In an interview with Lianhe Zaobao, Prime Minister Lawrence Wong discussed how the system has evolved and how the Government will continue supporting the housing, healthcare and retirement needs of Singaporeans throughout different stages in their lives. Here is an edited extract of his interview.
The Straits Times, 8 Feb 2025
Zaobao: What makes the CPF (Central Provident Fund) system unique, and how has it helped our CPF members?
PM Wong: Our CPF system has been improved and enhanced over many years and decades. The system we have today is very different from the one that we started with, or even the one that was in place 20 or 30 years ago. And there are several unique features in our system.
In some countries, they have what you call a defined benefit scheme. So when a person retires, they get a defined payout after retirement, and that funding is supported by taxpayers. It sounds very attractive, but it can be difficult to sustain because with a rapidly ageing population, it means that there will be fewer taxpayers to support a rapidly growing pool of seniors. And then the burden continues to grow, which is why commentators looking at some of these pension systems describe it as a pension time bomb. And there are no very good solutions. People are just kicking the can down the road.
In some other countries, they do not have comprehensive support for individuals, and they ask the individuals to rely more on their own efforts to save and look after their own retirement. But that is also not ideal because then the burden on the individual is considerable. So, our system is unique because it brings together different stakeholders, individuals, employers and the Government. We all do our part, and it reflects our social compact in Singapore.
We want to help one another, and it means, within our CPF system, the individual contributes, saves part of their income every month into their CPF account. Employer pays CPF, but the Government also does its part. We run the entire system for CPF, we provide guaranteed risk-free interest rates on CPF savings. And importantly, we provide additional support for the more disadvantaged and vulnerable groups in different ways, and by all parties coming together, we have a CPF system that can look after individuals’ retirement, housing and healthcare. And that’s also quite unique.
While the system is primarily designed for retirement, it is a system that has also enabled Singaporeans to take care of their own healthcare needs. They can use their MediSave for hospital bills and also for payments of their insurance premiums. As they start work and they want to set up a family, they can use their CPF for housing. Eventually, when they retire, they have CPF Life to take care of their retirement needs. So this is how we have over the years improved and enhanced considerably our CPF system. It is now a critical pillar in our social safety net. But of course, while it is a good system today, we are not resting on our laurels. We will continue to improve and enhance it, and make sure it remains a critical plank in our social security system, and can meet the current and future needs of all Singaporeans.
ZB: PM, you talked about Singaporeans living longer, so this means that they will need more funds for their retirement years. Some are worried that they may not have enough to support their golden years. How is the Government responding to this?
PM Wong: This is an issue that many countries are grappling with, especially those with rapidly ageing populations. And there are no easy answers. Because as the population ages and you have more seniors to look after, then whatever funds you have for retirement must stretch out for a much longer period.
The challenge is how do you look after people who are living longer? And in the end, the answer is that you need more funding. But the big question is who pays for the funding? We have been grappling with this issue for some time because we could see the trends. Even 20, 30 years ago, we could already see the trends. And we have been grappling with this.
When Singapore started out in the 1960s as an independent country, our average life expectancy was about 60-plus. People retired in their 50s, and they just needed to look after about 10 years of retirement. Nowadays, average life expectancy is around 85. And if you drill into the data, you have more and more people who are living beyond 90, even beyond 100. Our number of centenarians is growing rapidly. So when you retire, you have quite a long period of retirement to look after and to ensure that you have enough funds for your retirement years. What is the answer, then? How do we help everyone ensure that they have peace of mind during retirement?
I think there are two parts to it. One is we have to be prepared to stay employed and work longer. And that’s why we have been talking about raising the retirement age and the re-employment age for some time. Today, our retirement age is 63, the re-employment age is 68, which means employers must be prepared to offer the seniors a re-employment contract to work up to 68. And we have shared that we plan to raise this to 65 and 70 by 2030.
But we also know that it’s not easy for people, for older workers, to stay employed. And so we are not leaving Singaporeans to fend for themselves. It’s one major reason why we are investing so much in SkillsFuture, and we want to make sure that we continue to reskill and upskill our older workers, give them a substantial injection of new skills so that they can stay competitive and relevant.
