Estimated CPF minimum sum for 2015 [Part 1]

 Now that we are in July, the new CPF minimum sum has just come into effect.

The CPF minimum sum is now $155,000.

The Medisave minimum sum is now $43,500 and the Medisave contribution ceiling is now $48,500.






Some people may be wondering: What will be the CPF minimum sum next year?

There are 2 factors that will determine the minimum sum.
1) inflation for 2014 (which we do not know yet)
2) the $120,000 (in 2003 dollars) target for the minimum sum

Let me attempt to perform some estimates here:

Assuming an inflation rate of 3%,
Estimated 2015 CPF min sum = 155000 * 120000/117500 * 1.03 = $163047
= $163000 (rounded to nearest thousand dollars)

Assuming an inflation rate of 4%,
Estimated 2015 CPF min sum = 155000 * 120000/117500 * 1.04 = $164630
= $165000 (rounded to nearest thousand dollars)

Assuming an inflation rate of 5%,
Estimated 2015 CPF min sum = 155000 * 120000/117500 * 1.05 = $166213
= $166000 (rounded to nearest thousand dollars)



When the inflation figures are released in Jan next year, I will be able to provide a more accurate estimate. I will provide another post on the estimations in Jan 2015.


Related post:
CPF minimum sum 2014
CPF minimum sum for July 2014 [Predicted]
CPF minimum sum for Jul 2013 and projections for 30 years

CPF minimum sum 2014

The CPF minimum sum will be raised to S$155,000 for those who turn 55 between July 1 this year and June 30 next year. 

http://www.todayonline.com/singapore/cpf-minimum-sum-rise-s155k-july

Back in Jan 2014, I made an estimate of the CPF minimum sum on these 2 posts:

CPF minimum sum for July 2014 [Predicted]

In this estimate, I calculated the estimated minimum sum based on an inflation rate of 2.4%. My calculations worked out to be $154800 which is quite close to the announced figure of $155000. Perhaps CPF board rounded the nearest $1000 or $500 instead of $100 in my calculations.

I have also done a small revamp on the 30 year projection to include actual values.

CPF minimum sum for Jul 2013 and projections for 30 years

Increase in Medisave min sum

From July 1, the Medisave Minimum Sum will also be raised to S$43,500 from S$40,500, while the Medisave Contribution Ceiling will be increased correspondingly to S$48,500, from S$45,500.

For people who have hit the contribution ceiling, any Medisave contributions will go to your special account instead. Both account currently earns you an interest of 4% per year.

CPF minimum sum for July 2014 [Predicted]

The inflation rate for Singapore 2013 is announced as 2.4%
Source:
http://www.singstat.gov.sg/news/press_releases/cpidec2013.pdf



With the inflation amount released, I am now able to give my estimate for the CPF minimum sum for July 2013 like what I did last year.

"And the CPF mimimum sum for July 2014 will be...."

*** Drums roll ***

$154800 !

How do I arrive at this number?
The CPF minimum sum changes every July and there are 2 factors that affect the CPF minimum sum:
1) inflation rate
2) the target of 120k (in 2003 dollars) that is to be reached in July 2015.

There are still 2 more years to hit the 120k (in 2003 dollars) target. If we spread out this increase evenly over the next 2 years, we will see an increase of 2500 in 2003 dollars each year.

With this, my calculation for July 2014 CPF minimum sum is as follows:

Estimated July 2014 CPF minimum sum
= 117500 / 115000 * 148000 * 1.024
= $154847
= $154800 (rounded to nearest $100)

I believe this is the more likely scenario.


What if other targets for July 2014 is used?
If some other target (other than 117500) is used for Jul 2014, the minimum sum will be slightly different.

target of $117000
est min sum = 117000 / 115000 * 148000 * 1.024
= 154188
= $154200 (rounded to nearest $100)

target of $118000
est min sum = 118000 / 115000 * 148000 * 1.024
 = 155506
= $155500 (rounded to nearest $100)


target of $120000
This scenario will mean that the target is brought forward by one year from 2015.
est min sum = 120000 / 115000 * 148000 * 1.024
= $158141
= $158100 (rounded to nearest $100)

The actual figures will be released some time in June. We shall see if the above estimates is correct then.

CPF minimum sum for Jul 2013 and projections for 30 years

EDIT 2020
This projection is outdated. Please refer to new projection at:
http://madstranger.blogspot.com/2020/02/cpf-full-retirement-sum-projection.html

This post contains the predicted CPF minimum sum which I computed in May 2013.

