for anyone to calculate the age that he needs to live in order to "exhaust" his Minimum Sum he puts into CPF Life Annuity. (You can Private Message me to ask me for this spreadsheet if you want to).

Based on the typical Minimum Sum of $155K paid at age 55 years old, interests @ 4% (this is the PAP's claim of "Risk Free Interests" from them) with a monthly payout of $1200 (or $14400 per year) starting at age 65 years old, the BREAK EVEN age is 90!

It means that only when you can live BEYOND 90 years old, then you can get MORE than what you have put in. However, please bear in mind that if you died at 85 years old or after, there will be no bequest. Even if you die at age 65, your family will get only slightly more than $155K which is FAR lesser than the amount if you earn 4% per annum. If you die at age 75 (which most people do), your family will get only about 13% of the amount which is rightfully yours at 4% compounding rate! (This is based on the example given for CPF Life Plus).

 (paid @
 55 yrs old)
Interest Monthly
65 yrs old)
  155000 4.00% 1200 -14400
Age Starting Balace Amount after
Adding Interest
Total Yearly
65 229437.86 238615.37 -14400 224215.37
66 224215.37 233183.98 -14400 218783.98
67 218783.98 227535.34 -14400 213135.34
68 213135.34 221660.75 -14400 207260.75
69 207260.75 215551.18 -14400 201151.18
70 201151.18 209197.23 -14400 194797.23
71 194797.23 202589.12 -14400 188189.12
72 188189.12 195716.68 -14400 181316.68
73 181316.68 188569.35 -14400 174169.35
74 174169.35 181136.12 -14400 166736.12
75 166736.12 173405.56 -14400 159005.56
76 159005.56 165365.78 -14400 150965.78
77 150965.78 157004.41 -14400 142604.41
78 142604.41 148308.59 -14400 133908.59
79 133908.59 139264.93 -14400 124864.93
80 124864.93 129859.53 -14400 115459.53
81 115459.53 120077.91 -14400 105677.91
82 105677.91 109905.03 -14400 95505.03
83 95505.03 99325.23 -14400 84925.23
84 84925.23 88322.24 -14400 73922.24
85 73922.24 76879.13 -14400 62479.13
86 62479.13 64978.3 -14400 50578.3
87 50578.3 52601.43 -14400 38201.43
88 38201.43 39729.49 -14400 25329.49
89 25329.49 26342.67 -14400 11942.67
90 11942.67 12420.38 -14400 -1979.62
91 -1979.62 -2058.8 -14400 -16458.8
92 -16458.8 -17117.15 -14400 -31517.15
93 -31517.15 -32777.84 -14400 -47177.84
94 -47177.84 -49064.95 -14400 -63464.95
95 -63464.95 -66003.55 -14400 -80403.55
96 -80403.55 -83619.69 -14400 -98019.69
97 -98019.69 -101940.48 -14400 -116340.48
98 -116340.48 -120994.1 -14400 -135394.1
99 -135394.1 -140809.86 -14400 -155209.86
100 -155209.86 -161418.25 -14400 -175818.25

Thus, my conclusion is that CPF Life Annuity is just a money making machine for PAP government! It will end like the Medishield whereby the payout is pathetic and it will accumulate huge amount of surpluses ever year. The payout and bequest is designed to make MOST Singaporeans to forgo most of their hard earned CPF money and given to the government.

The implication of this finding is that PAP could have set up this system WITHOUT the need of CONFISCATING your money when you die. If a person has $155K in his CPF account, he can just put this money in CPF to further grow his retirement nest (at PAP's "risk free" 4% return) and then get  $1200 per month until 90 years old. If he died before reaching 90 years old, his family will get the balance of his money in CPF. If he lived beyond 90 years old (very few could reach that age), then I do not think it will bankrupt PAP government by showing these elders a little respect by providing them the necessary funding for the rest of their life.

If PAP is really stingy, then the alternative way is to get provide the retirees INDEFINITE payout from the interests earn throughout this period. i.e. give them $764 every month if they have the initial $155K in their CPF account until they die. When they die, the seed money of $229437 will be given back to their family. They can live up to 100 years old if they want and they won't burden the government at all.

Such arrangement is fully in Singaporeans' interests without risking their money which naturally, they would want to let their family member inherit them.

If insurance companies refused to give coverage to anyone who is 65 years old or above, why should we be forced to gamble with our hard earn money of $155K to put into CPF Life Annuity when we are 55 years old and risk losing it all by betting that we can live beyond 90 years old?

A good government will not be constantly thinking of ways in sucking off the citizens' hard earn money even when they die! They should be thinking of a more viable options for the sake of everyone's interests. A good government will not PUSH the responsibility of feeding the elders (over 90 years old) to other Singaporeans. Worse of all, this CPF Life Annuity scheme will become yet another tool for PAP to milk Singaporeans out as it will definitely have earned excess funds indefinitely as most people will only live till 75 years old and the government would have creamed off huge amount of money from these people.

If Singaporeans do not stop PAP government from such scheme, they will eventually find themselves being reaped off totally and their children and future generation will never be able to enjoy a kick start with more accumulated wealth.

All these funny schemes put up by PAP are the very reasons that I do not trust PAP at all. A government is here to serve the interests of Singaporeans, not trying with every means to EARN or cream off Singaporeans' money while shying away from its responsibilities.

Goh Meng Seng

Afternote: If you are really stuck with PAP and its CPF Life scheme, then I would advise my readers to choose CPF Life BASIC instead of CPF Life PLUS. According to the brochure posted by CPF (here), CPF Life PLUS is really a reap off and it doesn't give you a FAIR deal at all. (Read Pg 29-30). The CPF Life BASIC plan is a better deal although it still "earns" a few thousands of dollars when you die from the fund you left.


Xianlong said...

Thanks for the cpf basic recommendation. I haven't thought about this cpf annuity issue.

My dad passed away in Sept & we're told by cpf that around $40k would be transferred to my mum's bank account as per my dad's nomination.

There's not a page of breakdown of withdrawals by my dad from the cpf board. They just told us is around 40k.

Leads one to think if cpf has held back some monies......

Anonymous said...

I think you forgets to includes the bequest amount available. so like if the bequest is 50k, then technically the breakdown age would then be a more respectable age of 86 instead of your mentioned age 90. still crap but bettter