The DPM and Finance Minister has laid out the key thrusts for the Government in his Budget statement. My speech will focus on retirement adequacy and the CPF scheme in particular.
The CPF scheme has a long history in Singapore that pre-dates our independence. The Central Provident Fund Bill was introduced by the Singapore Progressive Party in the Legislative Council in 1951, while Singapore was still a British Colony. The CPF scheme provides a mandatory retirement savings plan for local workers. It is a “defined contribution” scheme, whereby every member takes out only what he has contributed. This has helped the Government avoid the heavy burden of Budget-financed pension liabilities that many other countries face.
While CPF provides a basic payout for retirees, it does not assure full retirement adequacy, particularly for those in the lowest income groups, including home-makers and people with disabilities.
The Minimum Sum requirement, which has been renamed to “Retirement Sum” by the CPF Advisory Panel, was introduced in 1987. It prevents CPF members from withdrawing their entire CPF savings in one lump sum when they retire. They are only allowed to withdraw amounts in excess of the Minimum Sum, plus another $5,000, at age 55.
This has been deeply unpopular among many Singaporeans. Many feel that since the money in our CPF accounts belongs to us, why should the Government control when and how much we can withdraw? “We’re not children after all,” some would say. A recent poll by Channel NewsAsia found that the majority of respondents would like a choice to withdraw all of their CPF money at age 55.
I empathise and identify with these sentiments. I too would like to be able to withdraw all my CPF when I turn 55. Apart from paying off day-to-day expenses, I feel confident of being able to manage my own money well and not squander it. However, the reality for me, and I think many other working Singaporeans, is that if not for the forced savings that CPF has imposed, we would probably have saved much less for retirement.
As pointed out by Mr Donald Low from the LKY School of Public Policy in a commentary in The Straits Times last week, faced with a choice between an immediate reward and a larger delayed benefit, people often choose the former.
Also, even if CPF members make an effort to invest their retirement savings after they are withdrawn, not many have investment skills that are good enough to consistently beat the current 4% CPF Retirement Account interest rate in the long term.
We also have to be on guard against swindlers who will try to find ways to persuade vulnerable elderly folks to part with their CPF money if they withdraw the full amount at one go.
Therefore, while we understand Singaporeans’ strong sentiments about the Minimum Sum “locking up” our CPF money, for the reasons I just mentioned, the Workers’ Party is not asking for CPF members to be allowed to withdraw all their CPF money in a lump sum, except under special circumstances.
Flexibility in Draw-Down Age
Having said that, there is still room for providing CPF members with more flexibility in determining when to start receiving monthly payouts from their CPF. Currently, members can start drawing down their CPF only upon reaching their Draw Down Age, now known as the Payout Eligibility Age, which will be 65 from 2018 onwards.
Some CPF members may have genuine reasons for needing monthly payouts to start earlier than age 65. For example, they may have been retrenched and, because of a skills mismatch or age discrimination, may not be able to secure another job. Or they may be labourers who are simply be too old to do manual work. When I observed the young men who helped me move the heavy furniture in my home recently, I wondered how long they would be able to continue in that role, and what jobs they would do once they are not strong enough to carry such heavy loads.
The Workers’ Party therefore proposes lowering the Payout Eligibility Age to 60. This will give CPF members the flexibility to start receiving CPF monthly payouts earlier, if they need to, instead of having to wait until age 65. This was a call made by my colleague, the Member for Hougang, Mr Png Eng Huat, in May 2014.
I agree with the CPF Advisory Panel’s recommendation to give members flexibility to defer their Payout Start Age to as late as 70, with a permanent 6 to 7% increase in monthly payouts for every year that they defer. In line with this, under the Workers’ Party’s proposal, there would be a permanent 6 to 7% decrease in payouts for every year that members choose to bring forward their Payout Start Age. Members must be made aware that their monthly payouts could be significantly less should they choose this early payout option.
De-link Payout Eligibility Age from Retirement / Re-employment Age
Many Singaporeans have expressed frustration about the constantly increasing Payout Eligibility Age. It is was 63 last year, 64 this year and will be 65 in 2018. It seems to be moving up together with the Re-employment Age. Perhaps it is assumed that people are able to work until the Re-employment Age and do not need to draw down their CPF savings before that.
However, just because the Re-employment Age has been raised does not mean that everyone will be able to work until 65, as I explained earlier. Furthermore, the statutory Retirement Age is now only 62. This leaves a gap of 3 years that a retiree will have to tide over, should his company not offer him re-employment until 65.
I would like to reiterate the Workers’ Party’s earlier calls for the Payout Eligibility Age to be de-linked from either the Retirement Age or the Re-employment Age. Even if the Retirement Age is increased, the Payout Eligibility Age should remain constant at 60. This will provide members with more assurance of when they are eligible to start drawing from their CPF, regardless of their employment status, instead of wondering when the target will move again.
Public education on CPF system
Madam, I would like to touch on the public education aspects of the CPF scheme. The CPF Scheme is not easy to understand, regardless of one’s level of education. The large amount of technical jargon, acronyms, figures and different conditions that apply to people with different birth years, all add to the confusion.
