5.13 As Minister Ng Eng Hen has recently stated, the Government has accepted the recommendations of the National Longevity Insurance Committee on the CPF LIFE scheme. It puts in place a major new plank to ensure Singaporeans a stream of income for as long as they live.

5.14 From 2013, CPF members will join CPF LIFE automatically when they turn 55 as long as they have at least $40,000 in their Minimum Sum. The first cohort to do this will be those aged 50 this year. We also want to encourage those with less than $40,000 as well as members who are older than 50 this year to join the scheme when they turn 55.

5.15 We have decided to provide a special bonus to the first few cohorts of CPF members who will participate in CPF LIFE. These older cohorts generally earned less over their working years compared to what younger Singaporeans currently have and can look forward to. By the time they join CPF LIFE, they would also have had less time to benefit from the extra 1% interest that CPF members now receive on the first $60,000 of their CPF balances. Younger cohorts will also be able to benefit from more years under the WIS scheme, which provides significant top-ups into their CPF accounts (plus cash payments).

5.17 The L-Bonus is targeted at the lower and middle-income CPF members. The L-Bonus will be given to members whose annual income when they sign on to the LIFE scheme is $54,000 or less, and whose annual assessed property value is $11,000 or less, which will include all HDB flats. These make up about 80 percent of the cohort aged 50 today, including those whose Minimum Sums are too low for them to be automatically enrolled in the LIFE scheme.

5.18 The amount of the L-Bonus will vary such that older and less well-off members will receive more. For members aged 50 this year, they can expect to receive between $2,200 and $4,000. A 50-year-old who lives in a five-room flat and earns between $24,000 and $54,000 will receive $2,200. However, a 50-year-old who lives in a three-room flat and earns less than $24,000 annually will receive $4,000 when he joins the LIFE scheme. If he has $40,000 in his Minimum Sum, this amounts to 10% of his retirement savings.

5.19 The youngest eligible cohort, those aged 46 today, will get around 30% of what the 50-year old receives.

Table 2 - Structure of L-Bonus for those 55 and older in 2013

5.20 Professor Lim Pin's committee had recommended that the Government provide a one-off incentive to facilitate greater participation and opt-in by members who are not automatically included in the scheme. The Government agrees with the committee?s recommendation and will extend the L-Bonus to this group of members.

5.21 Therefore, if members have less than $40,000 in their Minimum Sum, but want to participate in the LIFE scheme, we will help them to do so and give them the L-Bonus as long as they are willing to make a reasonable contribution to their balances and accept lower monthly payouts. This is particularly important for many of the women, who may have been housewives or stopped working early and do not have enough in their accounts. The L-Bonus will encourage their husbands or other family members to top up their accounts so that they can join the scheme.

5.22 We will also extend the L-Bonus to older members above the age of 50 this year who choose to opt into the scheme. They can opt in when they reach 55. (But if they have already passed 55 when the scheme is introduced, they will have to opt in within a year from then.) All these older members who choose to opt in will receive the same amount of L-Bonuses as those aged 50 this year.

5.23 The Government will set aside $770 million over three years for the L-Bonuses, including $260 million out of this year's budget.

5.24 Details on L-Bonus are at Annex C.