Monday, 17 November 2014

Major CPF policy shift on the way

Hopes for more certainty, simpler system

The CPF Advisory Panel held its first public focus group discussion on Saturday (Nov 15) to seek views on enhancing the CPF system. The panel will likely hold up to 10 focus group discussions over the next three months.

A variety of suggestions were given on what is considered adequate for retirement. One common thread was the desire for more certainty and a simpler system.


Prime Minister Lee Hsien Loong had said during the National Day Rally that more flexibility will be built into the system. Currently, a Minimum Sum of S$155,000 is set aside, once a member turns 55. When the member reaches 65, there is a monthly payout of about S$1,200.

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CPF Advisory Panel to Hold Focus Group Discussions to Seek Views On Enhancing CPF System

At his National Day Rally Speech in August 2014, PM announced that a CPF Advisory Panel will be formed to study enhancements to some key aspects of the CPF system, to make it more flexible to meet the needs of Singaporeans and provide additional options in retirement.

To help the Panel better understand these needs, we had invited public comments and feedback to be submitted to cpf_panel@mom.gov.sg. Further, a series of focus group discussions (FGDs) will be convened to gather views from the public in these areas under the Panel’s Terms of Reference:

  • How the Minimum Sum should be adjusted beyond 2015, in order to meet the objective of delivering a basic monthly retirement payout for life;
  • How to enable CPF members to withdraw more as a lump sum upon retirement, and the circumstances for their doing so, taking into consideration the impact on retirement adequacy for different groups;
  • How to provide an option for members who prefer CPF payouts that are initially lower but rise with time to help with increases in the cost of living;
  • How to provide more flexibility for members who wish to:
  • Seek higher returns while balancing the higher investment risks involved, through private investment plans;
  • Invest in private annuities when they retire as an alternative to CPF LIFE.


Focus Group Discussions on enhancement to CPF
CPF Advis­ory Panel has just announced a series of Focus Group Dis­cus­sions (FGD) to be con­duc­ted from mid-November 2014 to mid-January 2015. The dis­cus­sion will be on the fol­low­ing topics:-
  • Min­imum Sum — how to adjust bey­ond 2015 for future retirees
  • Lump sum with­draw­als at age 65 years — how much should CPF mem­bers be able to with­draw and under what conditions
  • CPF pay­outs — how could CPF pay­outs be adjus­ted to address cost of liv­ing increases over time
  • Altern­at­ive invest­ments and annu­it­ies — how to provide more flex­ib­il­ity for CPF mem­bers who are pre­pared to take on more risks.
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Focus group discussions for public to share views on CPF

A series of focus group discussions for members of the public to share their views on enhancements to the Central Provident Fund (CPF) will be held over the next few months by the CPF Advisory Panel.

The discussions will focus on four areas. This includes how to adjust the Minimum Sum beyond next year to deliver a basic monthly retirement payout for life, as well as how to enable CPF members to withdraw a higher lump sum upon retirement.

The focus groups will also explore views on how to provide an option for members who prefer lower CPF payouts that rise with time to help with increases in the cost of living and how to provide more investment flexibility for members.

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CPF: Focus groups not very focused?

Much ado about CPF – all of a sudden? - After decades – all of a sudden – we seem to be “head over heels” about the need to change our CPF system.

No matter how many focus groups you hold – if you ask a diverse group of people what they want – it is likely that you will get different wishes.

This is arguably what happened at this first focus group discussion – “Finally, participants were asked if they preferred to have flat CPF payouts or escalating payouts that rise over time. The majority preferred escalating payouts, due to inflation. However, there was a group opting for declining payouts, leading to mixed views.

related: 5th Return Our CPF protest on 29 November 4 pm at Speakers’

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KEY CPF CHANGES
  • More flexibility for Central Provident Fund (CPF) members, as they will be allowed to take out a part of their savings as a lump sum during retirement.
  • Annual bonus payments for the elderly poor who have insufficient CPF savings, no HDB flat or family support.
  • Advisory panel to be set up by Ministry of Manpower to study CPF changes.
  • CPF Minimum Sum to go up from $155,000 to $161,000 for the cohort that turns 55 next July, but no need for more major increases.

