The CPF Enhanced Retirement Sum (ERS)

8 Things To Know About The CPF 

Enhanced Retirement Sum (ERS).

The ERS will increase from 3 times the Basic Retirement Sum (BRS) to 4 times in 2025.

SINGAPORE 🇸🇬 SINGAPOREANS RETIRING

Retirement is a phase in our lives that most of us will inevitably face. To ensure we have sufficient savings during our golden years, we contribute a percentage of our monthly gross salary into our Central Provident Fund (CPF) during our working years.

When we turn 55 years old , a Retirement Account (RA) is created with monies up to the Full Retirement Sum (FRS) from our Special Account (SA), followed by our Ordinary Account (OA). These funds are then set aside for the next 10 years, earning long-term interest rates of 4.08% per annum (as of 1 January 2024 to 31 March 2024) for the purpose of contributing to the CPF Lifelong Income For the Elderly (CPF LIFE), which is a national longevity annuity scheme that provides us with monthly payouts throughout our lifetime.

While the initial retirement sum is capped at the FRS, we could top up to the prevailing Enhanced Retirement Sum (ERS) to receive higher monthly payouts from CPF LIFE. In this article, we look at understanding what the CPF ERS is and how it can benefit us.

#1 The Enhanced Retirement Sum (ERS) Was Introduced In 2016

The Enhanced Retirement Sum (ERS) was introduced in 2016 after a review by the CPF Advisory Panel in September 2014 to make the CPF more flexible and dynamic. It is one of the three levels of retirement sums to give CPF members more choices for CPF LIFE payouts. The other two levels are the Basic Retirement Sum (BRS) and the Full Retirement Sum (FRS).

To provide a recap, initially, a Minimum Sum Scheme (MSS)—later renamed the Retirement Sum Scheme (RSS)—of $30,000 was introduced in 1 January 1987. This single amount, known as the retirement sum, was intended to be set aside in the RA when we turn 55 to provide monthly payouts over a fixed duration. It was based on the basic expenses of a lower-middle-income household and was periodically adjusted.

#2 ERS Is The Maximum Amount We Can Top Up Our RA After Age 55

The ERS is the maximum amount that we can voluntarily contribute to our RA when we turn 55 and above. It is calculated as a predetermined multiple of the BRS, allowing us to receive higher monthly payouts from CPF LIFE during our retirement. In contrast, the BRS indicates the estimated sum needed to cover basic living needs, excluding rental expenses.

It’s important to note that in order to make a top-up to the ERS, we first need to meet the FRS, which indicates the ideal amount needed to cover our living expenses. The FRS is currently set at 2 times the BRS.

#3 The ERS Increases Every Year

While the BasicRS and FullRS are fixed for the rest of our lives based on the cohort sum when we turn 55, the ERS increases annually. As mentioned earlier, the ERS takes reference to the BRS and, therefore, follows a similar increment each year.

The BRS in turn takes reference to a person’s expenditure from a lower-middle retiree household, according to the latest Household Expenditure Survey (HES). It further assumes that the member owns a property that lasts him up to 95 and does not need to make any rent payments during his retirement years. Additionally, the BRS is raised by about 3.5% a year for each cohort turning 55 from 2023 to 2027 to account for the longer life expectancy, higher inflation costs, and increase in living standards.

This allows us to continually top up our RA to the ERS each year, enabling us to receive higher CPF LIFE payouts to fund our retirement needs. The current ERS for 2024 is $308,700.

#4 The ERS Will Be Increased To 4 Times The BRS From 2025

As announced in Budget 2024, the ERS will be raised from the current 3 times of the BRS to 4 times in 2025.

Year•BRS•Before Changes (ERS at 3 times the BRS)•Revised ERS from 1 January 2025 (ERS at 4 times the BRS)

2025•$106,500•$319,500•$426,000

2026•$110,200•$330,600•$440,800

2027•$114,100•$342,300•$456,400

Source: MOF

In other words, the ERS (before the change) for 2025 would have been $319,500. However, with the revised ERS, it would increase to $426,000, representing a difference of $106,500. The higher amount allows us to voluntarily save more each year to receive higher payouts from our CPF LIFE.

#5 ERS Allows Us To Receive Higher CPF LIFE Payouts  

Given that the ERS is the upper limit of the three levels of retirement sums, it gives us the highest CPF monthly payouts during our retirement years. However, the amount of the CPF monthly payout depends on several factors, such as when we set aside the ERS and when the payouts start (i.e., at age 65 or 70).

Based on the revised ERS limit from 2025, we could receive higher payouts of around $3,300 instead of $2,530 under the current ERS based on 3 times the BRS, resulting in a difference of $770. This could be useful if we want a higher payout to sustain our lifestyle needs during our golden years.

Year•BRS(Basic Retirement Sum)•Before Changes (ERS at three times theBRS) ERS • Estimated monthly payouts¹ • Revised ERS from 1 January 2025 (ERS at four times the BRS) • Estimated monthly payouts² .

2025•$106,500•$319,500•$2,530¹•$426,000.• $3,330².

2026•$110,200•$330,600•$2,610¹•$440,800•$3,440².

