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CPF Minimum Sum could differ, based on needs

SINGAPORE — Having different Minimum Sums for different groups of people is among the ideas being studied by the panel reviewing the Central Provident Fund (CPF) scheme to ensure it better caters to the needs of various groups.

CPF Building at 79, Robinson Road. Photo: Ernest Chua

CPF Building at 79, Robinson Road. Photo: Ernest Chua

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SINGAPORE — Having different Minimum Sums for different groups of people is among the ideas being studied by the panel reviewing the Central Provident Fund (CPF) scheme to ensure it better caters to the needs of various groups.

Speaking in an interview capping off the work of his ministry this year, Manpower Minister Tan Chuan-Jin said the fundamental role of the CPF has not changed: To provide for one’s financial adequacy for healthcare and housing during one’s retirement years.

The key, he said, is to establish how much flexibility to work into the system and whether more options can be provided. But he also warned that having more options would make the system more complicated.

The Minimum Sum is the amount one sets aside upon reaching age 55 to ensure some regular income upon retirement at 65. It now stands at S$155,000. It will be adjusted to S$161,000 in July next year.

Currently, if one is unable to set aside the full amount in cash, his property — bought with his CPF savings — will be automatically pledged, for up to half of the Minimum Sum.

Moving forward, how much Minimum Sum one sets aside may depend on the payout he wants. Mr Tan said: “We should be focused more on the payouts. At the end of the day, it is: What is the level of payout that we want? If we are happy with X amount being streamed out on a monthly basis, then obviously if we feel that that’s the amount that we need to provide for, whether our basic needs or enhanced needs, that amount will then obviously need to be tied to a certain amount that you need to accumulate because that’s how it works.”

Another possibility being looked at is a stream of payouts that get higher as the years go by to combat the effects of inflation.

The panel reviewing the CPF was set up in September, after intense public debate earlier in the year over the scheme. The panel’s scope of study covered four areas: How the CPF Minimum Sum should be adjusted beyond next year; how to enable CPF members to withdraw more as a lump sum upon retirement and the circumstances for doing so; how to allow CPF members to receive lower payouts initially with increases over time; as well as how to provide more flexibility for those who wish to take greater risks and seek higher returns through private investment plans and who wish to invest in private annuities instead of CPF LIFE.

The panel is expected to submit its preliminary recommendations to the Government by February next year.

In the interview, Mr Tan said the changes could mean different payout levels for different people. But those who need higher payouts in their later years are the vulnerable ones, who are also often the ones who need a higher lump sum payout when they hit 55. “For those who are all right, who have other savings and so on, perhaps it’s not such a huge concern. But for those who are perhaps less provided for in different ways, it has a very real impact because it does mean that your payment, your payout, on a monthly basis is reduced. So that’s not trivial.”

On the labour front, the minister said it has been a relatively good year for Singapore, with positive business sentiment and an employment rate close to 80 per cent. The local labour force participation rate has also gone up thanks to more older workers and women back at work, but this may have negated efforts to raise productivity. “What it means is that I (employers) am able to find more bodies coming in to do the things I need to do, instead of perhaps really revamping the way I do business and becoming a lot more productive,” he said.

With the overall labour pool set to decline, there is still the need to power on with productivity measures such as automation, re-engineering processes and re-skilling the workforce.

“It’s not just about having fewer foreign workers. It’s also about being leaner in operations because the reality is even your own local labour market is going to be small,” he said.

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