CPF scheme among top 10 pension systems in the world
The Singapore skyline as seen from Swissotel the Stamford at dusk on Sept 16, 2013. Singapore's Central Provident Fund (CPF) scheme has been named one of the top 10 pension systems in the world, among the likes of countries such as Denmark and Sweden. -- ST FILE PHOTO: CAROLINE CHIA

SINGAPORE'S Central Provident Fund (CPF) scheme has been named one of the top 10 pension systems in the world, among the likes of countries such as Denmark and Sweden.

The annual Melbourne Mercer Global Pension Index ranked Singapore seven out of 20 countries, an improvement from last year's 13 out 18 countries showing.

Singapore scored 66.5 overall, up from 54.8 last year. Denmark took first place with 80.2 and Indonesia with 42 stood in last place.

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Retirement scheme fair and one of world's safest: DPM Tharman
Madam Tan Kim Hing, 66, a housekeeping attendant at Royal Plaza on Scotts. The Central Provident Fund (CPF) scheme may not provide the highest returns, but the returns are fair, and it is also one of the safest retirement funds in the world, said Deputy Prime Minister Tharman Shanmugaratnam in Parliament on Tuesday, July 8, 2014. -- PHOTO: ST FILE

The Central Provident Fund (CPF) scheme may not provide the highest returns, but the returns are fair, and also one of the safest in the world, said Deputy Prime Minister Tharman Shanmugaratnam in Parliament on Tuesday.

This is because CPF interest rates are pegged to comparable investments in the market, and are also guaranteed by the Government, he said, in a statement that explained how CPF monies are invested and why the interest rates are set where they are. The questions had been asked by four MPs.
"The CPF is not a perfect retirement savings scheme, but it is among the better regarded internationally," he said.
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Time to relook pension plans
Prime Minister Lee Hsien Loong’ speaking at the National Day Rally 2014 held at the Institute of Technical Education (ITE) College Central on 17 August 2014

The National Day Rally this month heralded some significant changes to Singapore's much-discussed retirement fund system.

To provide more state support for lower- and middle-income groups, Prime Minister Lee Hsien Loong announced an annual bonus for the poorest old folk and extended the Lease Buyback scheme to owners of four-room Housing Board (HDB) flats.

He also said rules will be eased so CPF members can withdraw more funds in a lump sum upon retirement, in response to such requests.


Longer lifespans mean 55 not age to withdraw CPF funds meant for old age: PM Lee
With longer lifespans, 55 is no longer the right age for CPF members to make sizeable withdrawals from their retirement funds, Prime Minister Lee Hsien Loong said on a Mandarin radio programme on Capital 95.8 on Monday night

He encouraged CPF members to work until age 65 if they can, saying they can take out some of their CPF funds after they retire to pursue their dreams or invest.

Mr Lee made these remarks as he sought to explain why withdrawing all or a sizeable amount of CPF savings at age 55 is not prudent.

He noted that when the CPF withdrawal age of 55 was set more than 50 years ago, Singaporeans' life expectancy was around 63 years old. But with life expectancy up, and many people here living past 80 and even 90, CPF members should not aim to make withdrawals at age 55, he said.


Unionists worried about new CPF option
They fear low-wage earners will come to grief if they withdraw lump sum cash

An upcoming move by the Government to let workers who retire withdraw part of their Central Provident Fund (CPF) savings in a lump sum worries unionists.

They fear it will bring grief to the very group of workers whose well-being they have always strived to protect: the low-wage earners. These rank-and-file workers have traditionally formed the backbone of NTUC's union membership.

A lump sum withdrawal will reduce what is left in their CPF savings for the monthly payouts, they told Prime Minister Lee Hsien Loong at a closed-door dialogue yesterday.


The main takeaways from PM Lee's National Day Rally speech
National Day Rally 2014 on 17 Aug 2014, at ITE Headquarters & College Central. Photo: Prime Minister's Office

MEETING RETIREMENT NEEDS
  • Lease Buyback Scheme extended to four-room flats: Read more about it here.
  • Bonus payments from Government to supplement CPF savings payouts for low-income: Read more about it here.
  • New Silver Support scheme to provide annual bonus for low-income seniors aged 65 and up to help them with living expenses: Read more about it here.
  • Option to withdraw part of CPF savings in lump sum during retirement, subject to limits (e.g. up to 20 per cent of total): Read more about it here.
  • CPF Minimum Sum raised to $161,000 next year - no major increases expected thereafter: Read more about it here.

