1 / 71

RETIREMENT PLANNING

RETIREMENT PLANNING. What is Retirement Planning. It is preparing financially for when you are too old to work when you are too young to quit Involves making decisions about how well you want to live when you still have the means to craft how well you will live

corine
Télécharger la présentation

RETIREMENT PLANNING

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. RETIREMENT PLANNING

  2. What is Retirement Planning • It is preparing financially for when you are too old to work when you are too young to quit • Involves making decisions about how well you want to live when you still have the means to craft how well you will live • Requires you to defer some degree of current enjoyment in favor of future survival

  3. Who should be concerned about your Retirement? The Government is concerned You family is concerned You should be too!

  4. Population Statistics • By 2030, almost 20% or 1-in-5 of Singaporeans will be aged 65 and above Singapore Department of Statistics, 2005

  5. Population Statistics Source of Chart: Role of the Government in Healthcare Provision and Financing in Singapore, presented by Mr Edward Reiche

  6. Population Statistics Source of Chart: Role of the Government in Healthcare Provision and Financing in Singapore, presented by Mr Edward Reiche

  7. Population Statistics Source of Chart: Role of the Government in Healthcare Provision and Financing in Singapore, presented by Mr Edward Reiche

  8. 3 Phases of Retirement Decreasing Health and Independence Retiree may still be working albeit at a slower pace. Also lives an active lifestyle and have various hobbies. Extra income from work seen as a supplement Retiree stops work entirely. Less physically demanding hobbies will be preferred. Retiree may be more careful with expenses, but is still capable for caring for themselves Retiree is no longer able to take care of themselves, and may require special nursing care and other support services.

  9. 4 Pillars of Singapore Social Security Based on paper by M Ramesh entitled “Singapore’s Multi-Pillar System of Social Security”

  10. Successful Ageing for Singapore To ensure that all levels of society are well prepared for the challenges as well as opportunities of an ageing Singapore: National • Family Level – strong, extended and caring families • Community Level – strong network of community services, as well as with opportunities for engagement and the integration of the communities • National level – high level of national preparedness with a competitive and vibrant economy, as well as social cohesion and rootedness Community Family Source: Inter-Ministerial Committee on the Ageing Population, 1999

  11. Workfare Aims to provide support for low-wage workers so that they have the best chance to progress • Workfare Income Supplement (WIS) scheme was introduced in 2007 to encourage older low-wage workers: • to work regularly • To build up their CPF savings • Workfare Training Support Scheme (WTS) • Complements WIS by encouraging employers to send their older lower-wage workers for training, as well as encourage workers to go for and to complete their training • Workfare Special Bonus • This bonus is announced from time-to-time to ensure that low-wage workers benefit from economic growth More details on Workfare from http://www.mom.gov.sg/employment-practices/employment-rights-conditions/workfare/Pages/workfare-income-supplement.aspx

  12. Central Provident Fund (CPF) • CPF savings are meant to provide for housing and medical needs and for basic living needs after retirement* • Consists of 4 main funds • CPF Ordinary Account • Savings can be used to buy a home, CPF Insurance, Investment and Education • CPF Special Account • For old age and investment in retirement-related financial products • MedisaveAccount • Savings can be used for hospitalisation expenses and approved medical insurance • Retirement Account (created at age 55) • Administered by CPF Board • Mandatory contributions by: • Employers • Employees • Self-Employed *Source: SRS Booklet (Ministry of Finance) 18 Feb 2011 Source: http://mycpf.cpf.gov.sg

  13. Central Provident Fund (CPF) Main milestones include • 1955, the British colonial authority in Singapore established the CPF as a compulsory savings scheme to allow workers to save for their retirement • 1984, Medisave was introduced as a savings for Hospitalisation expenses for contributors and their family members • 1987, Singaporeans were required to set aside a minimum sum in their CPF when they reached age 55. This amount would provide them with a monthly income when they retiree. Source: http://mycpf.cpf.gov.sg

  14. CPFOA Contribution Contribution and allocation rates from 1 September 2012 Rates bracketed and in red show Contribution and Allocation Rates for the period 1 September 2011 to 31 August 2012) *Source: http://mycpf.cpf.gov.sg. Contribution Rate based on an Ordinary Wage of $5,000

  15. CPFOA Investment The OA is invested under the CPF Investment Scheme – Ordinary Account (CPFIS-OA) “Investible Savings” is the sum of your OA balance and the amount of CPF withdrawn for investment and education Source: http://mycpf.cpf.gov.sg

  16. CPF Special Account (CPFSA) • Special Account (SA) is a saving account specifically for old age use, and can be invested in retirement-related financial products • Can be used to pay for monthly housing installments under very strict conditions, and only for properties bought before 1 October 2003 • OA savings can be transferred into the SA, but not the other way around Source: http://mycpf.cpf.gov.sg

