The CPF Scheme that had me Decide Enough Was Enough

You may not believe this. I'll share this little snippet with you anyway. Do whatever you want with the information or just treat it as a fairy tale if you think it's a load of bullshit. It doesn't bother me anyway, because my mind was made up to leave after I did my analysis (be it right or wrong) and I have been standing by my decision since without regret.

The first spark in my mind about migration occurred in 2006. That was the year started my first job in Singapore. My friend Tucky started work earlier than me, so he was much sharper towards any changes in our financial environment than me. In 2003, one major change was made to our CPF, the sole retirement fund of many Singaporeans. Back then, there wasn't much talk about it, especially among my peers who just started their careers. By 2006, we realised something was amiss and sat down one evening to discuss about it. The CPF minimum sum had already risen $14,000, or 17.5% since its inception 3 years before. Still, most of my peers were not bothered by it at the slightest. Not Tucky and I though. We knew something was brewing and eventually ordinary Singaporeans would be in hot soup in regards to this policy change.

In 2006, migration was never on my mind. It was never an option. The thought of leaving Singapore to work and live elsewhere was simply too overwhelming for someone who planned to live and die in Singapore. I mean, who doesn't? Still, the first discomfort the CPF change continued to lingered in my mind, like a plague that refused to go away. By 2008, my worst fears were confirmed after I continued to monitor the progress of the new Minimum Sum scheme. It was the year I decided I had to do something drastic in my life because I knew I would be heading into financial hardship if I were to continue doing what I had been doing. There was only an obvious choice as a money minded Singaporean - to make more money. I was heading nowhere in achieving that goal be it in employment or self employment. Then the idea of migration was brought up by my ex-girlfriend Jen and the rest was history.

The purpose of this is not to share my migration story. It has been done to death. Instead, I'm going to share what I saw in 2006 that got me panicking. As a matter of fact, by now I believe many more Singaporeans have already woken up to the fact that the Minimum Sum policy is going to have a much larger impact on themselves than they initially thought. An elaboration may not be necessary after all. Still, I thought it is a good time to do so, since we finally have 10 years of data to refer to. 

In 2006, I realised the inflation rate used by the CPF was close to 6% per annum since the Minimum Sum scheme was introduced in 2003. I used that rate to forecast the amount I would be dealing with at the year I turn 55 and I didn't like what I saw (if things continue to go on the same way). Sadly, a decade of data reaffirms that the Minimum Sum has been increasing around 6.3% year-on-year, worse in the 6% rate I used to project in fact. I would update my calculations today:

If you are 50 years old today, your Minimum Sum by your 55th birthday is likely to be $207,000
If you are 40 years old today, your Minimum Sum by your 55th birthday is likely to be $371,000
If you are 30 years old today, your Minimum Sum by your 55th birthday is likely to be $665,000
If you are 20 years old today, your Minimum Sum by your 55th birthday is likely to be $1,119,000
* feel free to audit and correct me if I am wrong.

The above doesn't defer much from my original forecast in 2006. Back then I knew that amount of Minimum sum I had to deal with (for my case) was about half a million dollars. That was a great deal of money for any ordinary employee like me. I made an unrealistic projection of myself working for 30 straight years without a window of unemployment nonetheless. 

500,000/30 (years) / 12 (months) = $1,388

is the amount of money I have to had to put into the CPF on average per month, if circumstances remain the same. So how much monthly salary do I require for me to deposit $1,388 into my CPF account without topping up with cash? On current rates (36%), my salary has to be at least $3,850.

That was a nightmare of a finding to me because of 3 factors that make this totally unrealistic. Obviously, my entry level job during those years was never going to pay me $3,850 or anywhere close to it. In fact, many of my seniors who had worked for a few years did not hit this level of salary range. Even if I did better later on and manage to enjoy a $3,850 monthly wage or higher, how could I possibly make up enough for the deficient years? The second factor was that my assumption of 30 working years would have taken me to 60 years of age at the end of the projection. Many Singaporeans are still unaware that our employer's contribution to our CPF will drop from (the current) 16% to 14% (at 50 - 55 years old) and to 10.5% (at 55 - 60 years old). That will make a huge difference for 10 years worth of working wages. Lastly, of course, it is never realistic to expect employment for the full 30 years without a hiatus.

A possible purchase of a HDB flat was not even considered for this equation.

In short, I knew I was screwed.