On May 2014, I did a small revamp to this post as I find it useful to compare my predicted values to the actual values. From 2014 onwards, I will add in the actual inflation rate for the previous year and actual announced minimum sum value in the 2 new columns.

Notes:

1) Every year, the CPF minimum sum is increased to account for inflation.

 2) CPF has set a 120k (in 2003 dollars to hit) by 2015. Before 2015, the CPF minimum sum will also increase by a certain ratio to account for this target

As the CPF minimum sum is largely dependent on the inflation, any changes to inflation rate will affect the CPF minimum sum which will in turn affect our plans for retirement. This projection serves to give us a rough idea of the CPF minimum sum when we retire so that we can better plan for our retirement.

The projected CPF minimum sum are as follows:

 

	CPF Min sum for inflation rate			Actual
Year	3%	4%	5%	Actual inflation	Actual min sum
2014	155,800	157,300	158,800	2.4%	155,000
2015	163,900	167,100	170,300	1.0%	161,000
2016	168,800	173,800	178,800
2017	173,900	180,800	187,700
2018	179,100	188,000	197,100
2019	184,500	195,500	207,000
2020	190,000	203,300	217,400
2021	195,700	211,400	228,300
2022	201,600	219,900	239,700
2023	207,600	228,700	251,700
2024	213,800	237,800	264,300
2025	220,200	247,300	277,500
2026	226,800	257,200	291,400
2027	233,600	267,500	306,000
2028	240,600	278,200	321,300
2029	247,800	289,300	337,400
2030	255,200	300,900	354,300
2031	262,900	312,900	372,000
2032	270,800	325,400	390,600
2033	278,900	338,400	410,100
2034	287,300	351,900	430,600
2035	295,900	366,000	452,100
2036	304,800	380,600	474,700
2037	313,900	395,800	498,400
2038	323,300	411,600	523,300
2039	333,000	428,100	549,500
2040	343,000	445,200	577,000
2041	353,300	463,000	605,900
2042	363,900	481,500	636,200
2043	374,800	500,800	668,000

** each year's value rounded to nearest $100



My other thoughts:

Depending on the inflation rate for the next 30 years, the CPF minimum sum can end up very differently. As seen from the figures above, it works out to a difference of almost 300k! We should plan for our retirement using a higher inflation rate to allow more buffer for ourselves. If inflation rates remain at a level that is higher than the 2.5% and 4% interest rates, Singaporeans are likely to find themselves drifting further and further away from the specified CPF minimum sum.

I would suggest Singaporeans to plan for their own retirements separately and not rely on the the CPF scheme alone for your retirement needs. 

I will try to come up with a more accurate CPF minimum sum estimate for subsequent years when the inflation rates for 2013 are announced. Until then, the above estimates should serve as a good estimate for you.

Other posts relating to CPF minimum sum can be found here:
CPF min sum related posts

CPF minimum sum for Jul 2013 [Predicted]

The inflation rate for Singapore 2012 is calculated to be 4.6%

Source: http://www.singstat.gov.sg/stats/themes/economy/hist/cpi.html

The CPF minimum sum is targetted to reach $120k (in 2003 dollars) by Jul 2015. In Jul 2012, the minimum sum has hit 113k (in 2003 dollars) which is 139k. 

Source: http://mycpf.cpf.gov.sg/CPF/my-cpf/reach-55/Reach55-2.htm

Based on this, how much will the minimum sum be Jul 2013?

This will depend on the target (in 2003 dollars) that is set for Jul 2013. With 7k (in 2003 dollars) to reach in 3 years, we should expect of a target between 115k to 116k (in 2003 dollars)

Assuming, a target of 115k (in 2003 dollars), the minimum sum should work out to be:

115k / 113k * 139k * 1.046 = 147967 = 148000 (rounded)

Assuming, a target of 115.5k (in 2003 dollars), the minimum sum should work out to be:

115.5k / 113k * 139k * 1.046 = 148611 = 148600 (rounded)

Assuming, a target of 116k (in 2003 dollars), the minimum sum should work out to be:

116k / 113k * 139k * 1.046 = 149254 = 149300 (rounded)

** Rounding to nearest $100

With the above calculations, I would expect the minimum sum to be increased to a value between 148000 to 149500. The 149500 will be hit if the 116k (in 2003 dollars) target is set and CPF board round the amount to the nearest $500. 