Singapore PM outlines Central Provident Fund options for retirement
Mr Lee said home ownership and the CPF scheme - Singapore's twin pillars for ensuring that people have enough for retirement - will be improved to better support the poor and be made more flexible for all. -- ST PHOTO: NEO XIAOBIN

SINGAPORE'S fast-rising number of elderly people can look forward to several changes aimed at ensuring they will have enough to live on during their retirement years.

Addressing the nation at his 11th National Day Rally on Sunday night, Prime Minister Lee Hsien Loong announced that a new scheme, called Silver Support, will be set up to give lower-income Singaporeans with little or no Central Provident Fund (CPF) savings an annual bonus from the Government. The details will be announced later.

Another change: CPF members who are retired, that is 65 and over, will be allowed to withdraw a lump sum from their Minimum Sum savings if they need. But there will be a limit, perhaps 20 per cent, to ensure they receive monthly payments throughout their later years.


The Govt’s doubletalk on CPF rates of return

Much and nothing had been said by the government since the CPF furore erupted some months ago. The disbelieving were rightly not placated by what are essentially doubletalk. Here’s a checklist of the government obfuscation about rates of return and inflation rates.

US$ and S$ Returns: The first obfuscation is the rates of return earned by Temasek and GIC. Although Temasek reports its returns in S$, GIC reported in US$, having ceased reporting in S$ in 2010. The government said US$ rates of return are easier to compare against international benchmarks. Any reasonable person would ask why should US$ matter to a Singaporean saving and spending in S$.

The real reason may be to obfuscate the abysmal rate of return in S$ because the exchange rate policy mandated to the MAS by the government causes GIC’s returns to depreciate by 1.5% pa over the past 20 years. It cannot be certain that the government will not find yet another reason to revert back to S$ reporting especially the US$ appears to have embarked on sustained strength against S$.


Cracks in the façade - Strains in the pension fund hint at broader problems
Crowd-pleasing

EVERY year, soon after Singapore’s national day on August 9th, Singapore’s prime minister gives a state-of-the-nation address. On August 17th Lee Hsien Loong, the prime minister and son of modern Singapore’s founding father, Lee Kuan Yew, delivered his 11th such speech in his genial, if slightly mawkish, style. As usual, he offered plenty of crowd-pleasing goodies: gardens and a science centre for western Singapore; a new government department to co-ordinate public services; praise for Singapore’s “pioneer generation”. But Mr Lee also unveiled two significant changes in pensions policy that hint at some deeper systemic problems.

The first is a “Silver Support Scheme”, under which government will top up some payouts from Singapore’s retirement scheme. From the time they start working, Singaporeans and their employers are obliged to contribute a share of their monthly salary (starting at 20% for employees and 16% for employers) to the Central Provident Fund (CPF). Money in the CPF is intended to cover part of Singaporeans’ health-care, housing and retirement needs. As Mr Lee noted, the CPF rewards personal responsibility: “The more you work, the more you have in retirement,” he said. “Your retirement savings are for you, not someone else.” There is, in other words, no redistribution among Singaporeans paying into the fund.

In an economy with full employment and a favourable ratio of working-age to elderly people, a provident fund works well. But as life expectancy and living costs in Singapore have both risen, so has income inequality. The CPF has begun to look inadequate for many Singaporeans. A survey released shortly before Mr Lee gave his speech found that nearly half those questioned believed that their CPF contributions would be insufficient to tide them over during their retirement. The Silver Support Scheme—along with a broadening of Singapore’s Lease Buyback Scheme, under which the government buys back the remaining years of leases on flats—amounts to a tacit acknowledgment that a CPF which involves no redistribution at all no longer works for a sizeable minority of its citizens.


MOM defends PM Lee – says Lee’s comments “misunderstood”
The Minister for Manpower has defended Prime Minister Lee Hsien Loong’s National Day Rally speech on the changes to the Central Provident Fund (CPF) scheme

Mr Lee, who had announced that CPF members may be allowed to withdraw part of their CPF Minimum Sum in a lump sum upon reaching 65-years old, was criticised by economist Hui Weng Tat for not going far enough with the changes to ensure Singaporeans had enough for retirement.

Mr Hui, who is an associate professor at the Lee Kuan Yew School of Public Policy at the National University of Singapore, criticised Mr Lee’s speech in an article published in the Straits Times on Tuesday. (See here: “A “cosmetic change” to “pander to popular demands”: NUS economist“.)

