Wednesday, 6 November 2013

CPF: One of the World's Top 10 Pension System


Update 23 June 2014: CPF money 100% safe: Lim Swee Say
"(The) money with CPF... was not only safe, but continued to earn risk-free interest," Mr Lim told reporters on the sidelines of a mock parliamentary debate session for students at The Arts House. -- ST PHOTO: DESMOND WEE

Minister in the Prime Minister's Office Lim Swee Say yesterday assured Singaporeans that their money in the Central Provident Fund (CPF) was "100 per cent safe".

While many investments had been lost during the global financial crisis, he pointed out, CPF had still continued to earn interest then.

"(The) money with CPF... was not only safe, but continued to earn risk-free interest," he told reporters on the sidelines of a mock parliamentary debate session for students at The Arts House.read more

Use less CPF money to prepare for retirement: labour chief

The best way for Singaporeans to prepare for retirement is to use less of their Central Provident Fund (CPF) money when they are young.


Minister in the Prime Minister's Office Lim Swee Say said this will ensure the current level of CPF payout can be maintained over time, and not be eroded by inflation.

Mr Lim, who is also the labour chief, made that point when speaking to reporters on the sidelines of the closing of the Singapore Model Parliament on Sunday.read more

Prepare for retirement ‘by using less CPF money when young’


The best way for Singaporeans to prepare for retirement is to use less of their Central Provident Fund (CPF) money when they are young. Mr Lim Swee Say, Minister in the Prime Minister’s Office, said this will ensure the current level of CPF payout can be maintained over time and not be eroded by inflation.

Mr Lim, who is also the labour chief, made that point when speaking to reporters on the sidelines of the closing of the Singapore Model Parliament yesterday.

At the event, Mr Lim shared his experience with students when he was a Member of Parliament (MP) debating policies at the old Parliament House. One policy that has received much attention recently is the CPF.read more

CPF Minimum Sum to be raised to $155,000 from July 1

The CPF minimum sum will be raised to S$155,000 for those who turn 55 between July 1 this year and June 30 next year, the CPF Board and the Ministry of Manpower (MOM) announced in a statement today (May 8). This is S$7,000 more than last year’s minimum sum of S$148,000.

“To cater to Singaporeans’ rising expectations of what is considered a basic standard of living in retirement, the CPF minimum sum has been increasing for each group of members turning 55 yearly, to reach a target of $120,000 (in 2003 dollars) by 2015. In order to maintain its real value over time, the minimum sum increases to account for inflation,” said the CPF Board and MOM.

From July 1, the Medisave Minimum Sum will also be raised to S$43,500 from S$40,500, while the Medisave Contribution Ceiling will be increased correspondingly to S$48,500, from S$45,500.


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PAP Government raised CPF minimum sum by 4.73 percent to S$155,000 wef 1st July 2014 to account for inflation
Question: Singapore's actual annual inflation rate averages 6% over the past five years?

Ministry of Manpower (MOM) has just announced that the minimum sum that will apply to CPF members who turn 55 between 1 July 2014 and 30 June 2015 will be increased to $155,000 from $148,000. This will be set aside in their Retirement Account using savings from their Special, and then Ordinary Accounts. (press release) The Minimum Sum for CPF members who turn 55 before 1 July 2014 remains unchanged.

The ministry explains that the increase in the minimum sum is to maintain its real value over time, accounting for inflation. Along with the change in the minimum sum, from 1 July 2014: 
The Medisave Minimum Sum will be raised to $43,500 from $40,500. A member will need to have this amount in his Medisave Account and also meet the CPF Minimum Sum before excess funds can be withdrawn.

The Medisave Contribution Ceiling will be increased correspondingly to $48,500, from $45,500. This is the maximum balance a member can have in his Medisave Account. Link

Related: PAP's ingenious scheme to hold your CPF money after your demise


CPF Minimum Sum to be increased to $155,000 from July 2014


Ministry of Manpower (MOM) has just announced that the minimum sum that will apply to CPF members who turn 55 between 1 July 2014 and 30 June 2015 will be increased to $155,000 from $148,000. This will be set aside in their Retirement Account using savings from their Special, and then Ordinary Accounts. (press release)

The Minimum Sum for CPF members who turn 55 before 1 July 2014 remains unchanged. The ministry explains that the increase in the minimum sum is to maintain its real value over time, accounting for inflation.

