Tweaks to CPF – more flexibility

The Business Times
View From The Top
Published: 16th Feb 2015

Do the proposed Central Provident Fund changes go far enough to address the issue of retirement adequacy?
Are there any other measures that should be considered?

OVERALL, the proposed changes still encourage prudence while offering greater flexibility and choice for CPF members. This is a positive development as it takes into account the fact that each individual will have a different financial background and varying financial needs at retirement.

The introduction of the Basic Retirement Sum of S$80,500 required at 55 is also more realistic and attainable for the average Singaporean than the previous Minimum Sum of S$161,000. These are good strides forward but more can always be done to address the issue of retirement adequacy, which is a key concern weighing on Singaporeans’ minds.

Building on the proposal that allows CPF members to be able to withdraw up to 20 per cent of their Retirement Account savings at age 65, perhaps the government can provide incentives to encourage members not to make the withdrawal, such as offering a higher interest rate on this amount if kept intact. Keeping their retirement savings intact will ensure that the amount of members’ monthly payouts will not be reduced later on.

The seniors are a particularly vulnerable group and in tandem with the government trying to encourage more mature workers to return to the workforce, another proposal could be to level up the total CPF contribution rates of workers above 55 years of age, as it will help shore up their Retirement Accounts. Aside from these systemic CPF changes, I would also like to propose that the government explore how it can educate the masses on financial literacy. Most of us know that CPF savings alone will not be enough to tide people through their golden years. Beyond relying on mandated CPF savings, I believe that each individual should learn to take personal responsibility for their financial situations and look to complement their CPF funds by accumulating other savings and investments in order to enhance retirement adequacy.

Ronald Lee
Managing Director
PrimeStaff Management Services Pte Ltd

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