By Chong Zi Liang
SINGAPORE - The Workers' Party (WP) wants the Central Provident Fund (CPF) system to be more flexible by allowing people to receive monthly payouts earlier.
But the opposition party does not back the withdrawal of all CPF funds in a lump sum, said Non-Constituency MP Gerald Giam in the Budget debate on Tuesday.
Mr Giam noted that the payout eligibility age - the age at which CPF members can start receiving monthly annuity payouts - is 64 this year and will be raised to 65 from 2018 onwards.
He suggested lowering this age to 60, since some CPF members may have a genuine need to start receiving payouts from an earlier age.
"For example, they may have been retrenched and, because of a skills mismatch or age discrimination, may not be able to secure another job," Mr Giam said. "Or they may be labourers who are simply be too old to do manual work."
Changing the payout eligbility age "will give CPF members the flexibility to start receiving CPF monthly payouts earlier, if they need to, instead of having to wait until age 65".
He added that since the official retirement age is now only 62, "this leaves a gap of three years that a retiree will have to tide over, should his company not offer him re-employment until 65".
[I do not think much of Gerald Giam. But I have also noted this three year gap (my personal solution is to save up to cover that 3-year gap, but maybe others may not be able to save? If you need $30k a year, you will need $90k to cover those 3 years.]
But Mr Giam also recognised that starting payouts at an earlier age would mean lower payouts each month.
The CPF Advisory Panel recently recommended a permanent 6 per cent to 7 per cent increase in monthly payouts for each year that members defer these payments until they are 70. In line with this, the WP is proposing a permanent 6 per cent to 7 per cent decrease in payouts for every year that the payouts are brought forward.
Mr Giam also suggested that every CPF member be invited to meet one-on-one with a CPF Board officer a few months before turning 55, so as to get a personalised explanation of the funds in his or her account, and the choices available in handling the money.
[I think this would be helpful, But is it feasible? Each year about 50,000 people turn 55. Assuming these are divided over 12 months, that would be over 4000 people that CPF will have to see each month. Or over 1000 people each week. Over 200 clients each day. Over an 8 hour day, That would be 25 clients per hour, or about 2 minutes per client. (if there is only one officer to serving these pre-55s. In addition, there are already CPF members who are meeting CPF staff for various reasons.
If each pre-55 takes 30 minutes to discuss their option, CPF would need to provide 12 additional staff to cope with the increase in visitors.
I think this is a good idea, but not workable as it is. Perhaps with volunteers to help explain CPF.]
He noted that many Singaporeans would like to withdraw all of their CPF money at 55, and added that he too would like to do so if given a choice.
"However, the reality for me, and I think many other working Singaporeans, is that if not for the forced savings that CPF has imposed, we would probably have saved much less for retirement," Mr Giam added.
"Even if CPF members make an effort to invest their retirement savings after they are withdrawn, not many have investment skills that are good enough to consistently beat the current 4 per cent CPF retirement account interest rate in the long term."
In his speech, Mr Giam also called for the cash payouts under the new Silver Support Scheme, which provides support to the poorest elderly Singaporeans, to be paid out on a monthly basis instead of quarterly.
"Silver Support recipients are not working and receiving a salary, unlike Workfare recipients, yet they still have monthly household expenses like bills, food, transport and rental," he said.
He noted that many Singaporeans would like to withdraw all of their CPF money at 55, and added that he too would like to do so if given a choice.
"However, the reality for me, and I think many other working Singaporeans, is that if not for the forced savings that CPF has imposed, we would probably have saved much less for retirement," Mr Giam added.
"Even if CPF members make an effort to invest their retirement savings after they are withdrawn, not many have investment skills that are good enough to consistently beat the current 4 per cent CPF retirement account interest rate in the long term."
In his speech, Mr Giam also called for the cash payouts under the new Silver Support Scheme, which provides support to the poorest elderly Singaporeans, to be paid out on a monthly basis instead of quarterly.
"Silver Support recipients are not working and receiving a salary, unlike Workfare recipients, yet they still have monthly household expenses like bills, food, transport and rental," he said.
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