Along with the change in the minimum sum, from 1 July 2014:
The Medisave Minimum Sum will be raised to $43,500 from $40,500. A member will need to have this amount in his Medisave Account and also meet the CPF Minimum Sum before excess funds can be withdrawn.
The Medisave Contribution Ceiling will be increased correspondingly to $48,500, from $45,500. This is the maximum balance a member can have in his Medisave Account.
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Enhanced CPF nomination scheme transfers your CPF to your beneficiary’s CPF

Exactly why would any CPF member choose to do so, however, is quite beyond me

The CPF Enhanced Nomination Scheme (ENS), which was introduced in January 2011, enables a CPF member to transfer their CPF savings to their nominees’ CPF accounts when they pass away, subject to the prevailing Minimum Sum limit and Medisave Contribution Ceiling (MCC).

All the savings in the Ordinary, Special, Medisave and Retirement Accounts, as well as discounted SingTel (ST) shares, will be distributed to the nominees in the proportion as stated in the nomination form.

All CPF members whose nominees are Singapore Citizens or Singapore Permanent Residents (SPRs) are eligible to make an enhanced nomination. This can be done at any of the CPF Service Centres, where CPF Customer Service Executives will be able to guide the CPF member through the process and also act as witnesses for the nomination.

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MAKE SURE YOU USE THE RIGHT CPF NOMINATION FORM, OR YOUR CPF GOES TO NOMINEES’ CPF!

Pay your CPF to your nominees’ CPF?

We just discovered that you can now choose to pay your CPF to your nominees’ CPF on your demise, instead of as the normal cash to your nominees - Thanks to a posting on facebook.

It is called the Enhanced Nomination Scheme (ENS) that has been available since 1 January 2011. Was this ever reported in the media?

Under the ENS, there are 2 options for you to choose.

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CPF
– Money $mart: Will We Ever Get Our CPF Money? CPF Raises Minimum Sum
– Mad Stranger the Investor: CPF minimum sum 2014
– Marry Thai Girl Singapore: CPF Minimum Sum Raised to $155,000
– Ravi Philemon: Free my CPF
– The Heart Truths: CPF Min Sum Increased: How Many Ways To Milk You Dry
– Just Speaking My Mind: Increase of CPF Minimum Sum Again
– Tzlee: CPF Minimum Sum at $155K?!
– Sgpolitics.net: CPF Minimum Sum raised to $155,000
– My Singapore News: CPF Minimum Sum raised to $155k effective 1 Jul
– Singapore Alternatives: Should we take CPF & PAP government to court?

read more


CPF ranks 7th in pension systems

Singapore's Central Provident Fund (CPF) has been named one of the top 10 pension systems in the world.

The Melbourne Mercer Global Pension Index ranked Singapore seventh out of 20 countries, an improvement from last year's 13th out of 18 countries. Singapore scored 66.5 overall, up from 54.8 last year. Denmark took first place with 80.2, while Indonesia, with 42, was last.

On a letter grade level, Singapore scored a "B" which is for a pension system with a "sound structure, with many good features, but has some areas for improvement". Last year, the CPF scheme got a "C", meaning it "has some good features, but also has major risks or shortcomings that should be addressed".


MP LILY NEO: I CANT HELP S'POREANS WHEN THERE IS TOO MUCH RED-TAPE SURROUNDING CPF

MP for Tanjong Pagar GRC, Lily Neo posted to facebook yesterday evening that she felt “down” after her meet-the-people’s session that day.

She explained that she felt sad because she could not help unhappy residents because of the existence of some regulations. One of the issues she highlighted was about CPF where one elderly resident was unable to withdraw his funds due to the minimum sum requirement.


