Singapore-based financial blog that aims to educate people on personal finance, investments, retirement and their Central Provident Fund (CPF) matters.

Saturday, 23 May 2015

CPF Minimum Sum: 4 Insurances in 1

Today's post will be on how CPF is actually 4 insurance in one.
Our apologies that we have not been posting for the past few days.
We have been busy with some of our personal matters and thus were unable to blog daily.

I was working on a post on CPF Minimum Sum Scheme when a sudden thought came into my mind.
The CPF and subsequently the CPF minimum sum scheme is actually 4 insurance plan merged into one.

Instead of looking at the CPF minimum sum as a target where you can withdraw money at a certain age, look at it as a Savings + Medical + Life + Annuity insurance plan.
It is a Savings Insurance
It helps you save up money for housing, medical, kids' education, and retirement

It is a Medical Insurance
1) We have got Medishield, Eldershield, and other medical insurance schemes that are paid by the Medisave Account.

2) It is not just an insurance for yourself, but also for your family members - you can use your Medisave funds to pay for your family's medical bills. So it is like a family-medical-insurance.

It is a Life Insurance
1) In the event that you passed away, all your CPF money will be passed to your dependents. 

2) If you bought the Dependents' Protection Scheme (DPS) for yourself, in the event of you passing away or becoming mentally or physically unable to work anymore, you will receive a insurance payout of $46,000.

3) There is also a Home Protection Scheme (HPS), a housing insurance that will pay your mortgage in the event that any mishap falls on you and result in you no longer able to pay your mortgage.

It is an Annuity Insurance
1) Annuity is an insurance that you pay premiums to an insurance company every month, and in return, when you reached a certain age (usually retirement age), the insurance company will pay you a fixed monthly payout for as long as you live. However, if you die early/young, the payouts will stop, which is not worthwhile if you paid 20years of premium and took only 10years of payouts.

2) When you reach 55, CPF automatically enrolls you for CPF Life, which is an annuity plan that pays you a fixed monthly payout when you reached the retirement age (65).

3) However, it is better than just an annuity plan. In the event that you passed away before fully utilising the funds in your CPF accounts/CPF Life, the money unused will be passed over to your kids just like a Life Insurance. This feature is usually unavailable for most annuity insurances.

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  1. So have u settled the tax rebates for VC in the previous post? I didn't see u do any changes to the post, so I assumed that u think it's correct?

    1. Hi papillion,

      I have added a statement in the blog post to state that the table only includes if you are an employee. Because the self-employed would make the post more complex and beyond the scope of the previous post.
      Hope this clarifies.
      Thank you :)

  2. Yea, that would do for me. Thanks

  3. Hi, please do one on using CPF OA for purchasing houses and the subsequent payment. Such as whats the percentage of OA that can be used for purchasing house. The CPF website is too confusing. Hopefully you can break it down to simple bites for me :) thanks

    1. Hi,

      Thank you for your question.
      Utilising of CPF OA for home purchase is indeed one of the most important function of CPF for us.
      Indeed, the CPF website is as you mentioned: confusing, unclear and hard to fully understand.

      We have been researching about the CPF housing related schemes.
      Although we have gotten progress on the issue, there are still many unclear parts about it that we are still working on getting the answers out.
      We are also working on splitting in up into several posts because it would be too long a post if we were to include them all into 1 post.

      Do continue to stay tune to our site - subscribe to us if you have not.
      We will be releasing the posts soon once we have gathered all the necessary information.

      Thank you for your continuous support :)

    2. Hi,

      Please find below the link to the first part of our CPF OA Housing related post.
      We will keep more coming your way :)

      Thank you for your support