Those turning 55 from July to next June must leave $139k in accounts
By Teo Wan Gek, The Straits Times, 31 May 2012
CENTRAL Provident Fund (CPF) members turning 55 between July 1 this year and June 30 next year will have to leave at least $139,000 in their accounts for monthly payouts in their later years.
This is $8,000 more than last year's Minimum Sum of $131,000.
The Minimum Sum Scheme was introduced to help ensure that CPF members, who can withdraw their CPF savings at 55, will have enough to meet their basic retirement after they turn 65.
So CPF members have to leave some money in their accounts beyond the age of 55. In 2003, the Goverment set this Minimum Sum at $120,000 and aimed to reach it in 10 years.
Given adjustments for inflation, the sum to be set aside has in fact risen every year since 2004.
As a result of high inflation this past year, the increase for the year ahead would have been $12,000 - considerably more than increases in past years.
Instead of doing that, the Government has decided to raise the Minimum Sum by $8,000 and spread the remaining increases over a longer period than originally planned. CPF members will now reach the Minimum Sum target by 2015.
Those who have withdrawn CPF savings to buy property and cannot meet the Minimum Sum have to pledge part of the property's value towards the scheme.
In addition, a CPF member must set aside an amount in his Medisave account for medical expenses. This Medisave Minimum Sum will also be raised to $38,500, from $36,000, with effect from July 1.
The changes were outlined in a joint statement from the CPF Board and the Ministry of Manpower yesterday.
Yesterday, Minister of State for Manpower Tan Chuan-Jin reiterated the rationale for increasing the Minimum Sum even though only about half of members at age 55 are able to meet it.
That proportion, however, is increasing. Last year, 45 per cent of CPF members who turned 55 met the Minimum Sum, compared to 36 per cent in 2007.
He said that those who can meet the Minimum Sum can be assured of monthly payouts to cover their basic needs in retirement.
'If we do not increase the (Minimum Sum) in line with inflation, we may not ensure Singaporeans are financially provided for in their retirement years,' he said.
* CPF MINIMUM SUM
Increase doesn't fully reflect total inflation
MR YOUNG Pak Nang inquired about the use of the headline consumer price index inflation rate to adjust the Central Provident Fund Minimum Sum ('CPF Minimum Sum should reflect 'true' inflation'; last Friday).
As he noted, increases in imputed housing rentals on owner-occupied homes and certificate of entitlement prices for private cars contributed to higher-than-normal headline consumer price index inflation last year.
For the majority of retirees, these are not items that would lead to increased cash expenditures.
The Minimum Sum is aimed at providing for CPF members' basic retirement needs.
The original target, adopted in 2003, was for the Minimum Sum to increase in real terms to $120,000 (in 2003 dollars) by 2013.
Further, besides this real increase, the Minimum Sum has to keep pace with long-term inflation trends.
The Minimum Sum has therefore been increased each year to meet the required real increase and to take into account inflation.
However, this year's Minimum Sum increase was moderated, and hence did not fully reflect the consumer price index inflation that occurred over the last year.
This year's increase in Minimum Sum, by $8,000, was one-third less than it would have been if we had followed the usual formula for Minimum Sum adjustments. With the moderated increase, we have stretched out the 2013 target to 2015.
Some of the factors that have led to higher consumer price index inflation in the last year are cyclical, and likely to even out over the long term.
For example, imputed housing rentals on owner-occupied homes have significant short-term impact on the consumer price index, but tend to even out over time.
Over the 15-year period from 1996 to last year, which like most such periods saw the property market fluctuating in both directions, headline consumer price index inflation averaged 1.6 per cent.
This is comparable to the average inflation of 1.5 per cent over the same period if imputed rentals on owner-occupied homes were excluded.
We thank Mr Young for his useful query.
Farah Abdul Rahim (Ms)
Director, Corporate Communications
CPF Minimum Sum should reflect 'true' inflation
THE report ('CPF Minimum Sum to be raised'; May 31) stated that the Government has decided to raise the Central Provident Fund (CPF) Minimum Sum from $131,000 to $139,000 from July, instead of $143,000.
The reduction is aimed at cushioning CPF members from the impact of the acute, inflation-driven spike, spreading the balance of $4,000 until the new target date of 2015.
When Trade and Industry Minister Lim Hng Kiang addressed the concerns over rising inflation in Parliament ('When big policies impact the little man in the street'; May 15), he cited big-ticket items like housing rentals and car prices as being responsible for the bulk of inflation. As most Singaporeans own their homes, the issue of rents is irrelevant to citizens, he explained. As for private cars, only a small part of the population buy cars, so the majority of people are also not affected by the high inflation.
If these are the reasons for rising inflation, why is the Government applying the full annual inflation rate when adjusting for the increase in the Minimum Sum?
Shouldn't the Government moderate the figure downwards - say, to two-thirds the actual inflation rate - to recognise that some major contributors to inflation do not affect most CPF members?
Young Pak Nang
ST Forum, 8 Jun 2012
Related
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