She explained that she had sent an appeal letter to CPF but they just replied that they need to stretch retirement savings to fund members’ living expenses in retirement and so there is a requirement for the minimum sum. Currently, the minimum sum is already set at $148,000 so those without this amount in their CPF accounts at age 55 cannot withdraw whatever money they do have in CPF until the drawdown age.


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Ex-CPF employee exposes 3 biggest complaints SGs have about their CPF accounts

What is CPF used for? As you process your own answer to that question, chances are the words retirementhousinghealthcare and maybe Ponzi scheme are running through your head.

But no matter what function(s) you think CPF serves, everyone faces the reality of having to pay their “dues” to keep the system going. That means contributing 20% of your salary (up to age 50) every month to a scheme that only benefits those who vastly surpass the current minimum balance of $148K. Sadly, more Singaporeans who have money in CPF and need it can’t even touch it.

An ex-CPF employee named “Brian” (who wishes to remain anonymous for very obvious reasons), who deals with the valid concerns of Singaporeans daily, was kind enough to help us shed some light on what Singaporeans complain about most when it comes to their CPF accounts.

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Raising older workers' CPF rates 'has gains'

A cleaning lady makes her rounds at Woodlands MRT station on Feb 4, 2014. -- ST FILE PHOTO: MATTHIAS HO

A proposed increase in contributions to the Central Provident Fund (CPF) accounts of older workers would add to business costs, but also has its plus points, company bosses say.

They hope such a move would attract more older people back to the workforce, which would help alleviate the labour crunch.

The labour movement has called on the Government to raise the CPF rates of those aged 50 to 55 so that they are on a par with younger workers.


Investing is good, but think health over wealth


Central Provident Fund (CPF) savings are used by Singaporeans for various areas such as housing, investment, insurance, health-care expenses and education. The Sunday Times is embarking on a four-part series on CPF to help readers better understand its different aspects and examine how Singaporeans can best use their CPF money.

Today, we begin by looking at how those aged below 35 can use their CPF funds wisely.

Ask Singaporeans what CPF stands for, and expect tongue-in-cheek replies such as Cash Prior to Funeral or Coffin Purchase Fund.

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Most CPFIS investors make a loss in Q2


Investors who put money into funds under the Central Provident Fund Investment Scheme (CPFIS) would have made a loss in the second quarter of this year.

This was largely due to a sell-down in June, in anticipation of the end of the quantitative easing programme in the US

Although most global benchmarks have returned to positive territory, analysts say markets are likely to be volatile for the rest of the year

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Make your CPF funds work harder for you


You are at the point where you may have been working for more than 10 years, have gotten married, there's a child or two and you are not too stretched with the mortgage. So what next?

Well, it might be time to look at maximising your Central Provident Fund (CPF) monies, a social security savings plan that helps with retirement, health care, home ownership, family protection and asset enhancement.

Note, too, that the composition of your Ordinary Account (OA), Special Account (SA), and Medisave Account (MA), changes after 35 and 45



4% interest rate for SMRA CPF accounts

The Government is extending the 4 per cent minimum interest rate on Central Provident Fund (CPF) savings in the Special, Medisave and Retirement accounts (SMRA) by another year, until Dec 31, 2014, in view of the uncertain global economy and low interest rate environment, the CPF said today (Sept 27).

The first S$60,000 of a CPF member’s combined savings earns an additional 1 per cent interest and that amount will thus continue to earn 5 per cent interest with the extension.


Since 2008, SMRA savings have been invested in Special Singapore Government Securities (SSGS), which earn an interest rate pegged to the 12-month average yield of 10-year Singapore Government Securities plus 1 per cent.


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CPF Ordinary Account interest rate to remain at 2.5%

The Central Provident Fund (CPF) Board said the interest rate for Ordinary Account (OA) savings in the CPF will remain at 2.5 per cent for the next 3 months of next year.

The computed CPF interest rate, derived from the major local banks’ interest rates for the three-month period from May to July, worked out to be 0.21 per cent per annum, below the legislated minimum of 2.5 per cent a year.

An extra 1 per cent interest will still be paid on the first S$60,000 for combined balances, including up to S$20,000 from the OA.



