After three-month trial, service to extend to 6,500 individuals turning 55 this year
MATTHIAS TAY
MARCH 18, 2015
SINGAPORE — With three children and a career as a retail manager, retirement planning was the last thing on Ms Aisah Bakri’s mind.
But a one-on-one retirement planning session by the Central Provident Fund (CPF) Board — part of a trial for a fully fledged programme to be rolled out early next year — was a “wake-up call” for Ms Aisah, who turns 55 in November.
While she had previously not given the issue much thought, receiving the invitation to take part in the trial got her thinking about her financial status, said Ms Aisah. She went for the session hoping to find out more about how to manage the investments she had made using her CPF monies, as well as why only S$5,000 can be withdrawn unconditionally from her account when she turns 55.
“I think that this is one of the ways you can make people understand (better) ... The technical terms (explaining CPF matters) can be long and wordy. Getting someone to explain to you is easier than reading from the Internet or papers,” said Ms Aisah.
Plans to introduce a retirement planning service for Singaporeans were announced during the Ministry of Manpower’s Committee of Supply debate last week. The three-month trial was conducted with 50 participants who were turning 55 this year. A pilot will be launched in July to reach out to an estimated 6,500 individuals in the same age group.
The scheme is aimed at this group because 55 is the age when CPF members will see the creation of Retirement Accounts, said CPF Retirement Management Office senior manager Dorcas Fong.
“Because at age 55, we transfer (funds) from Ordinary Account (OA) and Special Account savings to create the Retirement Account. This reduces the Ordinary Account savings available for payable obligations such as the housing loan,” said Ms Fong.
The decrease in the OA accounts often shocks people, she said, noting those who took part in the trial were generally ignorant of the implications of the creation of the Retirement Account on their financial obligations.
Having one-on-one exchanges with a consultant makes it easier for CPF members to understand the CPF mechanism, compared to trawling the Internet for information. “With a person, you can ask any question. You don’t have to spend the effort to click here and there, Google around and pour through all the things ... You also feel trustworthy as there is a person you can latch on to,” said Ms Fong.
The duration of each consultation session depends on a client’s questions, and can range from 30 to 45 minutes.
CPF consultants prepare for the session by collating the members’ CPF information. The consultants then help them understand the impact of their decisions better through projected figures. For example, members who wish to withdraw their CPF monies if they meet the Minimum Sum will be presented with two sets of projections: The projected monthly payout they would receive at age 65 if they were to keep all their money intact, and another payout figure should they choose to keep only the Minimum Sum, which is set to be replaced by the Basic Retirement Sum.
“This allows them to consider the implications of their actions and decide for themselves,” said Ms Fong.
Ms Aisah said from the session, she found that the amount of money in her CPF accounts, together with her investments, would help her meet the current Minimum Sum. This has spurred her to contact her financial adviser to find out more about the investments she had made over the past 20 years. “I am more knowledgeable and now see the need to think about it (retirement) more seriously,” she said.
[Good! Should roll it out faster.
Started with 50. Now piloting with 6500. But each year about 50,000 people turn 55. They need to ramp up.]
MOM to pilot CPF retirement planning service
BY VALERIE KOH - MARCH 9
SINGAPORE — To further raise awareness and understanding of the Central Provident Fund (CPF) system and recent changes to it, the Manpower Ministry will pilot a retirement planning service in the second half of the year, following a three-month trial. The service will be ramped up gradually from next year.
Rising to speak in the Committee of Supply debate in Parliament, Manpower Minister Tan Chuan-Jin said that the guided one-on-one service will help CPF members better understand the savings options available, and decide on the option best suited for their needs and circumstances.
“Our priority will be members who are approaching 55 and may need the service most, such as those with outstanding housing loans and may be affected by the transfer of their Ordinary Account savings to the Retirement Account at 55,” said Mr Tan. “We hope such services will help members navigate the CPF system better and make better use of their CPF savings.”
