Monday 17 November 2014

CPF focus group: More to be done to explain CPF to low-wage earners

CPF Advisory Panel chairman gives assurance at first public discussion
By Pearl Lee, The Sunday Times, 16 Nov 2014

More will be done to reach out to low-wage earners to educate them about the Central Provident Fund (CPF). This was the assurance given by Professor Tan Chorh Chuan, chairman of the CPF Advisory Panel, yesterday after the first public focus group discussion on the CPF system.

There was a diversity of views from the 50 or so who attended the discussion at *Scape in Orchard Road - many wanted monthly payouts to increase as they got older to cope with inflation; others wanted a bigger sum earlier on.

But most agreed that the CPF system needed to be simplified so that it would be easier to understand, especially by those lower on the wage ladder.

Ms K. Thanaletchimi, a 48-year-old senior assistant manager at the National University Hospital, who represented the Healthcare Services Employees' Union at the discussion, said many of the lower-wage workers she encountered had only a vague understanding of how the CPF scheme worked.

Under the current system, CPF members who set aside a minimum sum of $155,000 at 55 years old will get a monthly payout of about $1,200 when they turn 65.

"But many don't understand how the CPF scheme works, or what the payout is about. All they know is that there are employee and employer contributions," she said. "It is important to have a scheme that everyone can understand."

Mr Daniel Yap, 35, who runs a public relations agency, shared the same view and said: "What struck me at this focus group was that people have such different ideas of what the CPF is."

He also believes more should be done to hear from the lower-wage group. "They may not have strong or robust views, but they are an important part of our society and we need to ensure they have enough for their retirement needs."

Participants, such as banker Pang Lead We, also wanted more certainty in the CPF scheme, which they said has been through many changes.

Before the roll-out of CPF Life, Mr Pang said he had transferred money from his CPF ordinary account to the special account to enjoy a higher interest rate, hoping to claim a bigger lump sum when he retired.

But when CPF Life was introduced in 2009, and made mandatory for all who would turn 55 in or after 2013, it became a system of monthly payments instead. "It is like going to the bank and signing up for a fixed deposit scheme, only to be told later that they have changed it to an annuity plan," he said. "I don't think that is very fair."

Participants were also asked whether $1,200 a month was enough, and if the payouts should remain the same each month or slowly increase as they got older. Views were split.

Some felt that $900 would be sufficient to support one's basic living expenses, while others wanted $3,000 a month as there may be people in their 60s who are still servicing mortgage loans.

Mr Yap supported the idea of receiving a smaller payout at first, with the amount rising as one ages, explaining: "It seems like the sensible thing to do, to cope with inflation." He added that medical costs will also rise with age.

But other participants preferred a bigger payout at first with the amount reducing over the years. They said they expected to be more active in their 60s, and therefore needed more money. One quipped that by the time he reached his 80s, he did not expect to still have his teeth and would "just eat porridge every day".

The 13-member CPF advisory panel, comprising academics and financial industry experts, hopes to hold 10 more focus group discussions over the next three months. The feedback will help the panel decide how to make the CPF system more flexible, an aim first announced by Prime Minister Lee Hsien Loong in his National Day Rally speech in August.

At the end of the discussion, Prof Tan, who is also president of the National University of Singapore, said: "What struck me was the diversity of views that we heard. This is quite natural, because it reflects the different circumstances, needs and perspectives of the different individuals and groups."

He agreed that more public education was needed on CPF, adding that "simple messages explaining how things work in a simple and practical way would be useful".

The next focus group is scheduled for Saturday at the same venue. Those interested to attend may sign up at

CPF focus group: Hopes for more certainty, simpler system
By Sara Grosse, Channel NewsAsia, 15 Nov 2014

The CPF Advisory Panel held its first public focus group discussion on Saturday (Nov 15) to seek views on enhancing the CPF system. The panel will likely hold up to 10 focus group discussions over the next three months.

A variety of suggestions were given on what is considered adequate for retirement. One common thread was the desire for more certainty and a simpler system.

Prime Minister Lee Hsien Loong had said during the National Day Rally that more flexibility will be built into the system. Currently, a Minimum Sum of S$155,000 is set aside, once a member turns 55. When the member reaches 65, there is a monthly payout of about S$1,200.

About 50 participants discussed how this could be adjusted.

Firstly, they were asked how much monthly payout would be adequate for basic living expenses during retirement. While answers ranged from S$900 to S$3,000, the majority felt a payout of more than the current S$1,200 was needed.

"If you still have housing loan (installments) to pay, S$1,200 is not enough,” said Hasnah Salleh, a participant at the focus group. “For example, if your housing loan is about S$400 to S$500 a month, it already takes up about half of S$1,200."

Secondly, participants were asked how much a CPF member should be allowed to withdraw in a lump sum at 65. Half of them felt there should be no withdrawal, while others suggested 30 per cent or capping the amount to S$20,000. It was mostly agreed that the low-income group should be given the option to withdraw a lump sum.

Finally, participants were asked if they preferred to have flat CPF payouts or escalating payouts that rise over time. The majority preferred escalating payouts, due to inflation. However, there was a group opting for declining payouts, leading to mixed views.

"Some of us felt a declining payment schedule would be best because we felt that when we are young, we probably need more money to spend on whatever interest that we have - travelling or to help with children's education,” said Colin Loh, a participant at the focus group. “But when we are old, we probably don't need much anyway."

But fellow participant Daniel Yap said: "Declining payment opens the country up to a lot of risks, in terms of social transfers. There is going to be a point where your payments don't meet the basic subsistence level, and when that happens, the government has to make up for that shortfall somehow."

Recognising the diverse views, the Advisory Panel said ultimately, a decision will be made to serve the majority needs.

"In the end, some judgement has to be made because no matter where you stand, there will be a trade-off,” said Prof Tan Chorh Chuan, chairman of the CPF Advisory Council. “That flexibility does not just affect the individuals concerned, it can also spill over into the wider society because if many people opt for certain options, then the consequences may have to be shared with the wider community."

Other than greater public education on the CPF system, participants also felt that special consideration should be made towards lower-income and minority groups. The CPF panel said it intends to hold focus group discussions with self-help groups to seek their views.

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