The Purpose of CPF

Lee Chee Kian

When the Central Provident Fund (CPF) was introduced in 1955, it only had one intention and that is to help Singaporeans to save for retirement. Since its establishment, the fundamental of it has remained. Till date, 64 years have passed and despite several modifications made to it along the way, the primary purpose of CPF is still to help us meet our basic retirement.

Watch this video as Lee Chee Kian, Client Adviser at Providend, shares with you how the various CPF schemes are created to support this one purpose.


1. What Is the Purpose of the Central Provident Fund (CPF)?

To understand the Central Provident Fund (CPF), we need to first understand its purpose.

CPF was created to support our basic retirement needs. Basic retirement typically covers three areas:

  1. Housing,
  2. Medical and,
  3. A monthly income for our day to day expenses

Other uses of CPF, such as education and insurances, are meant to support this purpose. Various schemes that were created such as Public Housing, MediSave, Minimum Sum, MediShield, CPF Investment and CPF LIFE were created with this primary purpose in mind.

2. What You Can Do to Get Higher Than CPF Returns?

Before the age of 55, you would have three CPF accounts: Ordinary Account, Special Account and Medisave Currently. OA will give you 2.5%. MA and SA will give you 4% per annum.

How can we achieve higher returns than the 2.5% in our OA?

You can consider using the CPFIS Scheme – investing in Stocks or Unit Trust. However, please keep in mind that you will be exposing yourself to investment risk. You can do this investment by yourself or through the help of a financial adviser

3. What Will Happen to Your CPF Account by Age 55?

At age 55, the fourth account will be created.

This new Retirement Account would be funded from your Special Account and Ordinary Account. Currently, there are three amounts that you can choose to transfer to the Retirement Account – The Basic Retirement Sum, the Full Retirement Sum and the Enhanced Retirement Sum.

Currently, Basic Retirement Sum is at $88,000, Full Retirement Sum at $176,000, and the Enhanced Retirement Sum at $264,000. By default, the Full Retirement Sum will be transferred to your Retirement Account. This money will then be growing at 4% per annum until 65.

At age 65, you can then decide on the CPF LIFE Scheme that can suit your retirement needs.

4. What Is the CPF LIFE Scheme?

CPF LIFE stands for Lifelong Income For The Elderly. Currently, there are three plans available – The Basic Plan, Standard Plan and the Escalating Plan.

The main differences between the three plans are in the payout and the bequests. By default, it will be the Standard Plan. Standard Plan offers the highest payout. However, the bequest will be slightly lower compared to the Basic Plan. The Basic Plan has a lower payout however the bequest will be higher.

As for the Escalating Plan, it may start out about 20% lower. However, it will increase at 2% per annum for the rest of the member’s life. The bequest amount is quite similar to the Standard Plan. Let me give you an example of the payout:

Say a CPF Male member at age 55, if he contributes the Full Retirement Sum, he can expect to receive about $1500 from age 65 onwards.

If he would like to receive a higher payout, he can then consider contributing to the Enhanced Retirement Sum. And he can look forward to $2000 per month from age 65 onwards.

As a financial advisory firm and a retirement specialist, we can help to design a comprehensive retirement plan for you, integrating your CPF monies.

For more related resources, check out:
1. Understanding CPF Part 6: Case Study – Is CPF LIFE Adequate to Fund Your Retirement
2. Financial Planning for Merdeka Generation Part 3: Your Safe Retirement Income Floor
3. To Understand CPF, First Understand Its Purpose


We do not charge a fee at the first consultation meeting. If you would like an honest second opinion on your current investment portfolio, financial and/or retirement plan, make an appointment with us today.

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