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Govt review on CPF’s Retirement Sum Scheme payout rules to be completed by end-2019: MOM

SINGAPORE — The Ministry of Manpower (MOM) and the Central Provident Fund (CPF) Board are reviewing the Retirement Sum Scheme (RSS) payout rules for senior Singaporeans, after receiving some feedback that the current payout duration up to the age of 95 is “too long”.

The Ministry of Manpower said that rising life expectancy over the years has increased the risk of Central Provident Fund members outliving their payouts under the Retirement Sum Scheme.

The Ministry of Manpower said that rising life expectancy over the years has increased the risk of Central Provident Fund members outliving their payouts under the Retirement Sum Scheme.

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SINGAPORE — The Ministry of Manpower (MOM) and the Central Provident Fund (CPF) Board are reviewing the Retirement Sum Scheme (RSS) payout rules for senior Singaporeans, after receiving some feedback that the current payout duration up to the age of 95 is “too long”.

MOM said in its written response to a parliamentary question from Ms Foo Mee Har on Monday (Oct 7) that it expects the review to be completed by the end of the year, with the outcome to be announced after that.

Ms Foo, who is Member of Parliament for West Coast Group Representation Constituency, had asked whether the CPF Board will consider reviewing the payout duration of the scheme “such that CPF members can receive higher payouts”.

WHAT IS THE RSS?

The RSS is the main retirement payout scheme for CPF members who were born before 1958, and it kicks in when they reach the age of 65.

Taking into account the 4 per cent base interest rate on the CPF Retirement Account savings, the scheme is designed to provide members with monthly payouts for 20 years, or until their Retirement Account balance is exhausted.

MOM noted in its response that rising life expectancy over the years has increased the risk of members outliving their payouts.

“In 2018, more than half of Singapore residents aged 65 were expected to live beyond age 85, and about one in five were expected to live past age 95,” it said.

Consequently, the ministry said that Extra Interest and Additional Extra Interest were introduced by the Government in 2008 and 2016 respectively.

The CPF website states that an extra one percentage point of interest a year is now paid on the first S$60,000 of a member’s combined balances from their Ordinary Account, Special Account, Medisave Account and Retirement Account.

For CPF members who are aged 55 and above, an additional one percentage point of interest a year will be paid on the first S$30,000 of their combined balances. This is paid over and above the earlier extra interest.

MOM said that doing so allows the scheme's payout duration to be extended beyond 20 years, which “reduces the risk of members running out of savings in old age”.

“Even with the extension, the CPF Board ensures that RSS payouts do not stretch beyond age 95,” MOM said.

However, the ministry said that it had received feedback from “some members” who felt that a payout duration up to the age of 95 is too long.

MOM said that the ongoing review of the scheme's payout rules will “consider how to address this concern”.

In 2009, the CPF Lifelong Income For the Elderly (Life) was introduced to provide members with a monthly income for as long as they live.

CPF Life is optional for members under RSS, who can apply to join CPF Life anytime between their payout eligibility age and before they turn 80 years old.

In February this year, Manpower Minister Josephine Teo told Parliament that about 92,500 members under RSS have taken up CPF Life voluntarily.

GIVE OPTIONS TO CPF MEMBERS

Ms Joanne Chua, a financial services consultant with Manulife Financial Advisers, said that Singaporeans’ longer life expectancy is a “real and immediate concern” for both the Government and citizens alike.

She told TODAY: "(It would be) good to give each member the choice to choose their start and end of payout duration such as till 80, 85, 90 or lifetime.”

However, Ms Viviena Chin, the chief executive officer of Eternal Financial Advisory, said that it would not be practical to shift the payout age of 65 to a later age.

“The current retirement age of 65… is a good age for the member to enjoy the fruit of their labour and receive their payout, instead of having it much later when they may not have the life to enjoy it when they are ill or if premature death were to occur.”

On whether it would be better to shorten the payout duration, she said that it depends on the individual.

Shorter durations with higher payouts certainly would help ease monthly spending such as cost of living and medical expenses, she said. However, a shorter duration might also mean that a member may not have enough savings to take them through their “golden age” if they were to live longer.

“One mustn’t be depending on just the scheme for the retirement funding. They must save or set aside or start planning to supplement their retirement funding,” she said.

Financial consultant Damian Pang agreed on the importance to review the RSS to ensure older Singaporeans are adequately covered. However, he similarly suggested that it may not be wise to compulsorily move the eligible payout age to a later age as it would likely upset CPF members on the scheme.

Mr Pang, who specialises in retirement planning, said: “The issue is that some people may need the money now.” 

A good compromise is to provide options to them, he added, suggesting that the CPF Board could offer various choices for members and spell out the potential consequence for each choice.

The first scenario, he said, would see no change in the way CPF members get their payouts from the RSS.

Other scenarios could see members either voluntarily choosing to delay the withdrawal of their payout, or opting to end it earlier.

Mr Pang also suggested that members should be allowed to amend their choice once, in the event they realise that they made the wrong choice or if their circumstances in life change.

“Different people have different opinions on retirement. Some will say, ‘I may not live so long.’ Some worry that they will live too long. Let the adults make an informed decision and choose their options. I think people will be happier,” he said.

Related topics

retirement age cpf MOM Parliament

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