2027•$114,100•$342,300•$2,690¹•$456,400•$3,550²

[Source: MOF]

The above estimated payouts are assuming a male member who sets aside the ERS at age 55 and starts payouts under the CPF LIFE Standard Plan at age 65.

#6 We Can Top Up To The ERS In Two Ways

We can top up to the ERS upon the formation of the RA when we turn 55 and continue to make further incremental top-ups, given that the ERS is increased in January each year.

We can increase our RA savings up to the ERS by either making a cash top-up or a CPF transfer.

Should we choose the cash top-up option, we could enjoy tax relief of up to $16,000 a year by topping up both our RA and our loved ones (up to the current FRS). Otherwise, we could make a CPF transfer from our OA (from 2025, the SA will be closed for those 55 and above) to the RA up to the ERS.

#7 Topping Up RA To ERS Is An Irreversible Move

Any top-ups that we make to our RA up to the ERS are irreversible. As the monies would be reserved to boost our monthly payouts during retirement, we will not be able to withdraw them for other purposes, such as housing or other immediate needs, after age 55.

Therefore, we should be certain of our retirement needs before we top-up our RA to the ERS.

#8 Whether We Are On The RSS Or CPF LIFE Affects The Distribution Of Our Savings Upon Death

In a typical scenario, the savings in our CPF accounts would be distributed upon our deaths to our nominees in the proportion stated in our CPF nomination. However, if there are no nominations made, then the CPF savings would be transferred to the Public Trustee’s Office to be distributed to our family members under the Intestate Succession Act or the Inheritance Certificate (for Muslims).

If we are on the Retirement Sum Scheme (RSS), our beneficiaries would receive the remaining savings, including interest (if any), when we pass on.

However, if we are in CPF LIFE, our beneficiaries would receive our CPF LIFE premium balance minus any total payouts received, along with our other remaining CPF savings. Unlike the RSS, the interest earned on CPF LIFE would be pooled and used to ensure other CPF LIFE members enjoy monthly payouts for their lifetime.

Why Removing The CPF Special Account For Members Aged 55 & Above Is The Right Move

The end of the CPF Special Account shielding hack.

In the Singapore Budget 2024, Deputy Prime Minister and Finance Minister Lawrence Wong announced a significant change for CPF members aged 55 and above: the discontinuation of the CPF Special Account. This change is particularly relevant to Singaporeans, as most have a CPF account.

Under the current system, when CPF members reach the age of 55, a Retirement Account (RA) is established for them. This RA is then filled to meet a predetermined retirement sum, which can be the Basic Retirement Sum, Full Retirement Sum, or Enhanced Retirement Sum, depending on the member’s choice.

To reach the chosen retirement sum in the RA, funds are initially drawn from the CPF Special Account. If the Special Account’s funds are insufficient, the Ordinary Account is then tapped to make up the difference and achieve the retirement sum specified by the CPF member.

Clearly, the government intent is that savings in our CPF Special Account should be first used to contribute to our RA, which in turn would fund our CPF LIFE payouts, before utilising savings from the Ordinary Account. This approach makes perfect sense since the Special Account’s savings are intended primarily for retirement purposes, while the Ordinary Account’s savings can be used for a broader array of needs, including housing and education.

However, because the CPF Special Account pays a higher base interest rate of at least 4.0%, compared to the 2.5% offered by the CPF Ordinary Account, some individuals might prefer to preserve their savings in the Special Account. They do this by using their CPF Ordinary Account to top up their RA. This is also popularly known as the CPF Shielding Hack.

RA & CPF Special Account Serves A Similar Function

Given that the Special Account and the RA both aim to support retirement income through CPF LIFE payouts, it could be argued that their functions overlap once the RA is established at age 55.

This raises a question: if CPF members have the RA specifically set up to finance their CPF LIFE payouts, what purpose does the Special Account serve beyond acting as an additional CPF account that offers a higher interest rate than the 2.5% provided by the Ordinary Account?

From this viewpoint, the CPF Special Account appears redundant for those aged 55 and above. If CPF members wish to have their savings contribute towards their RA to fund their CPF LIFE payouts, then logically, these funds should reside in their RA.

Conversely, if members choose not to maximise their RA up to the Enhanced Retirement Sum for the sake of maintaining access to CPF lump sum cash withdrawals, their savings would be more appropriately held in the Ordinary Account. Thus, permitting CPF members aged 55 and over to retain surplus savings in their Special Account—rather than allocating these funds to either their Ordinary Account or RA—seems unnecessary. This arrangement merely provides an opportunity to accrue higher interest rates than the Ordinary Account offers, while still offering withdrawal flexibility akin to that of the Ordinary Account.

Hence, from 2025 onwards, for those aged 55 and above, Special Account savings will be transferred to their RA up to the Full Retirement Sum ($213,000 as of 2025) where members will continue to earn a base interest of 4.0% (similar to that of their Special Account). The remaining Special Account savings will be transferred to their Ordinary Account. Of course, members can voluntarily transfer their Ordinary Account savings to their RA at any time, up to the Enhanced Retirement Sum, to earn higher interest and to receive higher retirement payouts when they turn 65.