This post hopes to provide better clarity how it works. I'm not the person who came up with this minimum sum policy. The policy has not changed. The policy allows the minimum sum to be increased yearly. Thus, the policy has not changed. The minimum sum has changed.
The below is found on CPF webpage. I'm just trying to explain this in english.
What happens is that the policy aims to increase minimum from SGD80k to SGD120k between 2003 and 2015.
But this is in 2003 dollars.
Meaning at 2015, you will need to take SGD120k and adjust for 12 years of inflation.
As the SGD120k is in terms of 2003 dollars.
In my 2nd column, that is the minimum sum which is stated for the respective years. These are all in 2003 dollars. So as you can see my row 2, in 2004, the minimum sum is SGD84k in 2003 dollars, but after adjusting for 1 year of inflation, it is SGD84,500 in the column on the far right.
In 2013, the minimum sum is SGD115k of 2003 dollars. After adjusting for 14 years of inflation, it is now SGD155k.
I think the government has not adequately explained this concept to Singaporeans.
Thus many people calculate the increase from 2013 to 2014 to be SGD155/SGD148, which would be around 4.73%
Similarly, people think that the inflation between 2009 and 2008 is 10.377% as they take SGD117/SGD106.
This is the incorrect understanding of the CPF minimum sum and how it is calculated.
People will note that the increase from 2015 to 2016 will be of much smaller amounts as the SGD120k of 2003 dollars would already be reached. Thus, it will truly be only inflation and not an increase PLUS inflation.
Why the minimum sum looks like it is increasing a lot is because the increase comprises of inflation PLUS a yearly adjustment to slowly increase the minimum sum from SGD80k 2003 dollars to SGD120k 2003 dollars between the years 2003 and 2015.
I hope this explanation is good enough for some readers of my blog.
If you don't understand it, read it slowly again.
I really don't know how to explain it any more simply.
EarlyretirementSG's projection for 2015 is about SGD163k with about 3% inflation.
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