Experts worried about retirees squandering CPF monies

SINGAPORE — While they acknowledged the need to provide flexibility in Central Provident Fund (CPF) withdrawals, especially for those who need cash for necessities, experts cautioned that allowing lump-sum withdrawals — albeit with limits — could lead to members squandering their retirement savings.

This concern was echoed by several Members of Parliament (MPs), although they said, given the desire for greater control over their CPF monies, the Government must trust CPF members to use their savings wisely.

To mitigate the risk of squandered monies, they suggested that withdrawals be limited to specific groups, allowed only on a case-by-case basis, be subject to caps and permitted only after counselling.

On Sunday, Prime Minister Lee Hsien Loong announced at the National Day Rally that CPF members would be allowed to withdraw part of their CPF savings in a lump sum when they need to, subject to limits and only during retirement.

Mr Alfred Chia, chief executive officer of financial advisory firm SingCapital, said the withdrawals could be done on a case-by-case basis.

“Before they do the withdrawal, the CPF Board can actually consider (doing) counselling, to understand what they need the funds for, and remind them of the importance of retirement funding,” he said, adding that applicants could be assessed based on their household income.

Mr Christopher Tan, CEO of financial advisory firm Providend, was “not very comfortable” with allowing lump-sum withdrawals, arguing that it would result in smaller payouts thereafter. “I let you take out, for example, S$10,000, S$20,000, and you are left with only a bit, (then) the CPF LIFE annuity (scheme) doesn’t make sense any more,” he said.

For those in dire need of money, he suggested there be guidelines to regulate such withdrawals, taking into account the minimum amount needed to provide for basic needs and the circumstances for withdrawal.

“If you really have no choice, and you are going to die without withdrawing, then we have no choice but to give it to them,” said Mr Tan, adding that this group is likely to depend on government welfare once the lump sum runs out.

MPs TODAY spoke to noted that CPF members have been asking to be given greater control over their CPF savings. The Government has to find a “judicious balance” between ensuring sufficient funds for members’ retirement and allowing them to enjoy the fruits of their labour, said Mr Zainudin Nordin, an MP for Bishan-Toa Payoh, who also chairs the Government Parliamentary Committee for Manpower.

The move is a major shift in CPF policy, but such a shift cannot be taken to the extreme, he added. In giving members greater control, he pointed out, more efforts need to be made to educate Singaporeans and help them become more financially-savvy — a view also held by other MPs and experts.

Ms Foo Mee Har, an MP for West Coast, said the Government’s decision to respond to public calls reflects a maturing society.

She felt the option should be given to all retiring CPF members, not only those in need. There could be members who want to fulfil personal goals or invest the sum withdrawn for potentially higher returns, she said.

The Government, she added, could encourage saving by allowing members the option to top-up beyond the Minimum Sum, increasing their CPF Life payouts.