Understanding risk-pooling: How CPF LIFE secures a lifelong income for you

02 Apr 2019 

CPF LIFE is a life annuity, which provides monthly payouts for as long as you live. As with any other annuity or insurance schemes, CPF LIFE is able to do so via risk-pooling.

What exactly is risk-pooling and how does it help to secure a lifelong income for you? Let’s find out. 

1. How does risk-pooling work in CPF LIFE?
When you join CPF LIFE, the Retirement Account (RA) savings that you set aside as your annuity premium goes into the Lifelong Income Fund.

The interest earned on the annuity premiums is shared among all CPF ​LIFE members. This pool of interest goes towards ensuring that you receive your monthly payouts for life — even after your RA savings have been used up!

Read more: Why you need to include annuities as part of your financial planning

2. Does this mean my interest is lost?
No! The interest earned has been pooled, not lost.

Depending on your longevity, you may ultimately receive more than the combination of the premium you contributed and the interest earned. This is because once your monthly payouts have exceeded the amount you used to pay for your CPF LIFE premium, the subsequent payouts will be drawn from the pooled interest.

For example, if a member commits $60,000 to CPF LIFE under the Standard plan and starts payouts at 65, his premium will be exhausted at the age of 79. However, under CPF LIFE, he will be able to continue receiving payouts for as long as he lives!  

3. What is the benefit of pooling my interest in this way?
As 1 in 2 members aged 65 today are expected to live beyond 85, CPF LIFE is designed to ensure members have a source of retirement income for as long as they live. Risk-pooling allows all members to share and protect themselves against the risk of outliving their savings.

Risk sharing is common in other insurance schemes as well. For example, with car insurance, the risk of encountering an accident is shared among policyholders. The payout a policyholder gets, should an accident occur, comes from a collective pool contributed by all policyholders with their premiums.

The pooled interest ensures that CPF LIFE members never encounter a situation where they outlive their savings or run out of income in old age. This is how you can be assured of receiving lifelong monthly payouts.

Moreover, because the interest earned is risk-free and the membership pool is very large, as a CPF LIFE member, you will receive one of the highest payout per dollar of premium, compared to similar annuity products in the market!

More importantly, you and your loved ones will ALWAYS get back your CPF LIFE premium in full, in the form of monthly payouts and/or bequest, no matter what age you live to. When a CPF LIFE member passes on, any unused premium will be distributed to the deceased member’s nominees.

Watch this episode of CPF in One Bite, which explains how CPF LIFE works to ensure a more secure retirement for you.


​To find out more about CPF LIFE, visit our website or read these 5 Facts About CPF LIFE.​

Information accurate as at 2/4/2019

You Might Like

Report Vulnerabili​​ty | Terms of Use | Privacy Statement | FAQ | Feedback | Contact Us

This site is best viewed using IE10 & above an​​d all latest 2 versions​.
​Copyright © 2021 Central Provident Fund Board.