I knew I would not be able to withdraw a single cent from my CPF account at age 55. Don't get me wrong, I'm not implying that I would be able to withdraw a healthy pension fund elsewhere at the same age. Let's not go there and stick to the topic. What was truly disappointing was that I knew I would not even hit my Minimum Sum if I took an average career path. I might have a chance if I burst a gut (I tried for a few years and got bladder cancer as the prize) but even if I worked that hard, did better than the average and made it, what about the rest of the Singaporeans? Is there any meaning to this if the majority of the population will not be able to make it?

Now for the worse news, even if you hit the Minimum Sum, you will still withdraw nothing at 55 years old because the CPF board only allows you to withdraw anything beyond your Minimum Sum. So yeah, you burst your gut and made it at the last minute. Well done, thank you here is $16.88 for your effort. The rest of your money had been used for purchase an annuity whether you agree to it or not. You will be paid $600 a month for your effort thereafter. Thank you for your participation.

In my opinion, no one should be penalised for failing to amass a certain amount of money in their working career. Singaporeans grow up being guided to a selection of schools (because the rest are deemed shit), channeled to certain units during National Service (whether they like it or not), herded to take up a selection of jobs (because the rest could not pay enough to fulfill your Minimum Sum) and when we finally exhausted all our life capital to head towards the final chapters of life, we cannot even decide the way we want to die. Is that what life is about as a Singaporean?


  1. I'm about 52 yrs old. My min sum will be more than $200,000 excluding the medisave account. Sigh!

    1. u know why? Coz your flat was bought at less than 100k

    2. the very same situation when you compare the price to build a landed house in Malaysia... which is about S$400k of building materials and then in Singapore... the same rebuilding of the same house will be S$2,400,000. (2.4 million).
      Simply put, everything in Singapore is Over-Inflated and also is the Government.

    3. Nonsense is 2017 now and you and I are 55. It is <180k and yoi can pledge your property to leave only sgd80k. OT also misguided many ..I paid of my 1.6kk house boight in 1997 and still have sgd400k in total combined ordi ary account and special account this year at 55

    4. Btw, hope you are happy now in a foreign land as 3rd or 4th class citizen.

    5. Never been happier than the days being a mindless automaton

  2. Hi Nix

    I do not work for the SG govt and I do not have any grandfather with surname Lee. So I am not a lackey for the SG govt in any way.

    A few things to point out:

    1. You appear not to include CPF minimum 2.5% interest rate which is not much compared to any long term deposit but still better than any saving account interest rate you can get in SG or AU for that matter. As such the net inflation rate may be 3.5 to 4.0% rather than 6.0 or 6.5% you estimated.

    2. Can't remember when it started but definitely before 1995 we can already use cpf to pay for HDB instalment although obviously if your contribution does not cover minimum sum instalment amount than you have to pay extra out of pocket. As long as the value of the HDB flat is not depreciated, it can cover for the minimum sum value at the age of 55, but if you sell the flat then you must use the monies to top up your MS.

    3. It is true however that whatever you do with your cpf monies under various schemes, the original value

    1. XYZ,

      1. Thank you for pointing out about interests. Please do not hold it against me. It was 4am in the morning and with that kind of interest rate, you can't blame me for not feeling too excited about it. No, it doesn't drop the inflation rate used to 3.5%. It's 4% flat we have to pay for even if you discount the interest rate CPF pay us. Bear in mind while it reduces our payment (to my initial calculation), the final Minimum Sum projection remains the same.

      2. No, don't get me started on HDB flat appreciation. I certainly do not see it the way most Singaporeans see it and do not think its appreciation is sustainable. In any case, buying a HDB flat makes matter worse in terms of attempting to fulfill the Minimum Sum. So if you do sell the "greatly appreciated" flat at 55, where are you going to stay? These assumptions are beautiful on paper, impractical in reality.

      3. They can call it anything they want. They can tell it's your money, or your DNA whatsoever. But it remains obvious it's a lock-in. Since you mentioned about migration withdrawal, I can have a side bet with it that will eventually be patched as well.

    2. Hi Nix

      Wah Lao, you make sound like they have to think very hard to patch migration leak of Ah Gong the govt CPF fund. I can provide a damn easy justification which if you bet on it sure win wan.

      It's called quitter's refund of education deposit. Any SG who migrate must have enjoy some sort of subsidy in education, since most have migrated under skilled migrants to most countries. If you quit SG, then govt must take back what subsidies you enjoyed under SG govt, including primary, secondary, jc, polytechnic, uni subsidies. Furthermore it also includes your children's education enjoyed so far as well.

