As there are too many permutations, you can get an idea of the bequest from the CPF Life Payout Estimator.

https://www.cpf.gov.sg/cpf_trans/ssl/financial_model/lifecal/index.html

Whether the bequest amount is linear or not will depend on which LIFE plan and when the bequest is given out. For Life Basic and Life Balance, the bequest amount will not be linear when the monthly payout comes from the RA account as the interest earned will be returned on death. The interest is the reason for the non-linearity. Once the payout comes from the Annuity, the bequest is linear as no interest is taken into account. However, I am not too sure how the extra 1% interest from the SMRA will affect this.

For a annuity premium of $117k, Life Plus payout will last around 10 years ($971 x 12 X 10) = $116,520. I am not too sure how the extra 1% will affect this. So after around age 75, the payout will start to come from the Lifelong Income Fund. Assuming that interest is paid to the CPF member instead of going into the Lifelong Income Fund, the losses should start to decrease as the payout starts to come from the interest. So, you see a decrease in the losses from age 75 to 80.

The graph here shows the Life Plus payout in the my way of calculating the ‘losses’ and ‘gain’. The graph is not to scale and is just an illustration.

i noticed that the bequest return is a NON-LINEAR curve so interests are non-uniform over the years (I read the fine print in CPF website). Clearly, CPF Board makes it tough for us to calculate the profit/loss for the scheme.

Also, I still cannot figure out why the increase in losses for the PLUS plan (after 65). It seems logical that once the payout starts, the losses should cut. What causes the loss to shrink later between 75 to 80 year-old???

Hope you can show us an illustration so we can understand better.

I had used a simple calculation to find the Future Value of the Annuity Premium at the respective age of death, taking account the monthly payout if any, then minus the balance annuity premium that is returned.

The L-bonus is a temporary measure, thus I left it out. I also have not taken into account the extra 1% interest for the first $60k as mentioned in the post.

The CPF Life Estimator have more info since I posted. The bequest amount is now shown in greater detail. I will try to study it when I have the time.

You mentioned nothing of L-bonus and the 1% Extra Interest promised on the first $60k.

I see where you are coming from. From my understanding, there are 2 ‘accounts’. 1 is for the annuity premium, the other is the interest.

Upon death, only the balance premium is returned, meaning to say, although the annual payout is higher than the interest, this payout amount is deducted from the annuity premium ‘account’ and not the total amount (premium + interest). Eg, should death occurs at age 66, the bequest will only be $117k – ($971×12) = $105,348. The whole of the interest is ‘lost’. So until the whole annuity premium is paid-out, the ‘loss’ will keep increasing as the bequest amount does not include the interest.

The straight line in CPF’s graph is thus not wrong as the same amount (assuming no change to payout) is deducted from the annuity premium every month. The compounding effect of the interest is not there as the bequest does not include interest.

Please correct me if my understanding is wrong.

For PLUS plan @66 year-old, the annual potential interest is $169,070.14×3.75%=$6,340.13 while the annual payout is $1042×12=$12,504.

I don’t mean you mislead the readers but just need clarification. It seems the bequest is a non-linear compensation over the years which is misleading in CPF’s graph.

The ‘losses’ arise out of the potential interest and compound interest on this potential interest should death occurs. Although payout starts from age 65, this payout is from the annuity premium. Only balance premium is refunded on death. The interest from the annuity premium is not refunded. So, there is this ‘loss’.

The loss will increase initially due to the new interest on the balance premium and compounding effect.

I certainly have no intention of misleading anyone and there might be errors in my calculations and or assumptions. Please share any information you might have so that I can improve.

It makes no sense because the person takes more so the loss should be reduced. This is seriously misleading the readers.