Solutions for the current CPF model

There are many areas of merit as well as many sources of angst with regard to our current CPF model (in Singapore). Both perspectives have been articulated vividly and passionately recently (including at the Institute of Policy Studies’ forum on CPF and retirement adequacy), with many suggestions being put forward for consideration. As a stakeholder myself, I thought I should contribute to this process by proffering some ideas as well.

To me, the main gripe over our CPF regime revolves centrally around the general lack of autonomy over our own CPF monies due to the imposition of arbitrary limits or barriers. Currently, we possess most control only at the age of 55 (when we can withdraw the bulk of our CPF, less the Minimum Sum of S$155,000 as of today) and at 65 (where we can begin to draw down the Minimum Sum).

With our increased life expectancy and cost of retirement, cold math suggests there will be perennial pressure to revise these milestone figures upward. As many have rightfully asked, “but to what end?” Will we one day only be able to withdraw our CPF monies and Minimum Sum at the ages of 70 and 80 respectively? Will the Minimum Sum be S$300,000 then? Will I actually be able to get anything?

Lack of transparency

This frustration is compounded by the lack of transparency over the management of the funds, which consequently fuels the perception of poor returns (regardless if it were actually the case) and the sentiment that we could have done better if we had invested the monies ourselves. It makes sense therefore that any solution(s) to improve the existing model ought to address these points squarely.

Fundamentally, we have to find a better balance between giving more control to the owner of the CPF funds and upholding the policy objective of the scheme of providing adequate means for our primary needs and retirement. I feel the focus should be on the Minimum Sum quantum, and not so much on the age milestones per se (do away with withdrawal at 55). Simply put, as a first principle, those who meet the Minimum Sum at any age should be allowed to withdraw any surplus for any purpose without any conditon (be it to invest based on their risk appetite or simply for pure expenditure).

The surplus and how it is used should not be the Government’s concern. And there is no reason why these sums should be withheld till 55, which is currently the case. Those who are building up their Minimum Sums can continue to use such funds on a wider array of approved products, which must be reimbursed to top up the Minimum Sum account upon liquidation. The Minimum Sum itself can also continue to be drawn down after a certain age. In order to maintain its real value overtime, the Minimum Sum will be set by the CPF Board and reviewed periodically to account for inflation. The onus is then on the CPF Board to determine a fair and appropriate quantum, and draw-down age for the Minimum Sum.

Also, the CPF Board can do more to assure us that our CPF monies are in good hands by providing superior returns vis-a-vis other low-risk investment instruments. For one, given its access to Government investment instruments, it can and should guarantee an interest rate return that is minimally tied to the inflation of that year. This is not an unreasonable request. If anything, it reflects the Government’s responsibility and commitment as a co-partner to ensure that the monies it safeguards remain adequate to help its people weather the times of need.

– Lim Sia Hoe, executive director, Centre for Seniors in Singapore. The non-profit organisation promotes the total well-being of seniors in Singapore, in particular, their vocational, financial and psycho-social well-being.


(** PHOTO CREDIT: 3D dollar sign, rigor789, freeimages)

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