Monday 26 May 2014

CPF money is your money, says Tan Chuan-Jin

In blog post, he also explains why Minimum Sum is increasing
By Toh Yong Chuan, The Straits Times, 26 May 2014

THE Manpower Minister put up a stout defence of the Central Provident Fund (CPF) system yesterday, amid criticisms online of Singapore's national pension fund.

Without naming anyone, Mr Tan Chuan-Jin hit out at those who labelled the system a scam and who described the Minimum Sum as a ruse to stop Singaporeans from withdrawing their savings.

Such allegations are untrue, he said, highlighting that many Singaporeans are already using their CPF monies for properties and health care.

"Money in your CPF account is your money," he said, adding: "Many of us are already using our CPF monies to fund expenses that would otherwise have come from our disposable income."

He pointed out that Singaporeans are living longer and, with inflation, the $120,000 target set in 2003 translates to a higher figure today.

"The Minimum Sum is increasing because we are living longer so we need to spread out our payouts," he said.

The Minimum Sum is now $148,000 and it increases to $155,000 from July 1. It is set to go up again in July next year and the amount has not been determined. The Government has not projected any increases after 2015.

In his blog, Mr Tan also sought to dispel misperceptions about the Minimum Sum.

While those who reach 55 can withdraw a portion of their CPF savings after setting aside the Minimum Sum, those who do not meet it will not have to top up the shortfall in cash, he said.

Half of CPF members are able to meet the Minimum Sum now, compared with a third five years ago. And the proportion will jump to between 70 per cent and 80 per cent over time, said Mr Tan, pointing to a local university study.

Overall, the CPF system is a good and fair one that is "a more sustainable system than most other retirement schemes... (and) CPF funds are absolutely safe", he said.

His strongly worded blog post came less than a week after the Ministry of Manpower pledged in its addendum to the President's Address that it "will enhance retirement adequacy to give greater assurance and peace of mind to all Singaporeans", and on the back of questions online on the CPF system.

Human resource expert David Leong said it is timely that the Government came out strongly to defend the CPF system.

"It is important to assure Singaporeans that the CPF system is a sound one," he said. "It is a key institution which affects all Singaporeans."

He added: "There cannot be any unanswered questions on the robustness of the system because it affects public confidence."

As Mr Tan said: "Let me state that the CPF is put in place to help Singaporeans have peace of mind when it comes to their retirement years.

"With increasing longevity, it has become even more important to help Singaporeans sustain their retirement adequacy for longer."


The Minimum Sum is increasing because we are living longer so we need to spread out our payouts.

Workers need not worry: Chuan-Jin
Other ways to supplement retirement income if they don't meet target
By Toh Yong Chuan, The Straits Times, 26 May 2014

SINGAPOREANS who do not meet the Central Provident Fund (CPF) Minimum Sum need not worry, Manpower Minister Tan Chuan-Jin said yesterday.

Currently, half of CPF members who turn 55 have less than the Minimum Sum in their accounts. The Minimum Sum is now $148,000 and it increases to $155,000 from July 1.

Among those who could not meet the Minimum Sum are older Singaporeans who were working when Singapore was still a developing country and wages were low, noted Mr Tan in a blog post.

They will get help through the Pioneer Generation Package to lighten their health-care costs.

Those who did not work regularly will also not meet the Minimum Sum, but "many among" them have family support, said Mr Tan.

There are other ways to supplement their income in their twilight years, he said.

For the majority of older Singaporeans who own their homes, they can rent out rooms in their homes for income.

Other seniors can turn to the Silver Housing Bonus which gives a cash grant if they downsize their flats, or tap the Lease Buyback Scheme to cash out their HDB flats.

Low-wage workers who are still working will get special attention, he assured.

For instance, the Workfare scheme, in which the Government provides wage support for those earning below $1,900 each month, also pays into their CPF accounts.

The extra 1 percentage point interest for the first $60,000 of CPF savings will help workers grow their savings, Mr Tan noted.

From next year, workers will also receive between 1 and 2.5 percentage points more in the CPF, with the bulk of the hikes going into medical and retirement needs.

Apart from these moves, the minister hinted that more changes are afoot.

"We are looking into other ways to further strengthen our support for those who might need more help," he said, without elaborating.

While agreeing that the CPF Minimum Sum provides a reference point on how much to save for retirement, self-employed piano tuner Bernard Moey said he will have a harder time reaching the Minimum Sum than employees on companies' payrolls.

Self-employed Singaporeans are required to contribute only to their CPF Medisave Account.

"Besides the CPF, I will try to be self-reliant, save as much as I can, and continue working for as long as I can," the 45-year-old added.

Move away from 'Govt knows best' approach

PERHAPS it is time to re-examine the paternalistic nature of the social contract between the Government and the people.