And of course, all of us must start to change our mindsets and attitudes. Because in the past, it was very simple. Study, work – and often the work involves one career, one job – and then they retire. I think with longer lifespans, we have to be prepared for studying, but you are in fact going to continue learning throughout life, and your work will have multiple phases. Even if it’s one industry, you may have different kinds of job responsibilities, and very often it will be different industries, different seasons, different second, third acts in life, before you eventually retire. And SkillsFuture is there to support Singaporeans through these different phases. That’s one important way in which we help.
The second way we help is when someone retires, for example at 65, you want to ensure that their retirement savings can go on throughout their lifetime no matter how long they live. So we have CPF Life, which we implemented some time back, and this provides an annuity payout for the individual’s lifetime. And if you have your Basic Retirement Sum at 55 in 2025, by the time you are 65, you should be able to get a CPF Life payout of around $900 a month on the Standard Plan (in 2035). If you are able to work in a job that pays more, and you accumulate the Full Retirement Sum, the payout will be higher at around $1,700 a month (in 2035).
So it’s a scheme that allows you to design payouts, provide some flexibility. You can decide how much you want to save, and you can design the payouts to suit your own lifestyle and needs. What we want to do is to assure every Singaporean that so long as you make the effort, you work consistently throughout your lifetime – it doesn’t mean that you have to work every single year, but as long as you put in consistent work, and if you start young – by the time you get old and you want to retire, you should have enough protection through the CPF system to provide for your retirement. That’s our assurance to all Singaporeans.
ZB: Most people may take it that fundamentally, CPF is anchored on personal responsibility. What about the vulnerable groups who need more support?
PM Wong: It is. Personal responsibility, self-reliance is a key principle we have continued to uphold, but it is not the case that the system is all weighted only on individual contributions. In fact, it has evolved over the years as I described, and the Government has been doing a lot more to contribute our share in the CPF system to support those who are more disadvantaged.
We’ve been doing this consistently over the last 20 or 30 years, especially as we saw income gaps widening in our society. So we provide a whole range of different support. It’s not just the higher interest rates that are offered to every individual up to a certain threshold in their balances. We also do a lot more to support the disadvantaged groups.
We have Workfare for those who are working and in the lower-income groups. We provide CPF housing grants, where more is given to those with lower incomes. Recently, we introduced the ITE Progression Award for ITE (Institute of Technical Education) students and graduates because we know that when they start off, their wage salary scales are not as high as those with polytechnic diplomas or university degrees, and their wage trajectory also lags behind some of their peers. So we want to give them additional support.
So when you look at all of these amounts that we provide, for a young person entering the workforce today, by the time they are 65, through some of these schemes which I’ve just described, they would have received something like $150,000 in government support in their CPF. That’s a lot of money.
And we are not supporting only those who are young. That’s important, but we also look after the seniors because the seniors who are with us today may not have the chance to benefit from some of these improvements in the CPF system. They will not have sufficient runway.
So, some years back, we introduced Silver Support, which is another very critical pillar, that allows us to provide more help for those who have not had so much CPF contributions in their working lives. We give packages to certain groups of seniors. We have the Pioneer and Merdeka generation packages, providing a lot of help for their healthcare. And then more recently, we looked at the figures and the statistics, and we saw that even some young seniors may have difficulties meeting their retirement needs. And that’s why we introduced the Majulah Package, with a component that’s Earn and Save. So if you earn, you do your part, you are working, the Government will put something into your CPF to help boost your retirement savings. So these are ways in which we are helping all Singaporeans support their CPF, particularly the disadvantaged groups, both young and old.
And again, it reflects very importantly the social compact we want to have in Singapore, the society we want. We want to be able to lean forward to make the CPF system more progressive, to temper and reduce inequalities in our society, to have a fairer and a more inclusive society where no one is left behind, where everyone feels they are supported and we can all benefit from the nation’s progress.
Importantly, it’s not just the Government doing more, because we have always said that we want to be a society where we can support one another. We can have one another’s backs. So even in the CPF system, you can do this. We have the Matched Retirement Savings Scheme, where if someone were to contribute some amount to an elderly person’s retirement account, the Government will provide some matching grants. So the Government will be doing more, but we also want to encourage Singaporeans to do their part, and together we can help our fellow citizens, and we can move forward together as one people.
