What if CPF created a bank for retirees?

As I started planning for my retirement, I began to pay attention to how our Central Provident Fund (CPF) system works for retirees.

As retirees reach the age of 55, CPF allows them to withdraw $5,o00 and transfers the rest of the money from their Ordinary Account (OA) and Special Account (SA) to their Retirement Account (RA). Retirees can also withdraw anything above the Full Retirement Sum (FRS) or Basic Retirement Sum (BRS) by pledging their properties.

At 65, retirees can choose to withdraw 20% of their Retirement Account (less the $5,000 withdrawn at 55). Naturally the monthly lifetime payout from CPF Life would decrease if they make the withdrawal.

Here’s a gap that I noticed. What if I plan my retirement strategy early, manage to achieve the Basic Retirement Sum (and pledged my property) as planned, and still have excess money in my Retirement Account? At the current CPF life scheme, it looks like the excess money would be channeled into the CPF Life scheme if I don’t withdraw them.

An idea that came to mind would be for CPF to provide banking features to retires by setting up Retirement Savings Accounts (RSA) for retirees to manage the excess money after deducting the BRS/FRS for CPF Life.

Here’s how I think the system could work.

The proposition for a Retirement Savings Account

The RSA would replace the Retirement Account at age 65 where CPF Life kicks in and deducts the BRS/FRS amount. It would hold the leftover money in the Retirement Account so that retirees do not have to withdraw the money at age 65 if they don’t need it. Retirees could also choose to make the RSA the default account of choice to receive CPF Life monthly payouts.

The RSA would continue to generate an interest of 4% like the Retirement Account to provide the added incentive for retirees to leave their money in the account until they have an actual use for it.

Provide a simple mechanism for retirees make withdrawals

Like a bank, CPF can install automated teller machines (ATMs) to allow retirees to withdraw cash from their RSA in small amounts. In fact, CPF can choose to link to atm⁵, an interbank network in Singapore that connects the ATMs of six of Singapore’s eight qualifying full banks to facilitate cash withdrawals to minimize costs.

A Pioneer Generation card that matters

The current Pioneer Generation card serves little purpose for retirees apart from medical subsidies. By integrating RSA with the Pioneer Generation card, the card can function as an ATM card for retirees to make withdrawals or even pay for purchases (at a later stage).

Making Retirement Account top-ups a lot easier

RSA would make it a lot easier for retirees and their loved ones to top-up the account easily through bank transfers. As loved ones know that retirees can access the top-up amount easily, they would be motivated to top up the retirees’ RSA. Like typical bank accounts, RSA will have a digital paper trail that allows IRAS to manage relief claims easily.

This is just a wild idea that came right off the top of my head and is just a proposition at best. This idea could debunk the idea that most Singaporeans have where CPF money does not belong to them. While I can’t think of any reason why this idea wouldn’t work, I would really love to hear your thoughts.