Most Singaporeans do not harbour any conspiracy theories on their Central Provident Fund (CPF) money, but are more concerned about it being made available to them when they retire.

Manpower Minister Tan Chuan-Jin writes that "the CPF is put in place to help Singaporeans have peace of mind when it comes to their retirement years" ("CPF money is your money, says Chuan-Jin"; yesterday).

However, do we still need the Government's hand in determining how we spend our savings in our twilight years?

The imposition of a Minimum Sum does suggest the Government's belief that most Singaporean retirees are incapable of dealing with their own personal finances in a responsible manner - a suggestion that I strongly disagree with.

I suggest that we move away from this "Government knows best" approach and allow retirees to make their own decisions on their retirement funds. If someone chooses to fritter away his CPF savings, it is a decision made by an adult that we should respect, even if we disagree with it.

The corollary is that this individual should also not expect any handouts from the State if he should find himself in a destitute position as a result of his decisions.

Like a parent who eventually has to let his child deal with the repercussions of his decisions, the Government should not be watching over retirees' shoulders in their twilight years. We should not be a nanny state from cradle to grave.

After some 30 years in the workforce, retirees should have earned some respect and be given the leeway to live and spend the way they want, with no interference from anyone.

Tan Suan Jin
ST Forum, 27 May 2014

CPF cannot behave like hedge fund

I VISITED Mr Roy Ngerng's blog after reading reports of his allegation that Central Provident Fund savings were misappropriated ("PM Lee demands apology and compensation from blogger"; last Tuesday).

Most of the points he raised were without merit and probably reflected a lack of understanding of how complex financial systems work.

The CPF is a national savings programme and cannot be managed like an aggressive hedge fund, which takes on higher risks to secure better returns.

What would happen if the CPF scheme collapses due to losses incurred by investing in riskier instruments? It would be unfair to members who prefer a risk-free environment for their CPF funds.

Members with higher risk appetites have the option of investing their CPF funds in equities, unit trusts and other instruments.

It is also unwise to correlate CPF returns to the returns generated by the Government of Singapore Investment Corporation (GIC).

Some think that as GIC has achieved higher returns than the CPF over the last few decades, funds in the latter could be managed in the same way. Others feel that if GIC uses CPF funds either directly or indirectly to invest, then CPF members should be entitled to the returns.

If the CPF Board places the money in a bank, and the bank lends to GIC, these are separate transactions. It is not a case of the originator of the funds deserving the returns just because it provided the liquidity.

We should stop trying to link GIC and the CPF as they are different entities with different objectives and levels of accountability.

Understandably, raising the CPF Minimum Sum is not a popular move among Singaporeans, including myself.

However, we have to recognise that in running a national savings programme, the Government has to ensure that it achieves its intended objective - to meet the members' basic living needs when they retire.

If the full CPF balance is returned to members at age 55, some may squander away the funds and fall into the poverty trap. Government welfare systems would be needed to take care of them and taxes will have to be raised to fund the schemes. Would the working population accept this? Is it sustainable?

Also, it is not feasible to have greater transparency for our sovereign wealth funds. Doing so could reveal areas of vulnerability that could open the country to the risk of speculative attacks on its currency and financial systems.

These funds already have robust internal or even external auditing systems to ensure functional integrity is being upheld.

I hope public bloggers can differentiate between "perceptions" and "truths", which have to be based on evidence.

Jason Soon Hun Khim
ST Forum, 27 May 2014

Abolish 'not our money' mindset

WE SHOULD further strengthen the Central Provident Fund framework instead of abolishing it, as some people have suggested.

To fund retirement schemes, countries usually either tax their citizens heavily while they are economically productive, with the promise of a state pension at retirement, or enforce some form of national savings plan like the CPF.

If these measures are not taken, a significant number of people will not have sufficient retirement savings when they grow old and would expect the State to provide for them.

The CPF scheme allows members to use the funds for housing, medical, investment and education purposes. This is far better than paying taxes to receive a pension in future.

Also, under the taxation system, a person can only hope that when he retires, the State will be able to pay the promised pension.

The CPF scheme pays 2.5 per cent interest on Ordinary Account savings and 4 per cent for Special and Medisave accounts.

While it is understandable that members would like the rates to be raised, funds in the Ordinary Account can be withdrawn for other uses such as investments, housing and education. The money can also be transferred to the Special Account to earn higher interest.

So, on the whole, the interest paid on CPF funds does not seem unreasonable.

We have to start treating our CPF money like cash in our bank accounts, instead of thinking of it as "not our money". Only then can we plan holistically for our retirement.

