Basic Retirement Sum (BRS) for CPF

For an updated version, refer to the article HERE.

Today's post: Basic Retirement Sum
It is one of the 3 types of Retirement Sum launched by CPF.
It is currently set at half the prevailing CPF Full Retirement Sum (FRS)
Why would someone wish to pledge their house in exchange for a "large" sum of money?
This post will answer that question.

For more information on the different types of Retirement Sums, click HERE
For more information on the amount on the different types of Retirement Sums, click HERE

Criteria for BRS

1) You need to have a house.
The house will be used and pledged against CPF.
Is your house fully paid or are you still paying it?*

2) You need to have money in excess of the BRS amount
The BRS amount from now until 2020 has been set.
For 2015/2016, the BRS is set at $80,500 for those turning 55 after 1st July 2015.
For the years beyond, please look at our post HERE


Advantages

1) You get to withdraw your CPF money
No, you don't get to withdraw all your CPF money.
But you get to withdraw the amount that is in excess of your BRS.
So if your BRS is $90,000; you can withdraw from your CPF money in excess of that $90,000.

Disadvantages

1) Lower Monthly Payouts
Because you currently only have half the Full Retirement Sum (FRS), you will only get half of the monthly payout. But, you have withdrawn the excess amount.

2) You have to Return the Money to CPF
If you sold your house, you have to return the money you have taken out, back into the CPF.
BUT! You can still use the money in your CPF to buy another house and then apply for BRS again to get the excess money out if you have any. For more details, look at our post HERE


*If you have fully paid your house, you can pledge your house to withdraw money in excess of your BRS.
If you have not year fully paid your house, you can still withdraw the CPF money in excess of your BRS after pledging your house.
Your outstanding housing loan, however, will be paid with
       a) your CPF OA money - if you are still working or if there is still money inside
       b) with your cash - if your CPF OA has insufficient money to pay your monthly mortgage
The money in excess of BRS that you withdraw WILL NOT be forcefully used to immediately pay your housing loan.
For more concrete examples, you may refer to the link HERE and THERE

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FRS, BRS, ERS Amount

Today's post: The Retirement Sum Amount.

In our previous posts (link HERE ) we talked about the difference between the 3 Retirement Sums, namely the Full Retirement Sum (FRS), Basic Retirement Sum (BRS) and Enhanced Retirement Sum (ERS).

In this post, we are showing the figures for the 3 different Sums.

If your 55th birthday falls in any of the subsequent years, your FRS and BRS will be fixed at that year's Sum.
The ERS, however, can be topped up to every year's new ERS amount.

Figures for the subsequent years after 2020, however, are unable to be published because it is impossible to predict the impact of inflation on the Retirement Sum.
Hence only information for up to 5 years is released.
However, the data from 2021 onward will be released by CPF in the future.

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Singapore GE effect on STI

If you had been reading the recent Singapore news, you must have realised that a big political event is about to happen: the next General Election. While I am not entirely into the politics, I feel that it does have an impact on the local economy and performance of the market. I went to take a further look into the past history of when GE was held and the STI's performance afterwards. This is what I found:

Credits: https://sg.finance.yahoo.com/echarts?s=%5ESTI#symbol=%5ESTI;range=1d

The black lines mark the dates where the GE was held. Based on historical data, the GE is held often after a recent rally, with the exception of 2001 GE, the STI dived.

On a logical sense, any political party that is currently in control, would want to hold the next GE when the economy is performing well, or at least average. Such performance must also be recent. The reason for this is due to the recency effect. In psychology, the recency effect is termed as the principle where the most recently presented items or experiences will most likely be remembered best. Hence, it would be logical to present a report card that is decently scored to win votes. In this case, as of every topic relating to your own personal wealth, people would be less rational and use the general economic performance as an indicator to cast their votes.

I am not saying that the STI's upwards performance is limited due to the GE being held but it is imperative to note that there are some correlations on the STI's future performance based on historical data. Take it with a pinch of salt and judge it yourself.

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3 CPF Retirement Sum

Today, we will be sharing a short summary of the 3 types of CPF Retirement Sum available.
To know more about what is the Retirement Sum for, read up on it HERE

Full Retirement Sum (FRS)
This is the minimum sum that most Singaporeans are familiar with.
It is the amount of money that you hope/should have in your Retirement Account (RA) when you reach age 55.
If your birthday falls
Before 1st July 2015, it is $155,000
After 1st July 2015, it is $161,000


Basic Retirement Sum (BRS - for more info, click HERE)
This is technically the basic sum required inside your Retirement Account (RA).
It is set at half of FRS.
If your birthday falls
Before 1st July 2015, BRS is $77,500
After 1st July 2015, BRS is $80,500
However, to qualify for this amount, you need to have a house (fully paid or not yet fully paid; we will discuss this in another post).


