SINGAPORE — Addressing a long-time bugbear against the Minimum Sum scheme, the advisory panel reviewing the Central Provident Fund (CPF) system has suggested locking in the quantum of increase to the Basic Retirement Sum early.

From 2017 to 2020, the hike each year should be 3 per cent, it suggested, to account for inflation and changes in household expenses. The quantum of increase should be reviewed every five to 10 years, said Professor Tan Chorh Chuan, who chairs the advisory panel.

By fixing the quantum of increase early, CPF members will have a greater sense of certainty about how much they have to set aside, the panel said.

Hikes under the present Minimum Sum scheme, in contrast, were announced annually because they are pegged to the previous year’s inflation rates, leading CPF members to complain about what they feel is the “shifting goalposts” nature of increases.

In deciding the 3 per cent rate, the panel referred to average inflation rates over 20 years — 1.9 per cent for all-items inflation and 1.7 per cent for core inflation, which excludes private road transportation and accommodation). It also took into account the 5 per cent annual spending increase for lower-middle retiree households over the last decade.

The recommended 3 per cent increase is significantly lower than the average hike of 6 per cent annually to the Minimum Sum since 2003, said the panel.

“The panel felt that using a long-term inflation rate was more appropriate, given the long duration over which the monthly payouts would be made. It would allow for the adjustments to the Basic Retirement Sum to be made known ahead of time and also avoid significant year-to-year variations to the Basic Retirement Sum, which would be difficult to plan for,” it added.

The increase in the Minimum Sum this year, to S$161,000, is the final adjustment to meet the target of S$120,000 in 2003 dollars.

In his National Day Rally speech last year, Prime Minister Lee Hsien Loong said he did not see a need for any more major increases to the Minimum Sum beyond this increase, although it will be adjusted from time to time to take into account rising incomes, increased spending and longer lifespans.

The panel said it expects seven in 10 of those turning 55 in 2020 to be able to meet the Basic Retirement Sum — currently set at S$80,500 for next year. XUE JIANYUE