Christopher Leong
ST Forum, 29 May 2014

Be prudent when using funds

THE Central Provident Fund (CPF) is a risk- and tax-free retirement savings plan. So why is there a sense of uncertainty among some people over whether their CPF monies can see them through old age?

Could it be that people have unrealistic expectations of better returns from a conservative savings plan? Or is it that they do not treat their CPF funds like their own money?

If CPF is primarily a savings plan for retirement, it should not be allowed for too many other uses such as housing, health care, education and investment.

The CPF Board cannot assume that all members will be prudent and spend within their means.

I have heard of people using their CPF savings to deliver their children at costly private hospitals rather than at public ones, or buying condominium units when they can afford only HDB flats.

The lack of care in managing one's CPF funds could be because of the ease with which the cash can be dispensed - via a signature on an authorisation form.

If CPF did not exist, most Singaporeans would be putting their money in the bank, earning meagre interest. And their savings above $50,000 would not be protected if the financial institution fails.

Jolly Wee
ST Forum, 29 May 2014

Key points in Minimum Sum debate

THE Government has much to learn about communicating with the people.

The raising of the Central Provident Fund (CPF) Minimum Sum is in the headlines because of certain allegations by blogger Roy Ngerng.

Manpower Minister Tan Chuan-Jin corrected some of the misconceptions in his blog ("CPF money is your money, says Chuan-Jin"; Monday). However, he failed to address two key points.

First, he did not state categorically that property bought with CPF savings can be pledged for up to half of the Minimum Sum, for those unable to set aside the full amount in cash. Many people are unaware of this.

Perhaps the Government would prefer the full amount to be in cash, but people should be allowed to decide for themselves what they prefer.

Second, it is puzzling that the Government raised the Minimum Sum by 4.7 per cent to cushion inflation, yet often states that the high inflation rate is due to private road transport and accommodation costs, which do not affect most Singaporeans.

Was this taken into account when it raised the Minimum Sum, not only for this year but also for past years?

Tan Say Yin (Ms)
ST Forum, 29 May 2014

CPF review: Here are my three wishes
Raise minimum withdrawal amount, inflation-proof savings, boost returns
By Toh Yong Chuan, The Straits Times, 31 May 2014

MANPOWER Minister Tan Chuan-Jin has been busy defending the Central Provident Fund (CPF) system this week.

In a lengthy blog post on Sunday night timed for the Parliament debate which started on Monday, Mr Tan wrote: "Money in your CPF account is your money."

It was a stout defence of the CPF system, amid criticisms online of Singapore's national pension fund.

The former school debater turned army general and politician is not one who goes around picking fights, but neither is he known to shy away from a robust debate.

But his comments became a lightning rod.

An angry reader e-mailed me on Monday: "CPF money is your money? No it is not!" Another charged that the minister was stating the obvious, without addressing the real issues such as CPF returns.

It was an uphill task for Mr Tan from the onset.

Those who are already persuaded that the CPF system is sound would be indifferent to his blog post.

But for those seduced by the simmering online criticisms that decry the CPF system as a scam and the Minimum Sum a ruse, the blog post is not going to change their minds.

To put things into perspective, it is implausible that the majority of Singaporeans are unhappy with the CPF system.

The CPF Board's annual report published last year showed that more than 910,000 Singaporeans are using their CPF savings for housing mortgages. Without the CPF, their ability to own homes would have been severely limited.

Even so, it is not difficult to understand why some are unhappy with it.

First, some people feel that the CPF is not really their money because they do not have unfettered access to it.

This argument is difficult to refute. After all, the CPF is indeed a compulsory retirement savings scheme. It forces people to save for their retirement and medical bills.

While some agree that there is a role for the Government to play in helping Singaporeans plan for their retirement, others object to such nannying by the state.

Apart from these general sentiments, two specific aspects of the CPF draw the sharpest criticisms - the rising Minimum Sum and the less-than-stellar returns.

The Minimum Sum will increase from $148,000 to $155,000 from July 1. It is set to go up again in July next year but the amount has not been determined.

The Minimum Sum, in some instances, represents the bulk of cash savings for those who turn 55. It must be painful to see it locked away.

Other than the Minimum Sum, the issue of returns has also raised questions.

The interest rates are 2.5 per cent per annum for CPF Ordinary Account savings, and 4 per cent per annum for the Special, Medisave and Retirement accounts. An extra 1 per cent is paid on the first $60,000 of a CPF member's combined balances.

These returns, although guaranteed and higher than what banks are offering for deposits in the low-interest rate environment of the past few years, barely beat inflation in some years.

In 2011 and 2012, when inflation peaked at 5.2 and 4.6 per cent, the bulk of CPF savings shrank. The erosion is less severe when measured against the core inflation rates of 2.2 and 2.5 per cent in both years respectively.

