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

Sunday, 10 May 2015

What is the Historical CPF Minimum Sum?

02:37 Posted by cheez 8 comments
This post will answer 2 questions:
1) what is the historical CPF Minimum Sum?
2) what is its growth rate like?

Below is a table of the historical minimum sum since 2003.
The actual minimum sum you need to have is in column 'MS adjusted for inflation'.

Date MS in 2003 dollars % change in MS in 2003 dollars (A) MS adjusted for inflation % change in MS adjusted for inflation (B) B-A Govt stated inflation
Jul-03 $80,000 - $80,000 - - -
Jul-04 $84,000 5.00% $84,500 6.63% 1.63% 0.40%
Jul-05 $88,000 4.76% $90,000 6.51% 1.75% 1.72%
Jul-06 $92,000 4.55% $94,600 5.11% 0.56% 0.52%
Jul-07 $96,000 4.35% $99,600 5.29% 0.94% 0.91%
Jul-08 $100,000 4.17% $106,000 6.43% 2.26% 2.18%
Jul-09 $104,000 4.00% $117,000 10.38% 6.38% 6.52%
Jul-10 $108,000 3.85% $123,000 5.13% 1.28% 0.59%
Jul-11 $112,000 3.70% $131,000 6.50% 2.80% 2.81%
Jul-12 $113,000 0.89% $139,000 6.11% 5.22% 5.35%
Jul-13 $115,000 1.77% $148,000 6.47% 4.70% 4.54%
Jul-14 $117,500 2.17% $155,000 4.73% 2.56% 2.38%
Jul-15 $120,000 2.13% $161,000 3.87% 1.74% 1.01%
3.17% 5.60% 2.43% 2.21%

The last row shows the annual compounding rate of the category.


1) The Minimum Sum in 2003 dollars has been increasing at an annual compounding rate of 3.17%.

2) The Minimum Sum adjusted for inflation has been increasing at an annual compounding rate of 5.60%.

3) The difference between 'MS adjusted for inflation' and 'MS in 2003 dollars' is 2.43%; compounded annually. This is very close to the actual Singapore inflation rate published by Singstat.

4) Our CPF Minimum Sum is increasing at a rate faster than inflation.
I put the 3 category into a maths formula below:
'MS adjusted for inflation' - 'Sg inflation' = 'MS in 2003 dollars'
(5.60%) - (2.21%) = (3.39%)
[the numbers are not exact due to statistic reasons, but it shows a rough idea behind the formula]

I would like to call the annual compounding 3.39% in 'MS in 2003 dollars' as 'Lifestyle Inflation'.

Inflation is the increase in cost of living - transport, food, clothes etc getting more expensive.

Lifestyle Inflation is the change in preference for more expensive products. Instead of opting for a $2.50 chicken rice in a hawker centre, we choose to opt for $3.50 chicken rice in a air-conditioned food court.
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  1. You forgot about the most frustrating shifting goal post - the draw-down age. 55 --> 60 --> 62 --> 65

    Soon 65 --> 67and 67 --> 69 --> 7x.

    You heard of "Coffin Money"? RA will be "Coffin Money".

    How to frustrate the fish?

    When fishing during low tide at the wharf on a clear sunny day when we can see the fish clearly. When the smaller fish comes near our bait, we lift it up . LOL!

    1. Hi,

      This sounds like a more suited comment for my other post about CPF:

      But yes I do agree that the age keeps going up. But I guess this is just the way it has to be - longevity some times may not be a good thing to our retirement egg nest

    2. longevity? I doubt so, many are dying younger due to cancer and due to our lifestyle.. U look around and u will see more young ppl dying due to cancer and heart attack.. So is the worst of the worst lo, dying younger and increase in withdrawal age

    3. Hi Anonymous,

      I would say that the statistics published are not in line with what you are saying.
      You can look at the "age-specific death rates". Comparing 2004 to 2014, people are living longer (shown by the solid line being further to the left than the dotted line).

      Thank you

  2. As I scrolled down the table, I noted that the <(B-A)> value is higher than for most of the years but when I reached the last row, I was shocked for the result, as the trend is opposite of what I expected. How can that be, my understand of compound interest effect is that it should not.

    As such, i suspect that there is an error in your calculation and redo the calculation on "annual compounding rate" in the last row.

    For example for <% change in MS in 2003 dollars (A)> is e^(Log($120000/$80000)/12years)-1 = 0.0344 = 3.44%. Isn't this right?

    Based on my calculation, the values are as follow instead:
    % change in MS in 2003 dollars (A) : 3.44%
    % change in MS adjusted for inflation (B) : 6.00%
    B-A : 2.56%
    Govt stated inflation : 2.39%

    The new calculated values painted a different picture, it shows that our government raise the minimum sum above the targeted value slightly more than the inflation rate (with CAGR difference of 0.17%). However, it can be understandable as the government have to round off the minimum sum in thousands so that they don't set odd numbers value such as $123,456.78

    1. The 'B-A' last result is still higher than 'Inflation' last result, so I do not understand the 'trend is opposite' part

      As for the formula side, I took a different method from yours.
      You took the end figure ($120,000), initial figure ($80,000) and work on its rate.
      I took the compounding figure annually [(1.05 x 1.0476 x 1.0455 x.....)^(1/12)]-1.
      I think my method is statistically more correct - i think

      Actually, like I mentioned in the post, 'B-A' is almost the same as Govt' stated inflation.
      But there is still a 3.32% annual lifestyle inflation.
      This is why our CPF minimum sum is rising faster than our normal inflation rate

  3. Hi cheez,

    Nice work! I wrote something similar last year (link here).

    I also came up to the same conclusion that the MS is rising faster than the official inflation rate. However, I did not consider the reasons why it might be so, unlike the "Lifestyle Inflation" which you came up with. I think that quite nicely explains the difference then!

    Nice post!

    1. Hi GMGH,

      Thank you :)
      I think your article also has some good points!
      I think the CPF should be more transparent in how they determine their increase in minimum sum, and preferably how they determine that around 80% of the people born after 1990s will be able to hit the minimum sum