  17. CPFSA Investment The SA is invested under the CPF Investment Scheme – Special Account (CPFIS-SA) *For more information: ILP - http://mycpf.cpf.gov.sg/NR/rdonlyres/79349EA5-798A-4CA8-A1DE-ACE44FE7720E/0/RCSILP1.PDF Unit Trust - http://mycpf.cpf.gov.sg/NR/rdonlyres/83FD2278-D807-445B-B063-F301B30CDE09/0/RCSUT.pdf ETF - http://mycpf.cpf.gov.sg/NR/rdonlyres/171497E5-99C7-4517-9F59-0C96890D57F4/0/etf.pdf Source: http://mycpf.cpf.gov.sg

  18. CPF Medisave Account (CPFMA) • A national savings scheme to meet the healthcare expenses of members and their dependants, including grandparents who must be Singaporeans or Singapore PRs. Source: http://mycpf.cpf.gov.sg

  19. Use of CPF MA • Hospitalisation Expenses • Certain costly Outpatient treatments and treatment for a number of chronic diseases • Premiums of approved medical insurance schemes and certain enhancements under the Integrated Shield Plans for members and their dependants • Medishield is run by CPF Board • Medisave approved Integrated Shield is offered by private insurers • Premiums for approved long-term care insurance • Eldershield and Eldershield supplements are offered by private insurers • Available once members and their dependents reach 40 years of age Source: http://mycpf.cpf.gov.sg

  20. Use of Medisave Funds • Medishield • A catastrophic medical insurance programme to meet cost of medical treatment for serious illnesses or prolonged hospitalisations • Most programmes available today come with “as-charged” features with high yearly (up to $650,000) and lifetime limits • Has deductible and co-insurance features, which can be done away with by purchasing an enhancement • Eldershield • A national long-term care insurance programme initially launched in 2002, and enhanced in 2007 • With Eldershield Supplement, monthly benefits can beas high as $3,500 for life • Available to persons above 40 years of age • Hospitalisation Expenses Since 2010, Medisave is allowed for use for medical treatment in certain hospitals Malaysia* *Terms and Conditions apply. See http://www.moh.gov.sg/content/moh_web/home/pressRoom/pressRoomItemRelease

  21. Straits Times, Thursday 5 July 2012, Mind Your Body

  22. Medisave Minimum Sum (MMS) • The Medisave Minimum Sum (MMS) is the amount that a member turning 55 needs to set aside for future hospitalisation expenses • Regular MMS adjustments are necessary to help Singaporeans plan for their long-term healthcare needs • From 1 July 2012, MMS will be increased from $36,000 to $38,500.

  23. MedisaveContribution Ceiling (MCC) • The MCC is the maximum a member may have in his Medisave Account • The MSS value is set at $5,000 above the MMS value • From 1 July 2012, MCC is increased from $41,000 to $43,500 • Excess of the prevailing MCC will be transferred to • Special Account if the member is below 55 years old • Retirement Account if the member is above 55 years old and has a Minimum Sum shortfall

  24. MedisaveRequired Amount (MRA) • The Medisave Required Amount is the amount that you are required to have in your Medisave Account before you can withdraw the savings in your Ordinary or Special Accounts. • If you do not have at least the prevailing Medisave Required Amount, you are required to make a top-up to your Medisave Account with part of the balances from your Ordinary or Special Accounts • Since 1 Jan 2012. the MRA has been set at $32,000. This value will be adjusted for inflation every January until it reaches $25,000 (in 2003 dollars) on 1 Jan 2013

  25. MedisaveSummary

  26. CPF Interest Rates • Savings in the Ordinary Account earn an interest rate of 2.5% • The interest is computed every quarter, and is based on the weightage of • 80% of the average 12-month fixed deposit rate, and • 20% of the average savings rate published by major local banks • Savings in the Special and Medisave Accounts earn an interest of the higher of: • 4%, or • 12-month average yield of the Singapore Government Securities (10YSGS) plus 1% Interested is adjusted quarterly • An additional 1% is paid on the first $60,000 of a member’s combined balances: • Limited to $20,000 from the OA • Additional 1% interest received on the OA will be deposited into the member’s SA or RA to enhance the retirement savings *Source: http://mycpf.cpf.gov.sg

  27. CPF Interest Rates • RA savings earn an interest of of either: • 4% (the floor rate), or • 12-month average yield of the Singapore Government Securities (10YSGS) plus 1% Interested is adjusted annually Announced 30 September 2011, the minimum of 4% pa will be earned for all Special, Medisave and Retirement Account monies until 31 December 2012. After that, interest rates on ALL CPF Account monies will be subject to a minimum rate of 2.5% pa *Source: http://mycpf.cpf.gov.sg

  28. CPF Minimum Sum (MS) Scheme • Intended to finance the increase life expectancy of retirees. • Provides members with a monthly income to support a modest standard of living during retirement Q: Will CPF Savings be enough for Retirement?