ZB: Most could probably understand the need to use CPF for healthcare, but how do you reconcile the tension between financing housing and accumulating enough for retirement?
PM Wong: Housing in some ways is also a form of assurance for one’s retirement, because to have your own home as you grow old, it’s a very important form of assurance for every family, and it also means you don’t have to pay rent, so you have security as you get older. So we don’t see housing as necessarily contradicting the needs for retirement.
Of course, we cannot overspend on housing either. That’s why within the CPF system, we have different accounts. Within the Ordinary Account which we use for housing, we also set some limits on how much CPF can be used for housing. And we have some safeguards. For example, the lease of the flat you buy should be sufficient to cover you for life. So we ensure that if you purchase a flat solely using your CPF savings, it will be a flat that will cover you for your lifetime. So these are some of the safeguards we put in place.
Importantly, when someone has a home and as they retire, they can also unlock the value of the flat, so the HDB flat can also be an important nest egg and some help for them during retirement. For seniors, when their children have grown up, got married, have a flat of their own, and they have an empty nest, some of them may feel the flat is too big, they can do right-sizing. And some seniors do that, and we have schemes and incentives for them, including the Silver Housing Bonus.
If they prefer to stay within their own flat, they can unlock the value through the Lease Buyback Scheme, and then they can continue staying in the flat for the rest of their life and still get something out of the flat for their retirement. In fact, some years back when I was at the Ministry of National Development, we were going out all over Singapore to explain some of these schemes to Singaporeans. We worked with Zaobao on some of these forums. And I think since then, understanding and appreciation of these schemes have improved, but I’m sure still more can be done. Because when we go around talking to residents, there are still many who don’t know what the Lease Buyback Scheme is about.
So we will continue our public education. We will continue to let people know what schemes are available. But the point is, we will ensure that the CPF system is sustainable and is able to meet these different needs. Medical, housing, but importantly, retirement needs.
ZB: What would you say to those who think “CPF is my money, why can’t I decide what to do with it?”?
PM Wong: For sure, it’s Singaporeans’ hard-earned savings. But we must remember, this is not just like savings in your own bank account. This is part of a national savings scheme, and there are many different stakeholders and parties contributing to the success of this scheme.
As I mentioned just now, it’s individuals, it’s employers, it’s the Government. And we are coming together as part of a compact to make sure that this scheme works not just for the individual, but also addresses important national objectives: looking after Singaporeans’ well-being, and ensuring everyone is able to buy their own home, gets looked after for healthcare, and importantly, has sufficient funding and savings for their retirement.
We understand individuals want more flexibility and we provide some flexibility. After all, if you believe that you can invest your CPF monies in a way that earns more than the Government’s risk-free return, you are free to do so. And we provide, for example, some allowance to use CPF for housing, even for your children’s education. So there is some flexibility provided, but we have to manage the amount of flexibility given. Because if there’s too much flexibility, and individuals were to withdraw all of their CPF prematurely and spend the money, then how will they have enough monies to look after their own retirement? And that’s the balance we have to strike.
Ultimately, we are trying to design a system that can cater to the diverse needs of Singaporeans, but would also serve the long-term interests of Singapore and Singaporeans. And I hope everyone can understand, as we go about doing this, our main objective is to ensure that we are able to safeguard and grow Singaporeans’ hard-earned savings, and help everyone have peace of mind when they retire and grow old.
ZB: Looking ahead, we can see that there are a lot of challenges, both internationally and also domestically. So, what would you say to Singaporeans who are worried about future changes in CPF that might affect their retirement plans?
PM Wong: We are very careful whenever we make changes to the CPF system. Any change to the CPF system that we put in place should enhance and improve Singaporeans’ retirement savings, not detract from it. So, each time we consider a change, we will think through very carefully. If there is some impact, we can do things like (spread) out the change. (For example) so that it doesn’t impact present groups, and it is introduced only for new cohorts, as we have done when we rolled out CPF Life. So, this will be the same attitude and approach we take each time we go about improving the CPF system.