CPF minimum sum raised to S$148,000 for members turning 55 from July 1
The Ministry of Manpower announced changes to the CPF and Medisave minimum sum on Wednesday. (Yahoo! file photo)
The Ministry of Manpower announced changes to the CPF and Medisave minimum sum on Wednesday. (Yahoo! file photo)

From July 1 this year, CPF members who turn 55 between 1 July 2013 and 30 June 2014 will need to set aside a minimum sum of S$148,000 in their Retirement Account. The minimum sum for those who turned 55 last year was S$139,000 Each successive cohort of those who turn 55 will have the sum been adjusted over the years to account for inflation, longer life expectancies and Singaporeans’ rising expectations of their quality of life post-retirement.

In a statement on Tuesday, the CPF board announced the Medisave minimum sum for those turning 55 and above will also be raised from S$38,500 to S$40,500. This is the amount that a person needs to set aside in his old age for his own or his dependants’ healthcare expenses and basic MediShield and ElderShield premiums

The maximum balance a member may have in his Medisave Account is set at $5,000 above MMS and this will be increased correspondingly to $45,500, from $43, 500

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The real story of CPF


The real story of CPF is to provide a 100% reliable source of funds that the Government can dip into with the interest rate well below commercial rate. However as the population aged, the fund supposedly to be returned as a retirement security places a considerable load on payout.

Various schemes were devised and continue to be devised to retain an increasing amount plus to schedule the payout with claims of higher interest than current prevailing interest payout for fixed deposits and saving. The most regrettable fact is that the contributors are robbed of the right of self determination.

With the present proposal of healthcare, mandatory insurance cover is the order of the day and the premium though not revealed only that it will be higher than the present amount paid to Medisave or its alternatives, NTUC IncomeShield where the premium exceeds the maximum permissible from the Medisave account, part of the retained CPF fund.

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The Real CPF Scam

I recently read Part I and Part II by Leong Sze Hian and Roy Ngerng on the Central Provident Fund of Singapore and commend them for their level of detail and analysis.  I would urge everyone to read and re-read their work to understand what is going on financially in Singapore.  Rather than revisiting or reanalyzing their work, I would like to emphasize a couple of points which I believe are of central importance to understand the financial management of Singapore.

First, the CPF acts as an implicit tax on Singaporeans forcing you into lower earning CPF investments.  Currently, CPF returns 2.5-4% beneath returns on other assets and beneath the rate of inflation incurring large losses on savers.  What makes this forced saving is that it is regressive in nature.  In other words, it penalizes the poor more than the wealthy.  This is simply immoral.  Ask yourself whether the wealthy in Singapore who make little if any forced CPF contributions would accept earning 2.5% on their investments?

Second, given that CPF contributions are invested with either GIC or Temasek, the government is essentially confiscating all returns above the CPF rate of return.  This is best noted in Chart 6 of Part II.  The implication here is that the Singaporean government is keeping an enormous amount of money using the retirement savings of its citizens.

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SHOCKING Facts About Our CPF in Singapore!
Slide1  
Singaporeans have always been told by the government that we pay one of the lowest taxes in the world. But do you know what we have not been told?

Do you know that when comparing what we pay into our CPF with what people in other countries pay into their forms of social security, Singapore actually has the highest total contribution rate (employee 20% + employer 16% contribution rate) in the world (Chart 1)

But not only that, what is even more shocking is that the 20% of our own income that employees pay into the CPF is also the highest in the world (Chart 2)! So, Singaporeans pay the highest proportion of our income into social security in the world.


related: SHOCKING Facts About Our CPF in Singapore! (Part 2)


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Dear CPF: Give Me Back My Money!

For years you’ve taken a cut from my paycheck under the promise of social “protection.” In a way, you’re like a very well-intentioned gangster, protecting my money from well… me right?

I’m grateful though that you at least “allow” me to use some of my money towards buying a home, or to subsidise (partially) my hospital bills.

I’m not going to ask what you do with my money while it’s in your hands (I’m sure it’s just sitting there untouched right?). But I do ask that you let me use it for pressing emergencies that directly affect me and my family’s well-being.

