By Lydia Lim
CPF Life was introduced because there were cases, many cases of CPF recipients blowing their life savings on the extravagant life they had always dreamed of, being swindled by unscrupulous marketeers promising fantasy lifestyles, gold-digging foreign brides promising sexual nirvana, and financial advisers promising illusory fortunes.
Of course, the many many cases may well be a small percentage of retirees.
In any case the CPF Life is flexible. You can use your property as a pledge and reduced the amount of "investment" in CPF Life. Or you can even as the interviewee intends, "whittle down" your CPF to below the minimum for inclusion in CPF Life.
Why? In order to have control over one's investment decision over one's "hard-earned money".
Seriously? Less than $40k? Investment?
The very people trying to get out of CPF Life are precisely the people that needs CPF Life. With $40k, they are not likely to be able to tap into good investment opportunities. At retirement, they should be investing in safe, low-risk instruments, which are not likely to have a high returns. If they can get 2.5% returns, they would get $1000. If they can build this up over 10 years, they would have about $50k. Then when they start to draw down, that $50k could maybe last them 5 years. Eight if they are really frugal.
More financially stable retirees with savings other than their CPF are the ones that really do not need the CPF Life. BUT, the $40k would probably be small change to them. That is, they would have investments of hundreds of thousands, and the $40k can simply be considered part of a diversified portfolio and a "safe" investment.
Moving the scheme from compulsory to voluntary and taking the opportunity to educate the public about the desirability of the scheme is idealistic at best and self-defeating at worse. Voluntary human organ donation with public education went nowhere. Relaxing rules to allow CPF members to invest their savings resulted in losses more often than gains.
The track record for voluntary and autonomous choices have not been great in these respects.
To recap, the people who will most benefit from CPF Life will be those who have the barest minimum or just slightly more than the minimum sum. They really do not have a lot of options for alternative investments.
The richer CPF member really do not need CPF Life, but CPF Life needs them to balance up the pool. Excuse me if I do not feel that they are particularly disadvantaged.
Going the voluntary opt-in approach will be long, tedious, and result in the death of the scheme anyway. ]