As I said just now, the CPF system we have today is the result of continual enhancements. If we had taken the mindset (of), cannot change the CPF system at all, everything must be static, we would not have the CPF system today. But because we were able to improve, change, fine-tune, and each time we make a change, yes, there is some concern, there will be some groups who worry, but we understand that. We consult, we engage, and we bring everyone together to appreciate the benefits of the change. That’s how we have been able to get the CPF system to where it is today, a retirement system that is recognised as one of the best in Asia.
But we do not want to be complacent, we do not rest on our laurels. I think there will be new needs going out into the future, there will be more demands that Singaporeans may have, there may be longer lifespans, which we have to cater to. We will continue to study, review, and see how the system can be improved. But each time we make a change, we will engage widely and comprehensively, and we will ensure everybody comes along to buy into the change, and make sure that we all benefit from these changes.
ZB: What are the broad trends that may impact retirement plans and CPF changes?
PM Wong: The broad trends are things that all of us are concerned about already. Things like longer lifespans, ageing workforce, rapid technological advances, which will impact people’s jobs and ability to find jobs. So these are things that we have already identified.
A lot of these concerns were also raised when we had our Forward Singapore engagements. That’s why we have already been making changes in recent years. The Majulah Package arose from the Forward Singapore conversations. The Jobseeker Support scheme arose from those engagements as well. And we are continuing to see how we can improve our overall system, not just CPF itself, but the overall system to give Singaporeans a greater sense of assurance that their basic needs will be looked after throughout their life.
When we talk about CPF, it’s not just about CPF changes alone, because each time we improve job security, each time we enhance SkillsFuture, we are helping Singaporeans stay employed for longer. We are helping Singaporeans attain better jobs with better pay, and all this will eventually contribute to better retirement savings, which will help Singaporeans for their lifetimes.
ZB: With the volatile global climate, should Singaporeans be mindful of how it may affect investment returns which fundamentally support our CPF funds? Is that something the Government watches closely?
PM Wong: We have today a guaranteed risk-free return on CPF savings. And over the years, we have also enhanced the interest rate structure up to a certain threshold. The returns, everyone knows what they are now for the Ordinary Account, and for the Special and Retirement Accounts. They are guaranteed, they are risk-free. I think they are fair, and they are good returns that Singaporeans can enjoy, because you have a certain level of protection.
If Singaporeans desire higher returns, then there is flexibility for them to invest through the CPF Investment Scheme. But in finance, they say there is no free lunch, higher returns come with higher risk. And if you are prepared to take that higher risk, then you must also be prepared that financial markets are volatile. There will be ups, there will be downs, and you have to be prepared that if you make the wrong investment decisions, you could have a situation where your hard-earned investment monies go to a wrong investment decision, and then you end up with a big hole in your retirement plans. And that’s the current situation.
Some years back, we did think about putting in place a retirement investment scheme, which (we) can allow Singaporeans to opt into. You have to design the investment scheme carefully that will allow Singaporeans to not just pick their own stocks, but also invest in a fund which is properly managed, and then they can consider whether or not to choose such an investment fund for themselves. We have been studying that for some time. The challenge is – can such a fund produce returns that are better than the very generous, risk-free, guaranteed returns that the Government already provides, and would it still have some volatility, which would expose CPF members to financial market risk, especially when they retire? And this is quite a complex situation because each time we look at it, we are not very sure that we can design such a product that will provide certainty of greater returns while minimising the risk to Singaporeans. Because, like I said, in finance, higher risk comes with higher returns. So it’s something we are still studying. We are still thinking about whether there are design features we can put in place to offer such a product. And that’s something we will continue to keep in mind.
ZB: As part of our video series, we interviewed some seniors who had some burning questions on whether they can get their monthly payouts before age 65. What would you say to these seniors?
PM Wong: I can appreciate Singaporeans wanting to take their money out of CPF earlier, and they feel that this is their own savings. The challenge is Singaporeans are living longer, and you need your CPF money to last you for life. If you were to take the money out earlier and spend the money, then how are you going to assure yourself that you will have sufficient savings for your retirement for the next 20, 30, even 40 years? That’s our biggest concern, and that’s why we have put in place a system where you need to ensure at least a certain basic retirement sum for your retirement savings. Beyond that, yes, you can take money out, but please, let’s all agree, at least maintain that basic retirement sum for everyone, so that every Singaporean can be assured of some basic level of protection for their retirement.
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