  29. CPF Minimum Sum (MS) Scheme • First began in 1 July 1995 with the initial amount of $40,000 • to reach an amount of $80,000 by 2003 • $40,000 annual increments • Since 2004, MS has been increased from $80,000 to $120,000, in incremental steps of $4,000 (all values in 2003 dollars) • The 2003 MS value (with increment) is then adjusted for inflation each year. • The $4,000 increment in 2012 (adjusted for inflation) would have amounted to a $12,000 increase of the MS. • To mitigate the large increase in MS due to inflation, CPF Board has decided to spread out increase in MS to reach $120,000 (in 2003 value) by 2015 instead of 2013 • From 1 July 2012 to 30 June 2013, CPF members will need to set aside $139,000 (up from $131,000) *Source: http://mycpf.cpf.gov.sg

  30. CPF Minimum Sum (MS) Scheme • The initial MSS 2003 value for 2012 was $116,000. Adjusted for 2011 inflation, this would have resulted in a MS of $143,000 This is a large jump of $12,000 or 9% from the previous MS of $131,000 • Instead of the target of reaching $120,000 MS in 2003 value by 2013, CPF Board has decided to reach the target $120,000 over 4 years. • The 2012 MS stands at $139,000. *Source: http://mycpf.cpf.gov.sg

  31. CPF Minimum Sum (MS) Scheme • To help increase CPF LIFE payouts, members who turn 55 from 2013 onwards and who have not met their MS will have their post-55 contributions to the OA and SA automatically transferred to their RA when they reach the draw-down age (DDA) or 65 years old* • This will translate into higher monthly payouts for members • Amount a member can withdraw in cash under the existing withdrawal conditions remains the same. *Source: CPF Board – New CPF Changes in 2012. More details on the new LIFE plans will be made available in 3Q 2012

  32. CPF MS Withdrawal From 1 January 2013, members who reach 55 can withdraw their cash balances only after setting aside the CPF Minimum Sum and Medisave Minimum Sum. However, members can still withdraw the first $5,000 from the CPF account at 55. *Refers to cash balances in OA and SA, and any balance above MMS (currently $38,500) in Medisave Account (MA) at age 55 **The CPF Minimum Sum applicable for members turning 55 between 1 July 2012 and 30 June 2013 is $139,000.

  33. Draw Down Age (DDA) The DDA may eventually be increased to age 67 *Source: http://mycpf.cpf.gov.sg

  34. CPF Minimum Sum Plus Scheme If you are aged 55 and above from 1 January 2001: • Can buy life annuities (currently only from NTUC) beyond your Minimum Sum with your withdrawal CPF Savings • Monthly income from these annuities is tax exempt Monthly income from life annuities purchased with cashis not tax exempt *Source: http://mycpf.cpf.gov.sg

  35. Retirement Account • In the 10 years when the funds remain in the RA until the DDA, it earns interest* which • Cannot be withdrawn • Forms part of the RA savings for monthly payments when you reach DDA • The account is created at age 55. The Minimum Sum is then transferred into this account for disbursement of monthly income under CPF LIFE once the contributor reaches 65 years of age From 1 January 2013, CPF members aged 55 with at least $40,000 in their RA or with at least $60,000 at 65 will be placed on CPF LIFE. Members who are not placed on CPF LIFE can choose to join CPF LIFE before reaching 80, or remain on the MS Scheme. *Currently 4% pa until 31 December 2012 Source: http://mycpf.cpf.gov.sg

  36. CPF “Income” for Life? CPF will not be able to adequately finance your retirement: • monthly payouts are not indexed against inflation, therefore subsequent payouts will depreciate in value and hence, purchasing power • CPF MS is able to provide monthly income to the member for 18-20 years. This may not be a long enough period of time for retirement income • Singaporeans are expected to live much longer • Better lifestyle • Better medical support and advancement *Source: http://mycpf.cpf.gov.sg

  37. CPF LIFE • Singapore has one of the highest life expectancies in the world • For Singaporeans aged 65 today • 50% expected to live beyond 85 • 33% expected to live beyond 90 • Singaporeans are expected to live longer, and a growing number expected to outlive their CPF savings if they were on the MSS • CPF Life introduced to provide members with income for life *Source: http://mycpf.cpf.gov.sg

