Govt ready to be flexible with CPF on case-by-case basis

SINGAPORE — Responding to calls from Members of Parliament to allow greater flexibility for workers to use their Central Provident Fund (CPF) savings, for example, to repay housing loans, Manpower Minister Tan Chuan-Jin yesterday said the Government is ready to exercise flexibility on a case-by-case basis.

However, he rejected a suggestion from Tampines GRC Member of Parliament (MP) Irene Ng to make it automatic for lower-income CPF members who do not meet the Minimum Sum when they turn 55 to continue using their CPF for housing loans without interruption.

“Some of these members would be able to service their housing loans using cash, instead of drawing upon their Retirement Account savings and hence compromising the monthly payout in retirement,” Mr Tan said.

“We also do not want ... to encourage rash and imprudent housing purchases by members who think that they can automatically draw-down fully on their Retirement Account funds to service their loans,” he added.

Among the 11 MPs who filed questions on the CPF system or rose to ask supplementary questions after Mr Tan and Deputy Prime Minister Tharman Shanmugaratnam had spoken on the subject, five had asked the Government to allow greater flexibility on the use of CPF.

Mr Tan assured the MPs that the Government has exercised flexibility where a case merits it. For instance, it has allowed CPF members to use part of their Retirement Account savings for housing even when they do not have the Minimum Sum.

The authorities receive an average of about 500 appeals annually from CPF members 55 years and older who ask to use more of their Retirement Account savings for housing. About two-thirds are approved.

The number of such appeals is not large, considering there are more than 60,000 CPF members turning 55 every year, Mr Tan said.

He added that the Government is ready to exercise flexibility in the use of CPF for housing after the age of 55, “because we recognise that helping members maintain a roof over their heads is an important part of our overall retirement adequacy goals”, he said.

While the system does afford a certain level of flexibility, there is a trade-off, Mr Tan noted.

The Minimum Sum is meant to provide what is regarded as the basic requirements for a couple at a level slightly lower than middle-income. “The more flexibility we allow, the more we deplete the CPF account. What it means is the monthly stream ... for individuals would be reduced,” he said.

Mr Tan assured the House that various measures are in place to help those in need. For example, the Housing and Development Board may reduce or defer mortgage instalments for a period of time, or work out instalment plans for owners to repay arrears. It may also suggest renting out spare bedrooms or including children as joint owners to help service loans.

“Ultimately, if all these things don’t quite work out and families are in difficulties, that’s where the social safety nets come in.”

On the CPF draw-down age, Mr Tan said the Government is studying the issue of whether it should be increased further when the re-employment age is raised. The draw-down age is now 63 and will be raised to 65 by 2018.

“Whether it needs to be raised further will depend on life expectancy and the need to maintain retirement payouts at a reasonable level. We have not reached any conclusions yet.”

The Government’s focus over the next few years will be on helping CPF members cope with the rising cost of living during their retirement years and helping low-wage workers, who may have accumulated lower CPF balances over their working lives, Mr Tan said.