Usually as a end consumer, when we buy insurance products or anything, the more we buy, the more value we get. For example, the premium for a $100K product is usually higher per $100K the premium for a $200K product. In other words, typically, we tend to get a discount when we purchase more value of the same product.
However, based on the estimated payout on the CPF website on the CPF life package, it appears to be otherwise. Meaning the more we pay, the best payout we get in terms of ratio wise as compared to the lower package:
With Reference to CPF website: https://www.cpf.gov.sg/members/schemes/schemes/retirement/cpf-life
Correct as on 24 Jun 2017
| Basic Retirement Sum (BRS) |
Full Retirement Sum (FRS) = 2 x BRS |
Enhanced Retirement Sum (ERS) = 3 x BRS |
|
|---|---|---|---|
| Contribution Amount | $83,000 | $166,000 | $249,000 |
| CPF Life Payout estimates | $700 - $750 | $1,280 - $1,380 | $1,860 - $2,000 |
| Why are we not getting this? | N/A | BRS x 2: $1,400 - $1,500 | BRS x 3: $2,100 - $2,250 FRS / 2 x 3: $1,920 - $2,070 |
| Reduction in payout per year | N/A | BRS x 2: ~1 mths of payout | BRS x 3:~1.5 mths of payout FRS / 2 x 3: ~0.4 mths of payout |
Conclusion based on the above computation and analysis:
As you can see from the above illustration, we would have been losing a lot of value year on year should we take up anything above the Basic Retirement Sum scheme. It's not just the case for FRS vs BRS. Even ERS vs FRS also comes with a slight reduction in payout per year.
As it's a compulsory package that I must take up, I would definitely try to go for the Basic Retirement Sum instead of any other plans seeing that the higher values are definitely not worth my time and money. Especially, I'm definitely never going to topup for the enhanced plan as it would be totally crazy for me to throw my money into something I know for sure the returns is not worth it.
I would say that if they had come up with better full / enhanced retirement sum scheme where I'm getting what my money is really worth, I would have taken up a higher scheme if I do have enough in my CPF in the future. For now with the current payout scheme available, it's definitely not my cup of tea.
If you are able to get better returns than what our government have to offer and do have a property to pledge, I would strongly recommend the same for you.
P.S. Please come up with something that actually makes more sense if you do want us to take up the higher than basic retirement sum scheme.