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ONE OF LEE HSIEN LOONG’S BIGGEST FAILURES: CPF INTEREST RATE

The CPF interest rate is one of the most important aspect for Singaporeans to achieve retirement. It’s role is not only to beat inflation, but also to grow a fund for a decent and dignified retirement. Through a compulsory monthly contribution, many Singaporeans are able to gather a large sum of CPF and there were hardly any problems with retiring in Singapore during the 1980s and 1990s.

The list of interest rate under 3 different Prime Ministers is found respectively on this CPF link [Source]
LKY CPF
This is the CPF interest rate during Lee Kuan Yew’s time when he was Prime Minister from 1965 to 1990. CPF interest rate went as high as 6.5% during Lee Kuan Yew’s stewardship. It certainly beat inflation by at least 2% during the 1973 oil crisis. Those were the good times where putting cash in CPF certainly makes sense than investments in the stock market. Notice how the interest rates were rarely adjusted, it reflects LKY’s leadership as placing the people as priority regardless of the state of economy.
Goh CPF
Then the next Prime Minister Goh Chok Tong, CPF interest rate’s performance were pretty decent averaging about 3.5% with a consistent up and down.

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How the government leverages on CPF money to generate investment returns


This is a long overdue blog post, but as the saying goes, better late than never. This post will be about how the government of Singapore leverages on the money held CPF members’ accounts to generate investment returns at GIC and Temasek Holdings, the two sovereign wealth funds owned by the government.

The government achieves this by a process known as “rehypothecation“. Rehypothecation is perfectly legal in most if not all countries running national pension, national insurance and national annuity schemes, and Singapore is no exception.

To put it simply, rehypothecation means purchasing financial assets or bonds issued by third party organizations, backed by money held in client accounts. If the asset or bond purchases are made using client money as collateral and those investments turn bad, then client money may be at risk depending on how the legal framework is structured.


CPF SAVINGS BELONG TO MEMBERS, NOT FOR PAP TO DETERMINE WHEN WE SPEND


There has been recent online discussion and confusion over the CPF Retirement Account (RA). The RA needs some clarification and CPF members cannot be totally faulted for their ignorance. The PAP government’s frequent tweaking of policies without public consultation has also been a huge contributing factor to the confusion.
CPF Retirement Account

The RA was created in 1987, a separate account to ensure Singaporeans have ‘sufficient’ income during our golden years. This is not an overnight development as have been suggested from many recent online feedback. More information @ BT article, 13 May 2013 Tweaking all the way until members cash withdrawal drops to…. ZERO

The RA started with a Minimum Sum (MS) of $30,000 in 1987, increasing at a rate of about 3 per cent to $35,400 in 1994. It suddenly jumped to $40,000 in 1995 and increased by $5,000 per year to $90,000 in 2005. http://mycpf.cpf.gov.sg/NR/rdonlyres/27ACA8E5-7D0D-431F-B74B-D8D3A3E43463/0/CPFTrends_MSS.pdf

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Negative effects of CPF on locals

The CPF was set up in 1955 as an old-age savings scheme for employees. The scheme has since evolved into a comprehensive social security savings system addressing not just retirement adequacy, but also health care, home-ownership, family protection and asset enhancement.

The principle of self-reliance is an essential tenet underpinning the CPF system, which continues to meet the three key needs of retirement expenditure, health care and home ownership

Working citizens pay  a percentage of their salary as tax to CPF. The principle is similar to many western nations except that the returns are not the same and with no fairness involved.


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Understanding our CPF System

Our CPF system is a social security net. It is a system of forced saving. The history of such systems is simple and understandable. With a largely uneducated population, it was wise to organize some form of of forced saving to make sure that all citizens had some savings when they are too old to work anymore- something which (the then)common folk might not be able to adequately plan for. After all. It was a social service.

There always are some ‘really smart’ people who probably would have done more productive things if they were given fluid access to their CPF (like investing for higher returns, successful start-ups ect.). However, the problem has been (and still is) that how are we going to determine who we should trust to plan their savings by themselves? Should we use education level? Should we administer a nationwide IQ test?

