Still confused over CPF payout age? The Manpower Minister seeks to clear the air

SINGAPORE — Clearing the air on the debate sparked by an online post on Central Provident Fund (CPF) payouts, Manpower Minister Josephine Teo stressed that there is “no advantage” for CPF Board or the Government to want members to defer payouts.

This was after a viral Jan 15 Facebook post claimed that the Government had “quietly” shifted the CPF retirement payout age from 65 to 70 years old.

Mrs Teo also acknowledged in Parliament that there was “much room for improvement” in the way the CPF Board had communicated the issue of starting payouts. As such, the Board will step up its outreach efforts and review the letters sent to members who are approaching their payout eligibility age “to avoid misunderstandings which confused members unnecessarily”.

Mrs Teo was responding to Members of Parliament (MPs) Foo Mee Har, Cheryl Chan and Liang Eng Hwa on whether CPF information could be better related to the public.

Other MPs, including opposition member Png Eng Huat, also asked why CPF payouts were not automatically handed out at 65 and if the Board would amend its policy to simplify the activation process.

The default payout age for CPF had been pegged at 70, instead of the eligibility age of 65, as it did not want to assume that every member wants to start their retirement payouts early since there are “tangible benefits” for deferment, said Mrs Teo.

As of January last year, the latest payout start age was set at 70 following an amendment to the CPF Act in October 2016 to curb the “unsatisfactory” practice of CPF members leaving their savings untouched in their CPF accounts till they die, Mrs Teo added.

She also weighed in on the “spurious” Facebook post, which showed a letter sent by the CPF Board to members who are approaching 65 stating that no action was required if they wished to start their payouts at 70 — raising questions if the payout age had been shifted.

Mrs Teo noted that the CPF Board administers “quite a wide range” of government schemes including Medisave, Silver Support and Workfare Income Supplement and sends out about 220 types of letters. “Obviously, some of them have a risk of being not entirely clear,” she added.

She also admitted that there could be a percentage of CPF members who may be facing financial hardships who may not have known that they could have started payouts before 70 and thus did not instruct the CPF Board to do so.

As of the end of 2017, six in 10 members who came under the CPF’s older Retirement Sum Scheme (RSS) and reached 65 years old that year did not start their payouts. For those who reached 70, about half have not come forward to start their retirement payouts.

Mountbatten MP Lim Biow Chuan said on Monday that these statistics were an “area of concern”.

“Could it be that a large number of these CPF members may not do anything about it because they don’t know the procedure or they have forgotten about the need to apply to withdraw their CPF savings?” he asked.

“We need to assure every member that the CPF Board will be able to honour every request to withdraw their CPF savings when it is due for payment... this is about preserving the good faith and trust in CPF Board.”

In response, Mrs Teo said that “serious thought” was given to the possibility of shifting the automatic start age to 65, but that there were several concerns.

There will be a group who are aware of the benefits of payout deferral but forget to instruct CPF Board to do so, while another group who do not need the payouts yet may not be aware of the benefits. The latter could grow over time as Singapore’s employment rate for those between the age of 65 and 69 is at more than 40 per cent, said Mrs Teo.

“Both groups may not be so happy that the CPF Board made an assumption to start the payouts that deprive them of the benefits if we were indeed to have such a mechanical approach as well,” she said.

Another concern was the possibility of confusing even more CPF members with another change, she added.

“I suggest that we focus on improving the communication for the policies as it currently stands.”

FOUR QUESTIONS ON CPF: MANPOWER MINISTER CLEARS THE AIR

1. Does the CPF Board require members to come forward to start payouts?

Yes, but this is not a recent change. Mrs Teo said it has been a “longstanding” practice for members to trigger payouts “at any time” after they reach 65 as the Government felt members were “in the best position” to decide when they would need it based on their individual circumstances.

“All members can start their payouts any time after (they turn 65) by issuing a simple instruction to CPF Board. This has not changed,” she said.

2. Why not start payouts automatically at age 65?

For every year CPF members defer their payouts, they stand to earn “risk-free” interest of up to 6 per cent a year — a rate that is “well above” interest rates in the market, Mrs Teo said.

For members on the CPF annuity scheme with increasing payouts, CPF Life, their benefits could be even greater at up to 7 per cent more in payouts for every year deferred. This means that members who defer their payouts for five years would get up to 35 per cent more in the quantum of payouts, she said.

3. Why start payouts automatically at 70?

In the past, RSS members who did not instruct CPF Board to start their payouts could end up keeping their savings untouched in their CPF accounts for years even when they were already eligible for payouts. In 2016, the Government introduced a latest payout start age of 70 for members turning 70 from 2018. This was to ensure that all CPF members would get to enjoy their CPF savings by 70 at the latest, even if they had not applied to start payouts.

4. Do members of CPF Life have to come forward to activate their payouts?

Yes and no. For members who joined CPF Life before July 2015, payouts would be automatically triggered when they turn 65, unless otherwise instructed. About 35,000 CPF Life members have already started receiving their payouts upon reaching their payout eligibility age by end 2018, Mrs Teo said.

However, those who joined after July 2015 would have to instruct the CPF Board when they would like to start their payouts after turning 65.

Due to each CPF members’ particular circumstances, Mrs Teo said the exact payout application process and letters sent to members “may vary” so members “should not rely on letters sent to others”.