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CPF issues can be resolved

Sunday, Jun 8, 2014

SINGAPORE - Recent public attention has focused on the Central Provident Fund (CPF), with some expressing unhappiness at the increase in the Minimum Sum.

Others call for greater transparency in the deployment of CPF funds.

Prime Minister Lee Hsien Loong also told Parliament last week that the Government is studying how to improve the CPF and CPF Life annuity scheme so that payouts keep pace with the cost of living.

There is an urgent need to address some fundamental issues concerning the CPF, a compulsory savings scheme for workers to which employers must contribute.

A great deal of the current unhappiness revolves around the Minimum Sum scheme.

At age 55, CPF members are allowed to withdraw their CPF funds, but must keep a "minimum sum" in their retirement account.

This sum can be withdrawn in monthly amounts when they turn 60 to 65, depending on their year of birth.

The Minimum Sum has been rising each year as the Government tries to make sure CPF members set aside a large enough lump sum for their basic retirement needs.

CPF funds above that amount can be withdrawn.

The Minimum Sum will be $155,000 from July 1. This is up from $80,000 in 2003.

The rapid increase in the last decade is one reason for the unhappiness over the scheme, fuelling a sense of betrayal of trust.

In fact, the Government could have tackled this discontent better if it had dealt with it more directly.

The nub of the issue here is how to ensure CPF members have enough for their old-age needs.

The simplest way is to raise the withdrawal age directly. It was set at 55 at a time when people retired around that age.

Today, the retirement age is 62, and companies are encouraged to rehire workers till 65. There is also talk of raising the re-employment age to 67.

But memories still linger of the widespread public anger 30 years ago when the 1984 Howe Yoon Chong report on the aged suggested raising the CPF withdrawal age to 60.

Shying away from that anger, the Government allowed people to withdraw their CPF funds at age 55, but required them to set aside a Minimum Sum.

It then proceeded to ramp up the sum. This has inevitably caused many people to construe the compulsory retention of CPF savings beyond the official withdrawal age as unfair.

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