CONFIDENTIAL
Example:
Appendix C
A male employee earning in year 1 the current average manual wage of $3130 per month and contributing 5% of his income ($156.50) to a CP F (this contribution being matched by his employer) would after a period of 20 years be entitled to a lump sum equivalent to 22.7 months' final salary (if the CPF achieves real growth of 2.5%) or 26.3 months' final salary (if 4% real growth is achieved). On the basis of the assumptions in paragraph 3(a) above about real growth in incomes, final salary after 20 years would come to $5653 per month and the lump sums to $128, 323 or $148,674 respectively. After a further ten years, final salary would be $7,597 per month and the lump sums would be $252,220 or $315,276.
Assuming that the employee invests this lump sum in an annuity, on the ten years certain basis, payable from the age of 65 for the remainder of his life and offered on the basis of a 2.5% rate of return, he would receive a monthly income equivalent to 15.6% of his final salary ($882) on the basis of the lump sum available after 20 years' contribution or 22.8% of final salary ($1733) on the basis of the larger lump sum available after 30 years' contribution. If the annuity were offered on the basis of a 4% rate of return, the monthly income figures would be 20% and 31.7% of final salary ($1138 and $2412 per month) respectively.
CIDENTIAL