He had slammed the CPF changes as “piecemeal” and a “cosmetic change” to “pander to popular demands.” He also accused Mr Lee of having “an overly-optimistic view of current retirement adequacy.” “It does not address the fundamental issue of the retiree not having enough in CPF savings,” he said of the changes.


Seven pillars of a good retirement savings system
If it ain't broke, don't fix it. Just improve it. The Central Provident Fund, that is

THERE is a famous American South saying that goes, "If it ain't broke, don't fix it". In the more enlightened North, branding gurus and academics would prescribe a rebranding exercise for ailing entities.

Let me explain why the Central Provident Fund (CPF) system ain't ailing nor broke (no pun intended), and why we should actually be celebrating the fact that some folks from the pioneer generation almost 60 years ago had the foresight and extraordinary prescience to come up with a mandatory, fully-funded, defined contribution social security savings system that is able to provide for our basic retirement expense needs with assurance.


CPF changes do not go far enough
Those Singaporeans who have been anticipating announcements of significant changes to the Central Provident Fund system to improve retirement financing may be forgiven for feeling disappointed by Prime Minister Lee Hsien Loong's National Day Rally on Sunday

While the Silver Support bonus payment for poor elderly is to be applauded, the other announced changes do not address the fundamental source of concerns about retirement adequacy.

The extension of the Lease Buyback Scheme to four-room Housing Board dwellings would increase the number of households which are eligible by another 363,000. This compares with the approximately 230,000 three- room and two-room HDB dwellings currently eligible for this scheme.

However, it is not clear if this will make any significant difference to the popularity of the scheme. The low take-up of the current Enhanced Lease Buyback Scheme already provides strong hints that the typical Singapore family would prefer to have the option of bequeathing their property to the next generation.

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A “cosmetic change” to “pander to popular demands”: NUS economist
A “cosmetic change” to “pander to popular demands.”

That was how economist and associate professor, Hui Weng Tat, described the change in the Central Provident Fund (CPF) scheme to allow partial, lump-sum withdrawal from the CPF Minimum Sum.

Prime Minister Lee Hsien Loong had announced in his National Day Rally speech on Sunday that the government will allow CPF members to withdraw “a part of” their CPF Minimum Sum at age 65.

This would be a departure from the current rules which do not allow such withdrawals.


'CPF enough for retirement if...'
Study lists three conditions for people to build an adequate nest

YOUNG Singaporeans who join the workforce today will have enough savings in their Central Provident Fund (CPF) to finance their retirement, say two university professors

But there are three caveats:
  • - They must be prudent in their choice of homes and buy HDB flats within their means;
  • - Any CPF savings above the Minimum Sum they withdraw must be invested to generate a steady stream of retirement income; and
  • - They must continue to remain in the workforce.
National University of Singapore (NUS) economic professors Chia Ngee Choon and Albert Tsui drew these conclusions in their 27-page study on the adequacy of CPF payouts. The study was commissioned by the Ministry of Manpower and released yesterday.

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Lee to Add Funding Options for Singapore Retirees as Nation Ages
Singapore's Prime Minister Lee Hsien Loong’s administration has increased social spending in recent years as the population ages, after decades of policies that emphasized self-reliance over state-funded welfare. Photographer: Kiyoshi Ota/Bloomberg

Singapore will broaden the options for its citizens to monetize state-subsidized homes and may offer greater flexibility for retirees to draw funds from the mandatory savings program, Prime Minister Lee Hsien Loong said.

A plan that lets elderly citizens sell part of their leases on smaller Housing & Development Board apartments back to the government will be extended to so-called four-room flats, or those that are about 968 square feet in size, Lee said. The homes developed by the government are usually sold with 99-year leases, and buyers typically fund them with the state-run pension plan called Central Provident Fund or CPF.

The home is a “valuable little pot of gold to draw on, if they need to,” Lee said in the televised National Day Rally speech late yesterday. “The CPF and your house go hand in hand to provide for your retirement.”

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Singapore to reform enforced pension saving scheme after protests

Singapore is to reform its mandatory retirement savings scheme and will provide greater support to low-income pensioners, the Prime Minister said on Sunday, in response to growing public criticism of the system.

Providing for Singapore’s ageing society is one of the biggest challenges facing Lee Hsien Loong’s government, with the present enforced savings system threatening to erode dwindling support for his ruling People’s Action Party, which won its lowest ever share of the vote in a 2011 election.

