Friday 23 January 2015

NTUC calls for flexibility in CPF withdrawals

By Toh Yong Chuan, Manpower Correspondent, The Straits Times, 22 Jan 2015

WORKERS should be allowed to make a lump sum withdrawal of at least 20 per cent from their Central Provident Fund (CPF) savings even if they do not meet the Minimum Sum, the labour movement said yesterday.

The National Trades Union Congress also wants the Government to raise the current ceiling of $60,000 that attracts an additional 1 percentage point in interest rates.

These two suggestions were among a raft of 15 proposals aimed at boosting CPF savings and giving CPF members more flexibility in using their own retirement funds, said NTUC assistant secretary-general Cham Hui Fong.

But even as the NTUC proposed major tweaks, she said it is not calling for a major overhaul of the system.

"The fundamentals of the system should remain. In no way will we want to convert it into a retirement (pension) benefits scheme," said Ms Cham.

"We have seen how it has evolved in other countries and how it has collapsed."

NTUC has submitted the recommendations, based on views it gathered from 250 union leaders and workers at the end of last year, to the government- appointed advisory panel reviewing the CPF.

At the National Day Rally last August, Prime Minister Lee Hsien Loong said that the Government would consider letting CPF members make lump sum withdrawals after they retire, but withdrawals should be capped and not too excessive.

Currently, members can withdraw only $5,000 from the CPF savings at age 55 if they do not meet the Minimum Sum.

Ms Cham said the NTUC supported Mr Lee's call and it wants workers to have the flexibility of withdrawing a lump sum, "minimally 20 per cent", from their CPF accounts at the drawdown age, even if they do not meet the Minimum Sum.

At the same time, the Government should introduce financial incentives to encourage workers to continue keeping their funds in CPF accounts, she added.

For older workers, who have their CPF rates cut as they age, the labour movement wants the CPF contribution rate of workers aged 50 to 55 to be the same as younger workers.

NTUC also suggested that the Government raise the CPF contribution ceiling from $5,000 to between $5,500 and $6,000.

To further boost savings, the NTUC also wants the $60,000 cap on CPF savings that earn an extra 1 percentage point in interest rates to be doubled to $120,000.

Acknowledging that these could add to rising costs, Ms Cham said: "We have to be reasonable and fair to employees as well."

But former Nominated MP Eugene Tan said the recommendations do not go far enough in addressing retirement adequacy.

Only half of CPF members who turn 55 in 2013 met the Minimum Sum, including 15 per cent who pledged their properties.

"The CPF system cannot just do with tweaks but needs an urgent overhaul," said Mr Tan, an associate law professor from Singapore Management University.

CPF tweaks suggested to help those who miss out
More support proposed for groups such as freelancers, self-employed
By Joanna Seow And Aw Cheng Wei, The Straits Times, 22 Jan 2015

THE Central Provident Fund (CPF) system helps most Singaporeans build a retirement fund but it does less for some like self- employed workers, housewives and freelancers.

The labour movement yesterday proposed a number of tweaks to help these groups.

One suggestion raised was to encourage people to top up their family members' CPF accounts by tying tax relief to the number of family members helped. The annual income ceiling for siblings and spouses receiving the top-ups should also go up from $4,000 to $12,000, said the National Trades Union Congress in recommendations to the CPF Advisory Panel.

This is to keep pace with wage growth, said NTUC assistant secretary-general Cham Hui Fong at a media briefing yesterday.

Former Nominated MP Kanwaljit Soin agreed that retirement funds are especially needed for women outside the workforce.

But tax deductions benefit only the rich, as "only a minority of people in Singapore pay taxes", she said.

Another suggestion is to raise the wage cap for workers receiving the maximum Workfare Income Supplement (WIS) payouts from $1,000 to $1,200.

NTUC also proposed more support for freelancers and the self- employed, through WIS top-ups from the Government if these workers make contributions to their Special Accounts.

Companies who use their services should also receive incentives from the Government to make CPF contributions for the freelancers or the self-employed.

This proposal cheered freelance cartoonist Heng Kim Song, 51, who has not made any contributions to his CPF accounts.

"If companies are incentivised to match my contribution, I think I will start doing so," he said.

Some bosses supported the idea. "There should be CPF contributions for people doing freelance work. If not, they will not be taken care of even though they're contributing to society," said Mr Wei Chan, business development director of bakery The Pine Garden.

But though such a move could help grow their retirement savings, it may not add to their actual earnings, as companies may deduct the contributions from the fees they pay the workers, said Association of Small and Medium Enterprises president Kurt Wee.

NTUC also wanted greater transparency on how much people needed to set aside for their Minimum Sum. It asked the Government to provide a 10-year schedule of Minimum Sum changes.