If that happens, we will see an increase in CPF minimum sum of $10500. How many Singaporeans have even contributed this amount to the CPF OA and SA? With an inflation rate higher than the CPF-OA and SA interest of 2.5 and 4% respectively, many Singaporeans will find themselves further from the CPF minimum sum as higher targets are being set.

The actual figures will be released around end June. We shall see if my estimates are accurate then.

CPF Minimum Sum to be raised to S$139,000

Today, the announcement for the CPF minimum sum for 2012 is out. The new value now stands at 139k. This is 8k higher than the 2011 minimum sum of 131k.

Source:

http://www.todayonline.com/Singapore/EDC120530-0000100/CPF-Minimum-Sum-to-be-raised-to-S$139,000

My first thought was that the value was much lower than what I estimated earlier this year. In my earlier post in January this year, I estimated the minimum sum to be 143k instead.

Related post: CPF minimum sum for Jul 2012 [predicted]

Reading further, I realised why the actual figures are much lower than my estimates. The original plan was to increase to 120k (in 2003 dollars) by year 2013. The increase was carried over 10 years from 2003 in a "gradual" manner.  However, with a high inflation rate last year, this figure will work out to be 143k for 2012 which was the same as my estimates! In response to concerns of such a large increase, the gradual increase is now amended to extend by another 2 years due to the original huge increase. This change will mean that we will see medium to huge increases (depending on inflation rate) for the minimum sum until 2015. After which, only inflation will affect the minimum sum value. 

Other thoughts:

Based on earlier calculations in other posts, I feel that many Singaporeans will have difficulties hitting the minimum sum. There are a few possible changes to the current CPF rulings to help more Singaporeans hit this minimum sum, Some of them are:

1) Increase the current 5k cap for CPF contributions to 8k

2) Increase the employee CPF contribution to 25% or even 30%.

3) Increase the employer CPF contribution rate

4) Decrease the prices for HDBs

My guess is that (1) and (2) are more likely to occur. If they were to be implemented, the increase is likely to be introduced in small increments over a period of time. This will be similar to other policies like the minimum sum itself or the increase in GST. There is also likely to be one-time tax rebates if these were to occur. However, both options will definitely mean a reduce in cash flow and I don't like that.

Is it possible to achieve the CPF minimum sum with Special account alone?

While writing my earlier article on how many Singaporeans are left with little or no CPF OA balances, one question came into my mind: Is it possible to achieve the CPF minimum sum with the special account alone? Afterall giving us a 4% interest rate per year. This amount cannot be utilized easily even in investments products.

I did some simple projections in the CPF balances based on a few simple assumptions:
1) Interest rates for OA: 2.5%, Interest rates for SA and MA: 4%
I know there is an additonal 1% for the first 60k balances. However, to keep calculations simple, I left it as it is. The interest rates are also computed based on yearly basis

2) The projection is assuming the individual started working at the age of 26 and has hit the CPF cap of 5k throughout his working lifetime.


3) The individual has no additional income or bonuses.

