CPF LIFE in 2025: What Has Changed and What Has Not
CPF LIFE has become a cornerstone of retirement finance and planning in Singapore since its introduction in 2009. Back when we started this blog, we looked at the mechanics of CPF LIFE (see CPF Life: A Primer on Retirement), and also looked at the value of it (see CPF Life: Is it a worthwhile investment? and CPF Life: An Update for 2020). The value of the future cashflows for life paid out to CPF members under CPF LIFE is valued fairly at the same value as what they put into the Retirement Account, and hence it is the best annuity we can get. So, how is CPF LIFE in 2025? Has it changed? For the better or for the worst?
CPF LIFE in 2025: What Has Changed and What Has Not
The Basic, Full and Enhanced Retirement Sums
First, let’s take a look at the foundation of CPF LIFE – the amount we set aside for future payouts. In 2020, the Full Retirement Sum (FRS) was $181,000 for CPF members turning 55 in the same year. Today, the FRS has grown to $213,000, or an annual growth of some 3.3% over the past 5 years. Correspondingly, the Basic Retirement Sum (BRS) has grown to $106,500, or half of the FRS. At the same time, the Enhance Retirement Sum (ERS) has been redefined to be twice the FRS, or $426,000.
Why does the FRS keep growing over time? Well, it has to keep up with inflation, which is all too familiar to us now. Based on the Consumer Price Index, prices in Singapore have increased by approximately 3.1% a year over the past 5 years. Hence the FRS has just been able to keep up with inflation, allowing future retirees to safeguard their standard of living in the face of rising prices.
CPF LIFE payouts
In the early days of CPF LIFE (meaning from 2019 onwards), CPF always gave a range of possible payouts, based on different interest rates used (see CPF Life: An Update for 2020), and the growth of the projected payouts lagged the annual increase in the FRS, possibly to account for increasing longevity on top of inflation). However, the COVID-19 pandemic and the following inflationary period must have up-ended these calculations.
Today, CPF projects the payouts for men turning 65 in 2035 to be $1,700 per month under the Standard Plan. This has grown by an annual rate of 3.4% since 2020 (when it was between $1,390-$1,490), and it is a little higher than even the growth in the FRS over the same period! Perhaps CPF LIFE its trying to catch up with the inflation of the past 5 years? Or, perhaps longevity in Singapore has stopped increasing? The table below summarises these changes for 2025:
CPF LIFE in 2025 compared to 2020
| 2020 | 2025 | Annual Increase (%) | |
|---|---|---|---|
| Full Retirement Sum (FRS) | $181,000 | $213,000 | 3.3% |
| Monthly Payout (Standard Plan) | $1,390-$1,490 | $1,700 | 3.4% |
| Monthly Payout (Escalating Plan) | $1,070-$1,180 | $1,340 | 3.6% |
| Monthly Payout (Basic Plan) | $1,310-$1,360 | $1,650 | 4.3% |
Source: CPF
The surprising thing about the latest payout projections is how much higher the payouts under rate Basic Plan are! The payouts have grown faster than the increase in the FRS, and higher than inflation as well! Is there a free lunch here?
The monthly payouts for the CPF LIFE Basic Plan appear to have increased faster than the increase in the FRS and inflation! Is there a free lunch?
The Peculiarities of the CPF LIFE Basic Plan
When CPF LIFE was first introduced, the Basic Plan was an option CPF members could opt for if they were happy with lower monthly payouts and in exchange, leaving a bigger bequest for their loved ones. Unlike the Standard or Escalating Plans, where the bequest amount (i.e. the remaining CPF LIFE premium which has not been paid out as monthly payouts yet at the time of death) falls to zero around the ages of 80 or 81, the Basic Plan allowed the bequest left by the CPF member to be sustained until the age of 92!
But now, the Basic Plan is legacy plan, according to CPF. Which may mean that it will no longer be an option for CPF members in the future. And based on the formula of calculating the bequest, the higher payouts to the Basic Plan projected now in 2025 may also mean that the bequest for loved ones runs out at the age of 82 or 83, just a little longer than the Standard or Escalating Plans! So the higher payouts we see above for the Basic Plan are being funded out of the future bequests. There is no free lunch!
The higher monthly payouts for the Basic Plan are likely funded out of a lower bequest amount, which may run out by the age of 82-83. There is no free lunch!
Can CPF LIFE Keep Up with Inflation?
The question which may keep retirees up at night is inflation. Having lived through the past 5 years of much higher annual inflation than in the previous 15 years, we may wonder whether our CPF LIFE payouts can meet higher and higher cost of living in the future. Which is why we argue that the Escalating Plan, where payouts rise by 2% every year, is probably the best option amongst the CPF LIFE plans (see Is the CPF LIFE Escalating Plan the best plan?). Students of retirement finance will know very well that sustaining a withdrawal plan from investment assets which grows in line with inflation is one of the hardest problems to solve, which is why Safe Withdrawal Rates of 2.5% to 3.5% are usually suggested, far below the 4 percent rule we are more familiar with!
But there is a further issue with CPF LIFE. While the FRS grows at around 3.3% a year to keep up with price inflation, our expenditure grows even faster. Statistics from the 2022/23 Household Expenditure Report show that expenditures for households aged 55-59 and aged 60-64 grew at 6.9% and 5.7% respectively, between 2017/18 and 2022/23. This is faster than the rate of inflation!
Median Household Expenditure in Singapore
Source: Department of Statistics Singapore
Since the FRS and hence CPF LIFE payouts will increase over time, but at a rate lower than our expenditure growth (or lifestyle inflation), relying on CPF LIFE alone for our retirement needs will potentially lock us into a lifestyle of 2020 instead of whenever it is we retire! Therefore, CPF LIFE should not be the only source of retirement funds, but should be a part of different streams of income in retirement. Even better, CPF LIFE should be used as a fall back or failsafe for the possibility that the streams of income from other sources run out or dry up.
Conclusions
CPF LIFE has evolved over the past 5 years when it has come on stream and started making monthly payouts to CPF members. What has changed and what has not for CPF LIFE in 2025?
- Both the projected CPF LIFE payouts and the the Full Retirement Sum has grown at the rate of inflation
- The Basic Plan is now considered a legacy plan. So, it may not be offered as an option in the future when the time comes to choose a plan at the age of 65
- Median household spending in Singapore has grown faster than the rate of inflation in the past 5 years, and will continue to do so, based on history. Hence relying on CPF LIFE as the sole source of retirement income will leave us locked into a standard of living of the 2010s instead of the 2030s when we may actually retire