What then can the Government do in the face of such unhappiness? It cannot shrug off the debate, for doing so means accepting the view that the CPF is a fraud and flop, which it is not.

It also must not dismantle the CPF scheme or remove the Minimum Sum. These are still based on valid and sound principles of ensuring some measure of retirement adequacy.

But apart from these two sacred cows, all other aspects of the scheme should be open to discussion, as part of the review now underay, the findings of which are expected in August.

Here is my wish list.

First, raise the minimum withdrawal amount. What is not so widely known is that those who cannot meet the Minimum Sum at age 55 can still withdraw at least $5,000.

This amount has not been adjusted for at least a decade, not even for inflation. Raising it will give those turning 55 something more to look forward to, be it repairing their flat or even taking that long-awaited pilgrimage.

It should be acknowledged though that the trade off in doing is that this will leave less of the account holder's funds left to be invested, resulting in lower payouts for the rest of his life.

Next, inflation-proof CPF savings.

Since it is a forced savings scheme, public expectations are naturally that it will yield higher returns than bank fixed deposits. It is not enough just to provide higher than the already-low market returns.

One way of doing so is to issue inflation-indexed bonds.

It is not a new idea. During the Budget Debate last year, Minister Lawrence Wong, speaking in his capacity as a board member of the Monetary Authority of Singapore (MAS), said the central bank had studied the feasibility of such bonds and concluded that they were too costly for investors.

The MAS should keep studying the matter because the call to ensure that CPF savings are not eroded by inflation will not go away.

Apart from raising the minimum withdrawal amount and keeping pace with inflation, a third key area of improvement is to boost CPF returns, a call that several MPs made again this week.

For example, the extra 1 per cent interest for the first $60,000 in CPF balances has not been adjusted since it was introduced in 2008. A review is timely.

And since Temasek and the Government of Singapore Investment Corporation (GIC) have been held up for their high returns to shareholders, why not also have both manage a portion of CPF funds for the CPF members who are willing to take higher risks? That gives them more choices, and a shot at higher returns.

While CPF members who are willing to bear risks already have the option of investing with private fund managers, few come close to the stature and reputation of Temasek or GIC.

On its part, Temasek has signalled that it may sell bonds to individual investors.

I hope that when it does, ordinary Singaporeans with savings locked up in CPF can have a decent slice of the pie.

These moves can take some sting out of the unhappiness over CPF, even if it does not soothe all the anger or silence the critics.

CPF still a prudent scheme

THERE have been many comments about the inflexibility, necessity and transparency of the Central Provident Fund (CPF).

However, the scheme is beneficial, despite the perceived disadvantages.

If the CPF scheme is done away with, then we must be really disciplined in order to save enough for the down payment of our property. All the grants related to the CPF would also be gone.

Some ask why CPF pays only a 2.5 per cent to 4 per cent return on our money. They should also ask why banks, which also take our savings and invest them for a higher return, give us a meagre 0.1 per cent.

The reason the increase in the Minimum Sum is higher than the prevailing inflation rate is that the Minimum Sum is locked in at a particular point in time.

Retirement does not last just one year; it typically lasts 10 to 25 years. Since everyone is living longer, we should prepare a bit more.

We use CPF schemes when they benefit us and raise a ruckus when they don't.

Those who wish to withdraw all the money in their CPF accounts when they turn 55 should be made to declare that they will not ask the Government for assistance if they run out of money.

Freedom comes with a price.

We talk of the Government not listening, but the freedom to give feedback and criticism does not include making accusations that cannot be substantiated with facts.

Mervyn Song Chee Khin
ST Forum, 10 Jun 2014

The Truth About Our CPF and the Minimum Sum
Is our CPF money safe? Can the Government pay all its debt obligations?
How can I use my CPF money? What are the myths and facts surrounding our CPF savings?
8 Things About The Minimum Sum You Should Know
Our Nation’s Reserves
CPF Facts and Fallacies

CPF Minimum Sum to be raised to $155,000
CPF: Comparison of retirement plans around the world
Retirement Plans From Around The World
CPF: Comparison of retirement plans around the world, US, UK and Canada
Why it’s so hard for S’poreans to understand CPF

What the Govt does with the money that goes into the CPF
CPF monies not used for Govt spending: Ministry of Finance
CPF: Irrational to expect both low risk and high returns
CPF and retirement
Temasek doesn't invest or manage CPF savings
CPF issues can be resolved
CPF: Can't Please all Fund members
CPF just one part of retirement financing
CPF protest draws crowd
No reason to doubt CPF's intentions
CPF is a robust and sustainable system: Tharman

PM Lee suing blogger over CPF claims

Debunking CPF Minimum Sum myths
DPM Tharman explains the CPF scheme

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