CPF system constantly enhanced for more retirement assurance

We refer to Mr Geoffrey Kung’s letter “CPF system still flawed despite new proposals” (Aug 11).

The Government has been improving the Central Provident Fund system continually to help Singaporeans meet their basic retirement needs, recognising that they will live longer.

Among Singaporeans aged 65 today, half will live past age 85, and a third will live past age 90.

CPF Life was introduced in 2009 to help the increasing number of Singaporeans who will live longer, by giving them payouts for life. Since then, more than 89,000 members have joined CPF Life voluntarily. It will become the retirement scheme for the majority of CPF members turning 55 from 2013 onwards.

We have progressively enabled Singaporeans to save more through CPF. The salary ceiling — the maximum monthly salary that is subject to CPF contributions — has been raised from S$5,000 to S$6,000.

We have raised the contribution rates for workers aged 50 to 55 to the same level as those for younger workers.

To help lower-wage workers save more for retirement, we have provided them with CPF top-ups through the Workfare Income Supplement Scheme.

We have also improved the returns on CPF savings. Members aged 55 and above now earn an extra 1 per cent interest on the first S$30,000 of their CPF balances, on top of the 1 per cent extra interest on the first S$60,000 of CPF balances for all members.

Mr Kung stated incorrectly that CPF Life provides a return of 3.5 per cent per annum. CPF savings that are used to buy a CPF Life plan receive the current CPF interest rate floor of 4 per cent and the extra interest rates of up to 2 per cent. This will increase the member’s payouts.

Recently, the CPF Advisory Panel recommended the introduction of a CPF Life plan with a lower starting payout that increases at 2 per cent annually. This will provide more choice for members. It is in addition to the current CPF Life Standard and Basic plans and does not replace them.

The Government remains committed to continually enhancing the CPF system so we can better help Singaporeans prepare for their retirement.