There is a pressing need to increase and improve public education about the CPF scheme. The CPF Advisory Panel has also recommended that more public education on CPF is needed.
A recent poll by REACH, the government feedback unit, found that only 13% of respondents under 55 were able to provide the estimated monthly payout amount under CPF LIFE if one met the Minimum Sum requirement. With greater choices provided in the CPF scheme, it is important that CPF members are fully aware of the implications of their choices, including the lower payouts if they choose to start withdrawals earlier or withdraw a lump sum.
I am aware that there are many ways in which CPF Board tries to get its message out, including pamphlets, public seminars and even advertisements on YouTube. However, none of these ensures that a CPF member is fully aware of the choices he has to make at critical junctures, like at age 55 and 65. A letter is sent to CPF members just 1 to 2 months before they turn 55, to inform them that they can apply to withdraw their CPF. This may not give them enough time and information to consider their choices carefully.
My observation is that public education on CPF currently focuses a lot on how CPF benefits Singaporeans, or to clarify misunderstandings about CPF. The questions asked in the REACH poll are quite telling. They include questions like “If you do not meet your Minimum Sum requirement, do you need to top up the shortfall in cash?” and “Do you think you will receive a monthly payout from age 65 if you do not meet the full Minimum Sum?”
Public education on CPF should be more tailored to individual members, focusing on the information and numbers that are directly relevant to them and the choices they have to make. We should not confuse people with numbers that are irrelevant to them, like the different Minimum Sum amounts and Draw-Down Ages for different age groups. While the CPF website has a number of useful calculators, not every retiree is technically-savvy enough to access and use them correctly.
I would therefore like to suggest that before reaching the age of 55, every CPF member should be invited to meet one-on-one with a CPF Board officer, who should explain the details of the scheme, including how much he has in his account, how much he can withdraw, when he can withdraw, the choices of CPF LIFE plans and what his monthly payouts will be. This should be conducted in a language or dialect that he is comfortable with, and he should be allowed to bring a few family members to the meeting. It should be done at least a 3 months before the member becomes eligible to withdraw his CPF.
This personalised meeting should be done on top of the public seminars that are available to CPF members. It will provide a channel for important information to be explained personally to the member and to give him an opportunity to seek clarifications from the officer.
Silver Support Scheme
The last matter I wish to raise concerns the Silver Support Scheme. While CPF payouts are usually enough to meet the retirement needs of seniors who have the Full Retirement Sum or more at retirement, there is a sizeable number of Singaporeans whose CPF payouts are insufficient to meet basic household expenditure.
The solution for these individuals cannot be to postpone their CPF withdrawals or place further restrictions on their use of CPF and Medisave. This will only exacerbate their difficult financial situation. I am glad the Government has finally acknowledged that individual responsibility through the CPF system has its limits, and that it is time to provide a form of old age support for needy senior citizens.
While the details of the Silver Support Scheme are still being worked out, I would like to make some remarks on the scheme based on what the Finance Minister has announced.
First, the Silver Support quantum seems rather low, ranging from $100 to $250 per month. This is much lower than what even the poorest 20% of households spend each month on basic household necessities, which is $761 per month for all households and $317 per month for retiree households, according to last year’s Household Expenditure Survey.
Can the DPM share his basis for deriving the Silver Support quantum? Does it look at household expenditure, and does it assume that all retirees receive additional forms of income like children’s contributions?
Given the increasing cost of living in Singapore, I urge the Government to ensure that Silver Support is enough to cover retirees’ basic household expenses and that it also increases over time to account for inflation.
Second, while I agree that the Silver Support Scheme should provide targeted support, the evaluation criteria should take into account the current financial situation of the seniors and should not be so stringent that genuine cases end up being excluded. In particular, the “household support” criteria must not deny Silver Support to seniors whose children are unable to support them or whom they are estranged from. Needy seniors should not have to suffer for their children’s inability or unwillingness to support them.
My third request on Silver Support is that it should be paid out monthly instead of quarterly. Silver Support recipients are not working and receiving a salary, unlike Workfare recipients, yet they still have monthly household expenses like bills, food, transport and rental. A monthly payout would help seniors in their cash flow management.
Madam, in summary, I would like to reiterate the four main proposals in my speech:
First, more flexibility should be given to CPF members to start receiving CPF payouts as early as age 60, if they need to, so as to help those who are not able to find work at that age. Second, the CPF Payout Eligibility Age should be de-linked from the Retirement or Re-employment Age, to provide more certainty for seniors.
Third, personalised public education should be conducted for all CPF members, in their preferred language or dialect, well in advance of their 55th birthday, so as to give them more time to consider their options and discuss with family members. And fourth, the basis for calculating the Silver Support quantum should be made public and it should take into account the current financial situation of seniors to ensure that the needy are not excluded. It should also be paid out monthly instead of quarterly.
 CPF Advisory Panel Report, Chapter 2, p.8, point 28.
 Household Expenditure Survey 2014, Table 23.
 Household Expenditure Survey 2014, Table 47.