Singapore’s Central Provident Fund (CPF) has won widespread international admiration for the way it forces citizens to put aside money to fund their retirement, healthcare and housing costs, but many people are unhappy at the rate of return on their CPF savings and a rise in the minimum sum they must save before making withdrawals.

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Singapore to Revise Parts of Pension Plan Amid Retirement Concerns

Government Wants to Give Pensioners More Flexibility in How They Tap Savings.

Singapore wants to boost financial support to low-income pensioners and revise parts of its state-run compulsory savings plan, Prime Minister Lee Hsien Loong said Sunday, seeking to address citizens' concerns over the inadequacy of their retirement savings.

The move comes amid growing public discontent over Singapore's Central Provident Fund, or CPF, which culminated this year in one of the largest protests ever held in this tightly regulated city-state.


New Funding Options For Singapore Retirees, Adjustments To Pension Fund

Lee, who completed his 10th year as prime minister on Aug 12, said yesterday the government will introduce a yearly payout for low-income Singaporeans starting from age 65. The number of elderly will triple to 900,000 by 2030, according to the National Population and Talent Division.

Lee encouraged retirees to find ways to monetise their investments in public housing, such as leasing out their properties and moving in with their children, or moving to a smaller and cheaper home. More than 80 per cent of Singapore’s resident population live in government-developed apartments, which are sold with subsidies, according to the Housing & Development Board’s website.

The government is also planning to revitalise the city’s western Jurong area by transforming the suburb’s public parks and building a new science center, Lee said yesterday. The area has also been proposed to Malaysia Prime Minister Najib Razak as a possible location for the terminal of a planned high-speed rail connecting Singapore and Kuala Lumpur, he said.


Major CPF policy shift on the way
The government plans to allow those aged 65 and above to withdraw a portion of their Central Provident Fund (CPF) savings in a lump sum

The exact cap will be revealed at a later date, but Prime Minister Lee Hsien Loong said that the amount to be taken out "cannot be excessive". One possibility he mentioned was limiting it to 20 per cent of a member's total CPF funds.

Outlining this major policy shift for the country's compulsory savings scheme for workers, Mr Lee said that he made the decision after considering it for "a long time" and discussing it with his colleagues.

"We should allow people the option to take out part of their CPF savings in a lump sum, if they need to, subject to limits . . . it should only be during retirement, (that is) 65 and beyond," he said at the National Day Rally last night.

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Silver Support scheme to assist needy seniors with annual payouts

The Government will introduce a new scheme that will disburse annual payouts to needy elderly Singaporeans from the age of 65 to help them with living expenses.

The scheme is one on which the minority of the population can fall back, said Prime Minister Lee Hsien Loong yesterday. This group includes those who may not have accumulated enough Central Provident Fund (CPF) savings during their working lives and do not have an HDB flat or family support.

“In their case, these individual efforts will not be enough, so the Government and the society must do more to help them in their retirement,” said Mr Lee during the National Day Rally.

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CPF Minimum Sum to be raised to S$161,000

The Minimum Sum for Central Provident Fund (CPF) members turning 55 from July 1 next year will be S$161,000, Prime Minister Lee Hsien Loong said yesterday.

Although he said he did not see a need for more “major increases” in the Minimum Sum beyond this “final instalment” of a series of hikes since 2003, Mr Lee noted there would still be a need to adjust it “from time to time” as lifespan, income and basic spending needs go up. A panel will be set up to look at the Minimum Sum needed beyond next year to deliver a basic retirement payout, he said.

The Minimum Sum was set at S$80,000 in 2003, but the Government announced that it would raise it, over 10 years, to S$120,000 in 2003 dollars, so CPF members would have enough in their retirement to meet the basic needs of a typical retired household. The timeline for reaching the target was extended in 2013 by two years due to high inflation.

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Option of partial lump-sum CPF withdrawals for retirees
Prime Minister Lee Hsien Loong holds up a new CPF booklet during his speech at the National Day Rally at the ITE Headquarters and College Central on Aug 17, 2014. Photo: Ooi Boon Keong

Central Provident Fund (CPF) members will have the option to withdraw part of their CPF savings in a lump sum when they need to, subject to limits, said Prime Minister Lee Hsien Loong yesterday.

The amount that can be taken out cannot be excessive — up to 20 per cent of total monies, for example — and should be withdrawn only during retirement, added Mr Lee. “(A CPF member) must understand clearly the trade-off — if you take out a lump sum, that means you will have less left in the CPF and your monthly payments will be lower.”