"There must be clarity, and there must be rationale made known to CPF members as to how the figure is derived," said Ms Cham.

The labour force participation rate, employment rate and wage growth should all be considered to ensure the majority of CPF members can meet the Minimum Sum, she added.

"When we set a Minimum Sum, when the majority of CPF members are not able to meet it, then it just seems to be a target that is too far out of reach."

NTUC's recommendations

- Raise contribution rates for older workers aged above 50
- Review long-term contribution target rates, which were last set in 2003
- Raise Ordinary Wage Ceiling to between $5,500 and $6,000. This is the maximum base that CPF contributions are calculated from.
- Raise wage cap for workers receiving maximum Workfare Income Supplement (WIS) payouts from $1,000 to $1,200
- Provide WIS top-ups to self-employed people if they make CPF contributions
- Give companies incentives to contribute to the CPF accounts of freelancers and self-employed people
- Raise the current $60,000 limit of combined CPF savings that attract an additional 1 per cent interest
- Tie tax relief for CPF top-ups of family members' accounts to the number of recipients, and raise income ceiling for siblings and spouses receiving the top-ups

- Set 10-year schedule for Minimum Sum and corresponding CPF Life monthly payouts, with mid-term review
- Explain any adjustments to Minimum Sum in advance

- Allow a withdrawal of at least 20 per cent from the Retirement Account at the drawdown age whether or not the Minimum Sum is met, but provide non-withdrawal incentive
- Allow CPF members to top up their Retirement Account beyond the Minimum Sum, subject to a cap, in order to receive higher monthly payouts
- Give the option of receiving escalating monthly payouts, with incentives for starting with lower payouts initially or deferring the start of payouts
- Any alternative investment or annuity plans should be optional and supplementary to CPF Life

Provide financial counselling about the impact of lump sum withdrawals on future payouts

Employees cheer ideas, but some firms alarmed
By Janice Heng And Aw Cheng Wei, The Straits Times, 22 Jan 2015

HIGHER contribution rates for older workers was one idea that struck a chord with employees, among the list of the labour movement's proposed Central Provident Fund (CPF) changes.

CPF contribution rates fall gradually after workers turn 50. The National Trades Union Congress has proposed that workers who have turned 50, up till the age of 55, not suffer a rate cut. Contribution rates for workers aged above 55 should also be raised.

Of the eight workers aged 45 to 56 whom The Straits Times spoke to, all but one welcomed this idea.

Having to pay for mortgages was one of the reasons for them supporting not cutting CPF rates when they turn 50.

Another was fairness. Risk manager Albert Yeo, 49, noted that lower rates were originally meant to make older workers more employable.

"But in today's economy, especially in knowledge-based jobs, I don't think older workers should be penalised."

But firms were alarmed by the possibility that employers' contributions might rise.

Association of Small and Medium Enterprises president Kurt Wee said: "We are faced with cost pressures and the business outlook is poor. This is not the right time to bring up anything that adds to costs."

Singapore National Employers Federation executive director Koh Juan Kiat warned that raising employer CPF rates would raise wage costs and eat into pay rises, which are already expected to be lower in the coming years.

The food and beverage industry will be hit, as it has become more reliant on older workers, said Ya Kun executive chairman Adrin Loi. But he is willing to pay more for older workers if need be. "We do need these staff, so we will just have to comply."

One suggestion which MPs expect to be popular is allowing CPF members to withdraw a lump sum upon retirement, even if they have not met the Minimum Sum.

"Allowing (this) will address some of the public concerns about not being able to touch their CPF savings," said Bishan-Toa Payoh GRC MP Zainudin Nordin.

Chua Chu Kang GRC MP Zaqy Mohamad also expects support for proposals that will help higher-income workers, such as raising the wage ceiling for CPF contributions.

"Some middle-income older workers ask me, 'Why don't you allow us to contribute more if we want to?'" he said.

Raising CPF contribution rates for older workers will not burden firms: Expert
By Jessica Yeo, Channel NewsAsia, 22 Jan 2015

The labour movement's proposal to raise CPF contribution rates for older workers - if implemented - will not burden companies, said an academic.

The National Trades Union Congress (NTUC) had on Wednesday (Jan 21) made a call for CPF contribution rates for those aged above 50 to be increased, and companies expressed concern that doing so would raise their operating costs.

However, Associate Professor Tan Khee Giap, Co-Director of the National University of Singapore’s Asia Competitiveness Institute, Lee Kuan Yew School of Public Policy, said the impact on companies will not be too great. He also suggested that older workers' job scopes be redesigned and their wages adjusted to deal with the increased CPF contribution rate.

"Their responsibilities are being reduced and correspondingly their salaries are being reduced too. So this increase in CPF contribution for older workers will not contribute to that much burden,” said Assoc Prof Tan.

