Friday, May 30, 2014

Housing an important part of CPF system: Chuan-Jin


MAY 30

SINGAPORE — Ensuring that the Central Provident Fund (CPF) system caters to Singaporeans’ housing needs is an “important component” of the scheme, said Minister for Manpower Tan Chuan-Jin yesterday, in response to parliamentarians’ suggestions to tweak the system such that less CPF monies are spent on housing, leaving more for healthcare and retirement needs.

Speaking in Parliament during the debate on the President’s Address, Mr Tan also noted that higher CPF interest rates — which Members of Parliament (MPs) also called for — could mean greater risk, and explained why the use of the CPF monies should not be made more flexible.

The concerns of the MPs about the adequacy of CPF to meet Singaporeans’ needs followed the annual announcement by the Government about the raising of the Minimum Sum earlier this month. President Tony Tan, in his address at the reopening of the 12th Parliament two weeks ago, had said the Government would improve CPF savings and annuity schemes, and develop more options for seniors to monetise their homes.

Yesterday, Mr Tan said the Government has to cater for people’s housing needs. “There are those who asked whether the CPF should also, apart from providing for retirement adequacy, be looking at housing adequacy,” he said. “We believe it is an important component and this forms part of that pillar.”

[I don't disagree that housing is an important component of the social compact. BUT unbridled use of CPF has led to inflation of housing prices. If there are 5 persons eyeing the same resale flat, and all of them have $500k in their CPF, they would all bid $500k and then top up with COV (under the old scheme - under the new scheme they may estimate what would be the valuation and plan to exceed that). However, if there is a rule that says they cannot use more than $300k, then they would all bid around $300k, saving $200k in the CPF.]

The Government will make sure housing remains an option for people, not just in terms of access but also in terms of options for monetising their homes at the later stage of their lives, such that it also enhances their retirement adequacy, he said.

Last week, Ang Mo Kio GRC MP Inderjit Singh told TODAY that in tandem with more affordable housing, the CPF Board could further limit how much Singaporeans could use from their Ordinary Account to buy property, leaving more for retirement instead. Whampoa MP Heng Chee How also suggested that the allocation to the CPF sub-accounts could be tweaked.

Yesterday, Hougang MP Png Eng Huat also urged the Government to provide more flexibility in the system by offering an earlier draw-down age. Along with other MPs — including Mr Zaqy Mohamad (Chua Chu Kang GRC) and Ms Tin Pei Ling (Marine Parade GRC) — he also called for ways to provide higher returns on CPF monies to better withstand inflation.

While acknowledging that this is a fair consideration, Mr Tan pointed out that with higher returns come higher risks. “If you have funds and there is a downturn in the market, at that point of withdrawal, would it affect your returns?” he asked.

He noted that the current CPF interest rates were far higher than rates from similar products in the market, but assured that this was an area the Government is looking at in enhancing CPF Life.

Mr Tan also said there was good reason for not allowing full flexibility in the use of CPF monies. The CPF is aimed at allowing peace of mind by providing a constant stream of income in retirement.

“If you allow monies to be extracted early, prematurely, there will be concerns,” he said.

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