  38. CPF LIFE - Eligibility An Individual may apply to join LIFE between the age of 55 and 80, but must satisfy two conditions: • Must be a Singapore Citizen or a Singapore Permanent Resident • Must have Retirement Account Savings From 1 January 2013, CPF members aged 55 with at least $40,000 in their RA or with at least $60,000 at 65 will be placed on CPF LIFE. Members who are not placed on CPF LIFE can choose to join CPF LIFE before reaching 80, or remain on the MS Scheme. *Source: http://mycpf.cpf.gov.sg

  39. CPF LIFE Today 4 plans are available: *Source: http://mycpf.cpf.gov.sg

  40. Improved and Simpler CPF LIFE • From 1 Jan 2013, members can choose between 2 CPF LIFE plans* • Standard Plan (default plan) • Is a combination of the Balanced and Plus Plans • Higher payouts while preserving flexibility in the use of Retirement Account savings prior to age 65 • Members can also leave a bequest for their beneficiaries • Basic Plan • For members who prefer to leave a higher bequest and lower monthly payouts • Allows members to use their RA savings for housing after 65 years old Members who are currently on the 4 current LIFE plans can remain in those plans, or switch to the new Standard Plan before 31 Dec 2013 *Source: CPF Board – New CPF Changes in 2012. More details on the new plans will be made available in 3Q 2012

  41. CPF in Summary MA goes towards funding medical expenses Amounts in excess of MS can be withdrawn in cash as long as MRA is met Finances lifelong disbursement for retirement

  42. Supplementary Retirement Scheme • Was introduced in 2001 • Complements the CPF savings as part of the government’s multi-pronged strategy to address the financial needs of its aging population. This is due to the recommendations of the Inter-Ministerial Committee’s Report on the Aging Population • Contribution is voluntary, and can be in any amounts (subject to an annual cap) • Contributions can be used to purchase various investment instruments • Contributions to SRS are eligible for tax relief, and investment returns accumulated tax-free • When withdrawn at retirement1, only 50% withdrawal from SRS is taxable 1Retirement refers to the Statutory Retirement Age, which is the retirement age at the point in time the contributor makes his first SRS contribution *Source: Ministry of Finance

  43. Supplementary Retirement Scheme • All Singaporeans, Singapore PRs (SPR) and foreigners can open an SRS account • Must be at least 18 years old • Not undischarged bankrupts, and • Not mentally disordered and capable of managing themselves and their affairs • To participate in SRS, you must first open an account (only one) with any of the 3 SRS operators: • DBS Ltd • OCBC Ltd • UOB Ltd You may, however, transfer your account from one operator to another *Source: Ministry of Finance

  44. SRS Contribution • If you earn any form of income, including directors’ fees in the current year, you are allowed to contribute to SRS • Employers are also allowed to contribute to your SRS account on your behalf. Their contribution is treated as part of your remuneration, and thereby taxable in your hands. *Source: Ministry of Finance

  45. Contribution Cap You can contribute in a year any amount up to your contribution cap The Contribution Cap is determined by the product of the Absolute Income Base and the SRS contribution rate *Source: Ministry of Finance

  46. SRS Contribution and Taxation • The contribution cap is calculated based on income earned the year previous to the year of contribution • A contributor is entitled to tax relief on his contributions in the year following the year of contribution provided he is assessed as a tax resident  in that year where the contribution is to be allowed. EXEMPT

  47. Supplementary Retirement Scheme Contributions grow tax-free, and only 50% of the withdrawals is taxed at the then-prevailing income tax rate Assumptions: Starting Income $2,000pm, ROI 6%, General Inflation 3%, Income growth 5%

  48. SRS withdrawals Under certain circumstances, SRS savings can be withdrawn with penalty. However, 50% of savings withdrawn will be subject to income tax if you • withdraw your savings after achieving the statutory retirement age prevailing at the time you made your first SRS contribution • withdraw your savings upon death • withdraw your savings on medical grounds – physical or mental incapacitation • full lump-sum withdrawals by Singapore Permanent Residents (PRs) who have cancelled their PR status and • have been a non-Singaporean or a continuous period of 10 years preceding the date of withdrawal • have maintained their SRS account for a period not less than 10 years from the date of first contribution to the SRS account. • full lump-sum withdrawal by foreigner who has maintained his SRS account for a period not less than 10 years from the date of first contribution to his SRS account. • Under all other withdrawal scenarios, you will be taxed 100% of the withdrawn amount. This applies also for withdrawal upon bankruptcy and withdrawal before the statutory retirement age prevailing at the time of the first contribution.

  49. SRS Withdrawal A withdrawal from the SRS can be made at any time subject to the penalty imposed (where applicable) on the amount withdrawn *Source: Ministry of Finance

  50. SRS withdrawals • At Statutory Retirement Age, SRS balances can be withdrawn in 10 yearly installments. • 50% of each annual withdrawal will be taxed at the prevailing income tax rate

More Related