Okay, let’s say the government allows us to access our CPF monies fluidly. Then some Singaporeans gamble all their money away, or lose ll their money in investments. Or he just doesn’t save enough. What happens to this Singaporean when he is old and has no savings? Since he chose to spend all his money without saving, does this mean he now deserves to be old and poor with absolutely no money? Do you think as society, we will accept it? The liberals obviously won’t, and thy’d still expect the rest of the responsible tax payers to ‘pay for their upkeep’. This is just going to cost the rest of us more money/ higher taxes.

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SOME FACTS ABOUT CPF YOU MAY NOT HAVE KNOWN
CPF

The CPF Board is a statutory board under the Ministry of Manpower (MOM). In Singapore, the Central Provident Fund (Abbreviation: CPF; Chinese: 公积金, Pinyin: Gōngjījīn) is a compulsory comprehensive savings plan for working Singaporeans and permanent residents primarily to fund their retirement, healthcare, and housing needs

Highest pension contribution rate in the world? Working Singaporeans and their employers make monthly contributions of up to 36 per cent of their salary to the CPF and these contributions go into three accounts:

Ordinary Account - the savings can be used to buy a home, pay for CPF approved insurance schemes (CPF: Issues and questions?), investment and education.

Special Account - for old age and investment in SA (Special Account) approved financial products. Medisave Account - the savings can be used for hospitalisation expenses and approved medical insurance schemes.

Many not aware of CPF usage for housing limits? The maximum amount of CPF you can use is a percentage of the lower of the purchase price or the value of the property at the time of purchase, subject to the Valuation and Housing Withdrawal Limits (where applicable). http://mycpf.cpf.gov.sg/CPF/my-cpf/buy-house/CPFHousing_Leaflet.htm


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CPF: can’t withdraw more at 55 even with property pledge?


The CPF Minimum Sum (MS) is the amount a member has to set aside in his or her Retirement Account (RA) for retirement needs. The RA is set up when a member reaches 55 years of age, drawing from savings in the Ordinary and Special accounts (OA and SA respectively). During retirement, the savings accrued in the RA will then be disbursed monthly to the retiree

At present, the MS is set at $117,000. It will rise to $123,000 with effect from 1 July, as reported in the news recently. CPF members are allowed to pledge property that was bought with CPF funds toward the MS, with the value pledged capped at 50 per cent of the MS

According to the CPF’s web site, the property pledge for the CPF MS at age 55, has been changed to the following: “If you are unable to set aside your full Minimum Sum in cash, your property, bought with your CPF savings, will be automatically pledged for up to half of the Minimum Sum”

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CPF CAN NO LONGER BE USED TO PAY FOR HDB FLAT AFTER YOU TURN 55? 

It seems like after you become 55 years old, all the money that you earn (in your CPF ordinary and special account) will be moved to an untouchable “RETIREMENT ACCOUNT” that cannot be used to pay for your flat! 

You have to pay your flat mortgage instalments with real cash after that!!!! The “RETIREMENT ACCOUNT” seems to have been implemented this year i.e. 2013 and this is the 2nd Singaporean I know who has encountered this problem during the past 1 month.

I foresee this will be a big problem for Singaporeans who are asset rich but cash poor and who have already retired at 55 years old. I hope you can feature this. Thanks!

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Affordable has destroyed our retirement plans

SG+ is a new programme very similar to Talking Point. Last week’s topic was about CPF and whether Sinkies have sufficient money left for retirement. After the two experts gone through with Melanie, the host, it was a glaring admission that many Sinkies will be in deep shit when they retire.

The only hope to survive those greying years is to downgrade their homes, provided they have one and is down gradable

The two were talking about having more savings and more schemes to bolster the existing schemes which would not be enough due to high inflation and the huge amount of money sucked into housing and medical insurance. The recommendations are something like another CPF to cover for the shortfalls in the current CPF and more insurance schemes to cover for the inadequate schemes that the people are paying now


related: Malaysian EPF paying 6% interest

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