Last month, the CPF Advisory Panel released the first part of their recommendations, which introduce greater flexibility into the national savings scheme.
Retirement planning service to be piloted this year
BY VALERIE KOH - MARCH 10
SINGAPORE — With plans afoot to introduce greater flexibility into the Central Provident Fund (CPF) scheme, a one-to-one retirement planning service will be piloted in the second half of this year to help members choose the best option for their needs.
This was announced by Manpower Minister Tan Chuan-Jin as he outlined the important decisions CPF members will have to make regarding their savings as they approach retirement.
Acknowledging that more has to be done to increase the understanding of the CPF system and its coming changes following the first tranche of recommendations released by the CPF Advisory Panel last month, Mr Tan said initiatives such as the new planning service will help members.
It will be rolled out later this year and ramped up gradually from next year. “Our priority will be members who are approaching 55 and may need the service most, such as those with outstanding housing loans and may be affected by the transfer of their Ordinary Account savings to the Retirement Account at 55,” said Mr Tan.
He stressed that his ministry and the CPF Board remain committed to guiding members through critical junctures as they enter retirement, namely deciding on how much in monthly payouts is needed for retirement, which CPF LIFE plan to choose, and when to start payouts.
As for younger members worried that they would not have enough for retirement after paying off their home loans, Mr Tan, who used an example of a 25-year-old with a starting salary of S$2,200 (see below) to illustrate, said: “Most Singaporeans who work regularly and make prudent housing choices should have no worries.”
The Government has also been taking steps to boost Singaporeans’ retirement savings and income, he said, referring to the restoration of CPF contribution rates of workers aged 50 to 55 to the same level as that of younger workers, as well as smaller increases for those aged 55 to 65. However, it would not be prudent to raise the contribution rates of those above 55 too quickly, as the employment rate for this group is still considerably lower than for those who are younger, he said.
And while Members of Parliament Lee Li Lian (Punggol-East) and Ms Foo Mee Har (West Coast GRC) had called for more flexibility in the use of Retirement Account (RA) savings for housing, Mr Tan stressed that some leeway had already been given.
Upon turning 55, CPF members can choose to leave in their Ordinary Account the amount that they require for housing obligations and not transfer the monies to their RA. However, this means that these savings would not be accorded the higher RA interest rates of up to 6 per cent.
The CPF Board will be including information on this option in its letters to members turning 55 this year, said Mr Tan. However, he urged members to be prudent with their housing purchases, especially when buying or upgrading properties at an older age, as this would draw down their retirement savings. “This is because older members may have to take on loans with shorter tenure and higher monthly instalments,” he said.
He also noted that the CPF is not the only pillar of retirement adequacy, with housing also a key pillar to provide security, and MediShield Life to provide better healthcare protection and coverage for all. The Government will continue to provide subsidies and top-ups for the vulnerable.
He added: “This is a collective responsibility. Individuals, families, employers, social groups, will all need to step in to provide assistance and support.”
CPF Special Account ‘about maths, not magic’
“For someone with a salary of S$2,200, he and his employer will contribute S$130 per month into his Central Provident Fund Special Account alone. This contribution will grow up to S$250 per month as more gets allocated to his Special Account as he gets older. Let’s assume that he works 80 per cent of the time, which is 32 out of 40 years. If these contributions were to be set aside in a Khong Guan biscuit tin, he would have about S$55,000 by the time he reaches 65. But the CPF Special Account is ‘special’, because his monthly contribution earns interest of up to 5 per cent before age 55, and up to 6 per cent thereafter. Adding the interest earned, he would have about S$165,000 at age 65 — three times what he put in. This is not magic, just math. This is a very conservative estimate — it does not even account for wage growth or whatever savings he has accumulated in his Ordinary Account after paying off his flat. If you add those, he would have even more ... most Singaporeans who work regularly and make prudent housing choices should have no worries.”
--Manpower Minister Tan Chuan-Jin, sharing an example to highlight the healthyretirement picture for younger Singaporeans
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