Adding that this was an issue that he had been discussing with his colleagues and considering for a long time, Mr Lee said he had decided to adjust the policy.

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Singapore PM outlines Central Provident Fund options for retirement
Mr Lee said home ownership and the CPF scheme - Singapore's twin pillars for ensuring that people have enough for retirement - will be improved to better support the poor and be made more flexible for all. -- ST PHOTO: NEO XIAOBIN

SINGAPORE'S fast-rising number of elderly people can look forward to several changes aimed at ensuring they will have enough to live on during their retirement years.

Addressing the nation at his 11th National Day Rally on Sunday night, Prime Minister Lee Hsien Loong announced that a new scheme, called Silver Support, will be set up to give lower-income Singaporeans with little or no Central Provident Fund (CPF) savings an annual bonus from the Government. The details will be announced later.

Another change: CPF members who are retired, that is 65 and over, will be allowed to withdraw a lump sum from their Minimum Sum savings if they need. But there will be a limit, perhaps 20 per cent, to ensure they receive monthly payments throughout their later years.


Annual retirement bonus for elderly low-income Singaporeans
An elderly couple at the Choa Chu Kang Polyclinic. Prime Minister Lee Hsien Loong in his National Day Rally speech said more must be done to help about 10 to 20 per cent of elderly Singaporeans who do not have enough savings in their Central Provident Fund (CPF) accounts and lack other means of financial support. -- PHOTO: ST FILE

Prime Minister Lee Hsien Loong in his National Day Rally speech said more must be done to help about 10 to 20 per cent of elderly Singaporeans who do not have enough savings in their Central Provident Fund (CPF) accounts and lack other means of financial support.

To help them with their living expenses, the Government has decided that they will get an annual bonus when they turn 65. The yearly bonuses will be handed out as part of a new financial assistance scheme named Silver Support, said Mr Lee.

The scheme targets elderly Singaporeans who have little CPF savings, do not own Housing Board flats and lack family support.


PM Lee, the financial planner

Prime Minister Lee Hsien Loong on Sunday tackled criticisms of the Central Provident Fund head-on but with good humour, role-playing a financial planner to a fictitious Mr Tan and advising him on his retirement options.

Mr Lee, who roled-played a housing agent at last year's National Day Rally, quipped: “Last year, I was your real estate agent. This year, the real estate market is no good. I have upgraded myself and become a financial planner.”

Explaining the rationale behind the increase in CPF's Minimum Sum, Mr Lee played "financial planner" to a hypothetical Mr and Mrs Tan, aged 54, with a monthly income of $4,500.


New Silver Support Scheme for low-income elderly

Singapore's Central Provident Fund (CPF) and HDB schemes have helped the majority of the population save enough for their retirement, said Prime Minister Lee Hsien Loong in his National Day Rally on Sunday (Aug 17). But these are not one-size-fits-all policies, and the bottom 10th to 20th percentile may fall through the cracks, said Mr Lee. These people may not accumulate enough CPF funds during their working lives, and do not have an HDB flat or family support to fall back on.

"In their case, these individual efforts will not be enough, so the Government and the society must help to do more, must do more, to help them in their retirement. So for this group, we should supplement their payouts from their own CPF savings with bonus payments from the Government, just the same way as we have Workfare to supplement the wages of low-income workers," Mr Lee said.

Under the new Silver Support scheme, low-income elderly Singaporeans will get a yearly bonus, starting from the age of 65. This comes on top of other Government and community support these individuals already receive.


CPF system ‘should be more flexible, help lower-income’

While the Central Provident Fund (CPF) system has worked well for most Singaporeans, the scheme alone is not enough to ensure Singaporeans have enough money for retirement, said Prime Minister Lee Hsien Loong yesterday.


Polling the audience at the National Day Rally held at ITE College Central on how much money they thought a typical couple would require to get by during retirement, Mr Lee concluded that CPF savings and the public housing programme go hand-in-hand in providing for retirement and the current Minimum Sum is “not too much”.

He noted that, by and large, seniors here are doing well, with many having savings, investments and support from their children or happily working.

related:


Assurance in retirement tops National Day Rally discussions on REACH

Assurance in retirement was the most discussed topic on REACH platforms since the start of a feedback exercise on Prime Minister Lee Hsien Loong's National Day Rally on August 17.

