Wednesday, March 7, 2012

CPF LIFE 4 plans to reduce to 2 plans

Yesterday, there was news on changes to the CPF LIFE plans. The existing 4 plans will now be reduced to 2 plans.
Some of the changes are as follows:
1) The current INCOME plan which gives the highest monthly payout, but leaves no bequests will be removed totally. CPF said that this plan is unpopular (only 3% of CPF members took up this plan)
2) The existing PLUS and BALANCED plans will be combined to a single plan.
3) it seems that the existing BASIC plan will be remained unchanged.

Before I share my thoughts on these changes, I would like to share an analogy on the changes made.

Imagine if McDonald's announced that they will no longer be serving the small size drinks. These drinks are unpopular among customers. Only about 3% of customers actually choose this drink size. In addition to this, they will now combine the existing medium and large size drink to a super medium size. This will help to eliminate the need for customers to choose the size of their drinks.

For me, I do want the flexibility of choosing my own drink size. Even though a particular size is not popular, it doesn't mean it does not cater to the needs of those who choose it. It could be that they do not want to drink too much or that they want to spend lesser by getting a smaller drink.

Back to the CPF changes, I do want the flexibility of choosing my own plans. Even though there are still 2 plans to choose from, details on how the new merged plan is still unavailable. It is still unclear on how the new merged plan will be like. Further details is only available in September 2012. 

The removal of the INCOME plan will definitely affect some Singaporeans. There is definitely some who has no family to leave their CPF to; this group of people will benefit from the old INCOME plan. Or it could be that the retiree has no intention to leave his CPF to any bequests. These people now no longer have the opportunity to take home a higher monthly payout.

I also noticed that there has been an increasing CPF drawn down age. For Singaporeans born after 1954, the age is now 65. Since the life expectancy is expected to increase further, this age is likely to be increased further in later years.

These changes just increase my conviction to plan my own retirement without taking into consideration of my CPF. The rules just keep changing every year.

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