The Association of Small and Medium Enterprises (ASME) said raising older workers' contribution rates will not prevent companies from hiring them. But costs remain a concern.

Mr Ang Yuit, Vice-President of ASME said: “I don't think it really changes the fact that SMEs would find and employ the right person if they find him. So I don't think it really impacts that. It's more of the business costs and the additional pressures that they feel, that are being added on to their business. That's the challenge, we feel.”

Recommendations on CPF 'may not meet intended aims'
Some observers say NTUC's proposed changes raise other concerns
By Joanna Seow, The Straits Times, 23 Jan 2015

THE labour movement's recommendations for changes to the Central Provident Fund (CPF) system seek to improve both retirement adequacy and flexibility, but some may not achieve their intended aims, said observers.

Most expressed concern about allowing large lump-sum withdrawals, while others noted that raising the cap for savings attracting higher interest rates may benefit only the better off.

The National Trades Union Congress (NTUC) submitted 15 recommendations to the CPF Advisory Panel on Tuesday. Among these was a proposal for lump-sum withdrawals of at least 20 per cent to be allowed at the draw-down age, regardless of whether or not the Minimum Sum is met.

Another was to double the current ceiling of $60,000 in CPF savings which attracts an additional 1 percentage point in interest.

"This call for flexibility is going to make the attainability of the Minimum Sum even more elusive," said former Nominated MP Eugene Tan, addressing the former proposal.

"I don't know whether that's going to make CPF members more disappointed with the scheme," added the associate law professor from Singapore Management University.

Furthermore, if the cap is set at 20 per cent, it will be limited by the amount in the account.

"I don't think it's going to be enough for people to be happy," said SIM University economist and Nominated MP Randolph Tan.

He said he was not in favour of the suggestion as it does not solve retirement adequacy, and "it will give the impression that CPF should provide as much liquidity as a bank account".

In fact, the impact of retirement inadequacy could even extend beyond the current generation.

If the number of CPF members without enough savings in the later part of their lives keeps growing, so will the burden on their children, who may need to support them directly in cash or indirectly through taxes, said DBS economist Irvin Seah.

To that end, NTUC's proposal of an incentive to persuade people not to withdraw funds could help, said Lee Kuan Yew School of Public Policy economist Hui Weng Tat.

But SIM University senior lecturer Joelle Fong noted that the flexibility may leave some people feeling happier.

"While the option does not do much to boost retirement adequacy, it might actually be what participants want and look forward to, thereby boosting retirement well-being," said Dr Fong.

When it came to giving more savings higher interest rates, experts were more supportive, with some saying it may encourage more people to park their savings there.

"It will encourage prudent behaviour and leave less liability for the government and society down the road," said MP for West Coast GRC Foo Mee Har.

But not everyone has more than $60,000 in their CPF accounts, so such a move risks being regressive.

"If you have more in your account you'll earn more interest, whereas those with less won't benefit," said Institute of Policy Studies research fellow Christopher Gee.

"That dollar could easily have been spent (by the Government) on health care or Workfare."

More needs to be done for low-wage workers
By Toh Yong Chuan, Manpower Correspondent, The Straits Times, 29 Jan 2015

THE labour movement's proposals on how to improve the Central Provident Fund (CPF) were rightly described as "bold and relevant" by MP Zainudin Nordin, who chairs the Government Parliamentary Committee for Manpower.

But the National Trades Union Congress (NTUC) could have done more to advocate for low- wage workers.

It presented a laundry list of 15 proposals to tweak the CPF last week. They ranged from introducing financial counselling to raising the cap on the salary amount on which CPF contributions are calculated. Currently salaries above $5,000 a month do not attract CPF contributions.

It even included suggestions on Workfare and raising the CPF contribution rates of older workers, areas which are outside the mandate of a government-appointed panel reviewing the CPF system.

The panel is expected to release its report early next month, and NTUC was giving its views ahead of the report.

NTUC deserves credit for three proposals.

The boldest proposal is to allow CPF members to partially withdraw their savings in a lump sum at the CPF drawdown age (which is 65 for those born in 1954 and after) even if they have not met the Minimum Sum that needs to be set aside for retirement at age 55. The drawdown age is when CPF members start receiving monthly payouts from their CPF balance.

The NTUC wants CPF members to be able to withdraw at least 20 per cent of their retirement savings in the CPF at 65.

That goes beyond what Prime Minister Lee Hsien Loong said when he first mooted the idea last August. Mr Lee had suggested letting people withdraw up to 20 per cent of their CPF balances when they retire.

The second notable suggestion is to give higher interest rates for CPF savings. CPF members now get an extra 1 percentage point interest for the first $60,000 of their savings. NTUC wants that amount doubled to $120,000, which means putting as much as $600 more into the savings of CPF members each year.