Age	Monthly contribution	yearly OA	yearly SA	yearly MA	TOTAL OA	TOTAL SA	TOTAL MA
START					0.00	0.00	0.00
26	1,800.00	13,800.00	3,600.00	4,200.00	13,800.00	3,600.00	4,200.00
27	1,800.00	13,800.00	3,600.00	4,200.00	27,945.00	7,344.00	8,568.00
28	1,800.00	13,800.00	3,600.00	4,200.00	42,443.63	11,237.76	13,110.72
29	1,800.00	13,800.00	3,600.00	4,200.00	57,304.72	15,287.27	17,835.15
30	1,800.00	13,800.00	3,600.00	4,200.00	72,537.33	19,498.76	22,748.55
31	1,800.00	13,800.00	3,600.00	4,200.00	88,150.77	23,878.71	27,858.50
32	1,800.00	13,800.00	3,600.00	4,200.00	104,154.54	28,433.86	33,172.84
33	1,800.00	13,800.00	3,600.00	4,200.00	120,558.40	33,171.21	38,699.75
34	1,800.00	13,800.00	3,600.00	4,200.00	137,372.36	38,098.06	44,447.74
35	1,800.00	13,800.00	3,600.00	4,200.00	154,606.67	43,221.99	50,425.65
36	1,800.00	12,600.00	4,200.00	4,800.00	171,071.84	49,150.87	57,242.68
37	1,800.00	12,600.00	4,200.00	4,800.00	187,948.63	55,316.90	64,332.38
38	1,800.00	12,600.00	4,200.00	4,800.00	205,247.35	61,729.58	71,705.68
39	1,800.00	12,600.00	4,200.00	4,800.00	222,978.53	68,398.76	79,373.91
40	1,800.00	12,600.00	4,200.00	4,800.00	241,152.99	75,334.71	87,348.86
41	1,800.00	12,600.00	4,200.00	4,800.00	259,781.82	82,548.10	95,642.82
42	1,800.00	12,600.00	4,200.00	4,800.00	278,876.36	90,050.02	104,268.53
43	1,800.00	12,600.00	4,200.00	4,800.00	298,448.27	97,852.02	113,239.27
44	1,800.00	12,600.00	4,200.00	4,800.00	318,509.48	105,966.10	122,568.84
45	1,800.00	12,600.00	4,200.00	4,800.00	339,072.22	114,404.75	132,271.59
46	1,800.00	11,400.00	4,800.00	5,400.00	358,949.02	123,780.94	142,962.46
47	1,800.00	11,400.00	4,800.00	5,400.00	379,322.75	133,532.17	154,080.96
48	1,800.00	11,400.00	4,800.00	5,400.00	400,205.82	143,673.46	165,644.19
49	1,800.00	11,400.00	4,800.00	5,400.00	421,610.96	154,220.40	177,669.96
50	1,800.00	11,400.00	4,800.00	5,400.00	443,551.24	165,189.22	190,176.76
51	1,500.00	7,800.00	4,800.00	5,400.00	462,440.02	176,596.78	203,183.83
52	1,500.00	7,800.00	4,800.00	5,400.00	481,801.02	188,460.66	216,711.18
53	1,500.00	7,800.00	4,800.00	5,400.00	501,646.04	200,799.08	230,779.63
54	1,500.00	7,800.00	4,800.00	5,400.00	521,987.19	213,631.05	245,410.82
55	1,500.00	7,800.00	4,800.00	5,400.00	542,836.87	226,976.29	260,627.25
56	1,075.00	6,900.00	600.00	5,400.00	563,307.80	236,655.34	276,452.34
57	1,075.00	6,900.00	600.00	5,400.00	584,290.49	246,721.55	292,910.43
58	1,075.00	6,900.00	600.00	5,400.00	605,797.75	257,190.41	310,026.85
59	1,075.00	6,900.00	600.00	5,400.00	627,842.70	268,078.03	327,827.92
60	1,075.00	6,900.00	600.00	5,400.00	650,438.76	279,401.15	346,341.04
61	700.00	2,100.00	600.00	5,700.00	668,799.73	291,177.20	365,894.68
62	700.00	2,100.00	600.00	5,700.00	687,619.73	303,424.29	386,230.47
63	700.00	2,100.00	600.00	5,700.00	706,910.22	316,161.26	407,379.69
64	700.00	2,100.00	600.00	5,700.00	726,682.98	329,407.71	429,374.88
65	700.00	2,100.00	600.00	5,700.00	746,950.05	343,184.02	452,249.87
66	575.00	600.00	600.00	5,700.00	766,223.80	357,511.38	476,039.87
67	575.00	600.00	600.00	5,700.00	785,979.40	372,411.83	500,781.46
68	575.00	600.00	600.00	5,700.00	806,228.88	387,908.31	526,512.72
69	575.00	600.00	600.00	5,700.00	826,984.60	404,024.64	553,273.23
70	575.00	600.00	600.00	5,700.00	848,259.22	420,785.62	581,104.16

Conclusions
The individual is likely to have little or no CPF OA balances left when he hits the age of 60. This is due to the housing loans he had to pay over the 30 years, with some cash outlay.

At the age of 60, his SA account has only reached $279k, which some people might feel is sufficient to hit the CPF minimum sum. However, this is not true. CPF minimum sum will increase yearly to account for inflation.

In one of my earlier posts [http://madstranger.blogspot.com/2012/01/what-if-cpf-minimum-sum-continues-to.html], I estimated that CPF minimum sum will hit 349k 30 years from now. This individual will still be short of 70k.

For those who are more well paid, it is still possible to hit the minimum sum with SA alone as they will have bonuses yearly. However, the average Singaporeans are likely to suffer from this 20-30 years from now.

Other important notes:
The above projection is also meant to show how the CPF contribution rates
a) decreases with age and
b) how the allocation towards OA, SA and MA changes

When purchasing your housing, do bear in mind these changes so as not to be caught off guard when there is an increase in your cash outlay to your housing loans.