I was having lunch with my colleagues last week when the topic of CPF LIFE
came up. There seemed to be quite a bit of confusion about whether the interest
earned in your CPF Retirement Account (RA) belongs to you and your legacy or if
it gets pooled into CPF LIFE.
Let’s break it down and understand what happens to your CPF RA balance and its interest once CPF LIFE kicks in.
What is CPF LIFE?
CPF LIFE is a national annuity scheme that provides monthly payouts for
life, ensuring you don’t run out of money in retirement. One important aspect
to note is that the interest earned on your CPF LIFE premium does not belong to
you. Instead, it is pooled with CPF LIFE funds to sustain lifelong payouts for
all participants.
So, what actually happens to your CPF RA balance and its interest? Let’s
explore.
What Happens to Your CPF RA and Its Interest?
Before
You Turn 65 (or When You Defer Payouts until 70)
- Until you start CPF LIFE payouts, all interest earned on your CPF RA remains in your RA, helping your balance grow. This interest belongs to you.
After
You Start CPF LIFE Payouts (From 65 to 70, Depending on Deferral)
- CPF LIFE Premium Deduction: A portion or all of your RA balance, depending on the plan you choose, is deducted from your RA One month before payout to pay for CPF LIFE premiums.
- What Happens to Interest? The interest earned on the CPF LIFE premium no longer stays in your RA. Instead, it is pooled into CPF LIFE to fund your payouts and those of other participants.
How Much Interest Do You Keep?
The amount of interest that stays with you depends on the CPF LIFE plan you
choose:
Basic
Plan
- Only 10% to 20% of your RA is deducted for CPF LIFE premium.
- The remaining 80% to 90% stays in your RA, and all the interest earned on it remains yours.
- This results in higher legacy potential but lower monthly payouts.
Standard
& Escalating Plans
- 100% of your RA balance is deducted for CPF LIFE premium.
- No interest stays in your RA—all interest earned on the premium is pooled.
- This results in higher monthly payouts but a lower legacy.
Why Does This Matter?
It all depends on what you want from your retirement. Let’s compare:
Basic
Plan (More Legacy, Lower Payouts)
- Monthly payouts come from your 80% to 90% RA savings until one month before you turn 90.
- After reaching 90, payouts continue from CPF LIFE premium
- Once your CPF LIFE premium is depleted, payouts continue from the pooled interest.
- Since a smaller portion of your RA goes into CPF LIFE, monthly payouts are lower, but your legacy is larger because 80% to 90% of your RA and its interest remains with you.
Standard
& Escalating Plans (Higher Payouts, Lower Legacy)
- Monthly payouts start directly from CPF LIFE premiums.
- Once your CPF LIFE premium is depleted, payouts continue from the pooled interest.
- Since all your RA is used for CPF LIFE, monthly payouts are higher, but your legacy is lower.
- The Escalating Plan starts with lower payouts that gradually increases, while the Standard Plan provides a fixed payout.
The infographics below provides a quick summary of the points above.
In short, all the money (CPF RA, CPF LIFE Premium paid and CPF LIFE payout) except the CPF LIFE Interest Pool (Interest earned from CPF LIFE premium) are yours.
With the Basic Plan, 80% to 90% of RA along with
its interest stays with you. This means that you will generally have more for
legacy but lower payout.
With the Standard and Escalating Plans, 100% of your RA balance is used for the CPF LIFE plan, and no interest stays in your RA. This means a lower legacy and higher payout.
Make sure you understand how your CPF LIFE plan affects your interest, monthly payouts and legacy and think about your other income streams to ensure a well-rounded retirement plan.
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What Happens to Your CPF RA and Its Interest Under the CPF LIFE Scheme?
Reviewed by Valuewarrior
on
March 01, 2025
Rating:

what does it mean by lower legacy? i am on standard plan
ReplyDeleteFor the standard plan, with everything else remains equal, you should get more payout per month verse the basic plan. However should you pass away (depending on what age you pass away) you will leave less money (lower legacy) for your dependent compared to the basic plan.
DeleteIf I choose basic plan, can I withdraw the interest payout yearly from my Retirement Account?
ReplyDeleteNo you cannot choose how much to withdraw from your RA. The money in the RA will be paid out monthly to you determined by CPF.
DeleteIf I renounce my citizenship at 60 then will I get back my RA with 5 years interest?
ReplyDeletePlease advice. Thanks
Yes. The interest from 55 to 60 will be in your Retirement Account and should be yours to withdraw if you renounce your citizenship.
DeleteFor both the standard and escalating plans, 100% of your RA balance is used to pay for the CPF LIFE premium. In the event of your passing (depending on the age), how can one determine the remaining amount to be passed on to the nominee as a legacy? What is the formula used to calculate the legacy amount?
ReplyDeleteThe amount to be passed on as legacy is the remaining CPF LIFE premium (CPF LIFE premium paid - total payout till date). The formula to calculate the CPF LIFE pay out is not available to the public.
Deletel am on CPF Life plus plan. What happens to the interest earned on CPF life after my passing. For CPF Life plus plan, the interest is still mine after my passing. For your clarification please. Thanks
ReplyDeleteI am not sure what is CPF LIFE plus. Regardless, whatever interest earned from the CPF LIFE Premium paid will be pooled and does not below to you and will not be passed on to your nominee when you passed.
DeleteBoth CPF LIFE Standard and Escalating uses 100% of your RA for CPF LIFE Premium. Only CPF LIFE Basic uses 10 to 20% for CPF LIFE Premium.
Do note that the unused CPF LIFE Premium paid belongs to you and will be passed on to your nominee when you passed.