Enhanced Retirement Sum (ERS - for more info, click HERE)
This is if you set aside more money than FRS in your CPF Retirement Account (RA)
You can transfer money from your Ordinary Account (OA) and/or Special Account (SA) to your RA up to the ERS limit.
The limit for ERS is 1.5x the FRS - maximum amount you can have in your RA.
This scheme is only applicable to those who turned age 55 from 2013.
If your birthday falls
Before 1st July 2015, ERS limit is set at $232,500
After 1st July 2015, ERS limit is set at $241,500
Who would put extra money into the CPF? We will discuss this in another post.

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CPF Investment Forum

CPF is hosting a Focus Group Discussion (FGD) to seek feedback from the public regarding Alternative Investment Choices.

There are 2 dates available for this event:

To Register and Participate in the Forum:

However, if you are unable to attend but wish to contribute, you may email your suggestion/question/view to  cpf_panel@mom.gov.sg.
You could also email/comment us your views and we can help you raise your views when we attend the Forum (that is if you would not like to email CPF)

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Disadvantages of Using Private Annuity instead of CPF LIFE

For an updated version, refer to the article HERE.

Today's post: Disadvantages of using Private Annuity Plan instead of CPF LIFE.
Although this post title is "Disadvantage", but we included some "Advantage" of Private Annuity against CPF LIFE too below.


From what we have found, Private Annuity Plans available in the market tend to supplement CPF LIFE instead of replacing the CPF LIFE.

Instead, Private Annuity Plans can be used together with CPF LIFE to
1) Boost your monthly retirement income.
2) Help you withdraw out a portion or the whole of your Retirement Sum.

Advantage
1) Potentially higher returns (Annuity plans invest your money into a unit trust which can bring high potential returns. However, this depends a lot on the trusts that the insurance company invests in).
2) May comes with rider benefits (Eg; cheaper insurance premiums if you buy other INSURANCE from the same insurance company you bought your annuity plan).

Disadvantage
It is fairly difficult to plan for your  Private Annuity Plan to replace your CPF LIFE.
We made some comparison on our previous post HERE
1) Returns not as great as what CPF can provide.
2) Returns are not guaranteed - 4.25% is not definitely a 4.25% every year. Returns are determined by underlying investments (usually unit trust, which has a history of not performing well)
3) Might not have bequest left over for your children
4) Unable to plan accurately your future annuity monthly payouts*

*Your CPF LIFE cost (Retirement Sum) and its future monthly payout to you is determined when you reach age 55. The 2 figures will keep changing every year. Thus it is very hard to accurately plan your annuity plan to match its monthly payout against the CPF LIFE's future monthly payout.
This difficulty to match payouts might make you under-sized your future annuity payout and hence unable to withdraw your Retirement Sum out from the CPF fully.

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My Views on Democracy

Democracy is not where the larger group of people make the rules and dictate directions for everyone. Nor is it many different people voicing different views and the dominating view prevailing.

Democracy shouldn't be like your Prom Queen; who is usually not the most pretty person who wins, but the most popular (and usually the one with the most friends).
And yes, if you think I'm judgmental, you're probably focusing on the wrong point.

A good Democracy is one where a small group of people (preferably elites) make decision for the larger group - or everyone, with appropriate accountability tools in place to check on the small group of people.
An election is just one of the methods of accountability; it is by no means the best, the only, nor should be seen as the the most accurate form of accountability.
This may seem elitist but you probably would not want someone dumb at helm.

Greece had a referendum that showed 60% of its population (of which, only 90% eligible voters voted) had rejected austerity measures.

If you are looking at "larger group dictating" form of democracy, you should pity the 46% of the people who did not choose "No" for austerity. They are in trouble because of the 56% who spearheaded their country towards what the majority wanted but may not be a good thing.

Yes, Greeks are now cheering that they had rejected an austerity proposal, and their PM just thanked their country for this success and labelled this as a win for democracy.
But look underneath all that, nothing's changed.
Banks are not opening, not more than 70Euros can be withdrawn, Greece is still unable to pay its creditors.
"Democracy Wins, Now What?" is probably the more appropriate slogan.
I have no idea how does winning this referendum gives Greece more bargaining chips on the negotiation table - economically and politically.

The problem with Greece is accountability, accountability on politicians. They elected dumb people up, who approved a lot of dumb things, and they think that this is democracy (electoral democracy, people electing people they think are good into power to work for them).
This is why 'Elections' is not the best method of measuring a government's ability nor the greatest part of democracy (Yes, this part goes to Hong Kong).

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