NTUC also deserves credit for including freelance workers, the self-employed and even housewives in its recommendations. It has a raft of ideas on how to help them, from giving government top-ups to those who make voluntary contributions to easing restrictions so that more people can enjoy tax relief from topping up the CPF accounts of their spouses and family members.

Taken together, these suggestions, if accepted by the Government, will expand the CPF system to cover more people and boost their savings.

But the NTUC's proposals also raise eyebrows in other ways.

There are more proposals favouring middle- and higher-income earners than lower wage workers. Take for instance the suggestion to give the extra 1 percentage point interest to CPF savings above $60,000. The move will benefit middle- and higher-income earners who have larger CPF savings.

To help lower income earners boost their CPF balances, it would have been more logical to give higher interest to those with smaller savings.

Another example is raising the monthly CPF cap of $5,000 from which contributions are calculated. This only benefits those earning above that sum.

Providing more tax relief for those who top up the CPF accounts of their family members will similarly only benefit those who earn enough to pay income taxes in the first place. These workers are in the minority.

NTUC had fewer ideas for low-wage workers. One is to raise the wage band for workers receiving the maximum Workfare Income Supplement (WIS) payouts from $1,000 to $1,200 a month.

More importantly, NTUC failed to address the elephant in the room - that people are not saving enough for retirement.

Only half of CPF members who turned 55 in 2013 met the Minimum Sum, including 15 per cent who pledged their properties.

Singapore Management University law professor Eugene Tan said: "I find the recommendations do not go far enough. The recommendations only address the symptoms but do not engage purposefully with the all-important question of why retirement adequacy is seemingly unattainable."

To be fair, the NTUC was merely gathering the views of workers and union leaders, and it had tailored its proposals to focus on areas the government panel is looking at.

And while the panel is reviewing the retirement adequacy of the CPF Minimum Sum, it was not asked to look into helping those who have not saved enough.

Yet this issue of how to help low-wage workers build up their CPF savings in the first place is of vital importance. This can be done either by raising wages; raising the long-term CPF contribution rates; or raising the CPF interest rate.

The first two require tripartite collaboration. With NTUC's political heft and its strong three-way partnership with employers and the Government, it can take the lead to advocate more on this issue and prod the Government to do more to help raise CPF balances of low-wage workers. Otherwise this gap will become an abyss from which low-wage workers cannot climb out as they age.

NTUC is the voice of workers.

Helping low-wage workers boost their CPF savings must surely be front and centre of their advocacy and policy proposals on behalf of this group.

Holistic approach to helping workers

AS AN inclusive labour movement, the National Trades Union Congress (NTUC) represented the concerns of workers from all collars and ages in our proposals on the Central Provident Fund (CPF) ("More needs to be done for low-wage workers"; last Thursday).

Out of our slew of proposals, one-fifth will positively impact low-wage workers. We called for the wage band for workers to receive the maximum Workfare Income Supplement payouts to be raised from $1,000 to $1,200 to benefit more low-wage workers.

And to enable more to receive CPF top-ups from their spouse or siblings under the Minimum Sum Topping-Up Scheme so that they can meet the Minimum Sum, we suggested increasing the recipients' annual income ceiling from $4,000 to $12,000.

Following our call last year, workers aged above 50 up to 55 now get higher CPF contribution rates - up by 2.5 percentage points. We continued our call to further close the gap between workers in this cohort and the younger ones so that they can also build up retirement savings.

We further asked that the contribution rates for workers aged above 55 be raised in tandem. This will benefit many low-wage workers, as many of them are above 55 years old.

Our CPF recommendations are but only one of the many ways that NTUC advances workers' interests.

We launched the Progressive Wage Model (PWM) in 2012 for workers to progress in wages, skills, productivity and career. Particularly for the low-wage sectors, we championed its use as a licensing condition to help raise wages.

Now, 35,000 Singaporean and permanent resident cleaners benefit from higher wages since the licensing took effect last September. Similarly, the PWM for security officers will benefit about 29,000 of them. Wages for workers in these two sectors will increase by 20 per cent to 30 per cent. This year, the PWM will be rolled out to the landscaping industry.

Low-wage workers are also the focus of the annual National Wages Council guidelines, whereby we called for a dollar quantum built-in wage increase for workers earning a basic monthly salary of up to $1,000: $50 in 2012, and $60 in 2013 and last year.

We also set up the U Care Centre that is dedicated to helping low-wage workers enhance employment and employability. We remain committed to helping our low-wage workers earn a better living and achieve retirement adequacy in Singapore.

Zainal Sapari
Director, NTUC U Care Centre
National Trades Union Congress
ST Forum, 3 Feb 2015

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