      This may easily run into $500,000, not enough money in CPF? Then don't worry, govt will not ask for more than what is in your cpf so far. You can quit but you can't withdraw your cpf.

      Hey mr SG agent reading this, isn't this policy scheme worthy of a govt minister? PM me ok?

  3. 3. It is true however that whatever you do with your cpf monies under various schemes, the original value plus interest is locked into CPF whenever you sell the HDB or stocks you bought under the scheme. As such unless you migrate you will never get away from Singapore inc, no matter how you cry father or cry mother, everything still locked into ah gong the govt.

    PS. A reminder to any SG government agent reading this post and interested in hiring me as propaganda, sorry citizen spokesperson: I am happy to consider any offers that matches my supreme abilities and qualifications, maybe pegged to a usual PSC scholar become Minister (S$1.47 M pa plus pension), but don't worry, I only work part time and you will get value for money since I will not charge Australian overtime loading for Woking in my spare time.

    PM me if interested, Ok?

  4. 1) Its might be good if you can compare how much average life expectancy of Singaporeans have grown over the years. So use that increase no, of years, (X) average annual expensive of a healthy retiree or a handicap retiree which require nursing cares (this is excluding medical expenses)

    2) It might be good is your could convert the S$ CPF value over the years into the weight in gold using gold price in their respective period. From there you will be able to see how much paper money has lost its value over the years.

    3) Since you are living in australia, I think its only fair if you include the amount of taxes you are paying per year vs how much income tax you will pay if you are in Singapore.

    4) It might also be good if you could highlight the quality of public healthcare in Australia since this is what Australian pay for from the income taxes. (its not FREE)

    5) With CPF, you are allow to use the money to buy property. With income taxes in Australia (>40%), you will need to dig into your personal saving to fund the down payment. For that reason Australian are paying mortgage interest through their nose, and that is also why in Australia, they have such thing as interest payment only mortgage. (which is similar to subprime). I am sure you are aware the interest rate in Australia is around 5%, vs around 1.5% in Singapore.

    6) It might also be good if you could give us an estimate on the value of Australia natural resources reserves as this will give us a good indication on how much the government can leverage without fearing of going bankrupt or losing its currency value.

    1. I think Jade is veering off topic here; the fact remains that the CPF scheme in its current form is 'screwing' many Singaporeans. Briefly by having this so-called minimum sum which more and more ordinary Singaporeans can't meet, the people are denied the rights to their own savings and money.

      To put it simply, it is wrong to withhold people's money against their will. It is also not right to have a system where the majority of ordinary workers will not be able to meet this so-called minimum sum.

      I can hazard a guess that Jade doesn't quite belong to this group.

    2. Search the blog. I've covered all your above mentioned beyond the stereotyping and I know which deal is clearly better.

    3. I agree with Jade on taxes and mortgage rate. You pay so much tax in Australia and you get nothing back from the govt. the superfund is 9.25% only and you can't do much about it. Furthermore, whatever interest and dividend earned in your superfund, you get taxed as well. Tax, tax..all taxes. Yes, Singapore has indirect taxes like COE and ERP if you don't own a car you no need to pay unlike ATO, it's complicated as hell and you must pay.
      House is cheap here as compared to sg but with the sky high interest rate (consider low now used to be 7%) if you just pay the interest only, a 500K house may end up 1 million at the end. Maintaining a house is not cheap too, the council and water rates will kill you. This is also why most of the local spend beyond their short money not enough.

  5. CPF and the gov needs to be more transparent such as where did all the money go into and why. If the people have full information about the status of cpf and reserves, people will be more happy to do whatever necessary to ensure the country will progress and prospers.

  6. Hmm.. just a thought.. is there a loop hole to this? Like migrate so you can withdraw your entire CPF fund even without hitting the minimum sum?

  7. You missed out the point that the past increases in minimum sum is due not only to inflation but also to adjust the minimum sum to S$120,000 in 2003 dollars. This adjustment is slated to be completed by 2016. Hence, the projected values for minimum sum for the different age groups by 55 birthday is likely to be grossly over inflated.

  8. Your CPF contribution should minus the Medisave as it does not add to the min sum. Hence you need a salary of $4950 per month to have $1386.46 for ordinary acc + special acc, provided you don't use it to buy a HDB flat