A news release from Government feedback portal REACH on Thursday (Aug 21) said about 37 per cent of 530 feedback inputs touched on this theme. Many gave feedback on the HDB's Lease Buyback Scheme, the option for the elderly to take part of their CPF savings in a lump sum, subject to limits, and the Silver Support Scheme.

Achieving one's potential was the next most discussed topic (20 per cent) followed by the topic of a "home for all ages" (19 per cent).

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National Day Rally: 3 questions and answers on the Minimum Sum and retirement
The Minimum Sum for Central Provident Fund members turning 55 from July 1 onwards will be $161,000, up from the current $155,000 level this year

For those turning 55 from July 1 onwards, the Minimum Sum will be $161,000. This is up from the current $155,000 level this year.

The new Minimum Sum level does not apply to older cohorts who turned 55 earlier. CPF members who do not meet the Minimum Sum need not top up the shortfall in cash, or sell their property to meet the Minimum Sum.

The good news is that Prime Minister Lee Hsien Loong said that there will not be "any major increases in the Minimum Sum" beyond next year.

related:



CPF changes good but devil is in the details

There were three main complaints over the Central Provident Fund (CPF) leading up to the National Day Rally on Sunday evening.

One was over whether it provided enough for retirement. Another was that people wanted more flexibility in withdrawing bigger sums from their CPF savings. The last big complaint was over the Minimum Sum levels, which will hit $161,000 next year.

Prime Minister Lee Hsien Loong squarely addressed all three issues in his speech by announcing a few significant changes to the system.

related:


3 questions and answers on the Minimum Sum and retirement

The Central Provident Fund (CPF) Minimum Sum will be raised one more time, to $161,000 next year. But after that, there will be no more major increases, said Prime Minister Lee Hsien Loong in his National Day Rally speech on Sunday night. Here are three things about the Minimum Sum and retirement.

What will the Minimum Sum be for those turning 55 be next year? For those turning 55 from 1 July onwards, the Minimum Sum will be $161,000. This is up from the current $155,000 level this year.

The new Minimum Sum level does not apply to older cohorts who turned 55 earlier. CPF members who do not meet the Minimum Sum need not top up the shortfall in cash, or sell their property to meet the Minimum Sum. The good news is that Prime Minister Lee Hsien Loong said that there will not be "any major increases in the Minimum Sum" beyond next year.


NDR 2014: CPF scheme to be made more flexible to help elderly Singaporeans

CPF members should be allowed the option to take out part of their savings in a lump sum if needed, PM Lee said in his speech yesterday. As Singaporeans age, the Government is trying to ensure that they do so without fretting about money.

For one thing, it is improving the Central Provident Fund (CPF) scheme to make it more flexible, said Prime Minister Lee Hsien Loong in his National Day Rally speech yesterday. He said that CPF members should be allowed the option to take out part of their savings in a lump sum, if they need to, subject to limits - 20 per cent, for example.

The Minimum Sum that a person has to set aside in his CPF account will also be raised to $161,000 for those turning 55 from July 1 next year but, beyond that, there is no need for any more major increases.


CPF changes do not go far enough

Those Singaporeans who have been anticipating announcements of significant changes to the Central Provident Fund system to improve retirement financing may be forgiven for feeling disappointed by Prime Minister Lee Hsien Loong's National Day Rally on Sunday.

While the Silver Support bonus payment for poor elderly is to be applauded, the other announced changes do not address the fundamental source of concerns about retirement adequacy.

The extension of the Lease Buyback Scheme to four-room Housing Board dwellings would increase the number of households which are eligible by another 363,000. This compares with the approximately 230,000 three- room and two-room HDB dwellings currently eligible for this scheme.


Lump-sum CPF withdrawal, lease buyback change hailed

The Central Provident Fund (CPF) should discourage Singaporeans from frivolously taking lump-sum withdrawals from their retirement savings, even though the government's granting the option gives valuable flexibility, observers have said.

They were reacting to Prime Minister Lee Hsien Loong's announcement in his National Day Rally speech on Sunday that retired CPF members will be allowed to take out part of their CPF savings in a lump sum, subject to limits; the amount that can be withdrawn will be capped, and details are being worked out.

Academics and financial advisers who spoke to The Business Times also welcomed the other major announcement - the expansion of the lease buyback scheme for Housing Development Board (HDB) flats to four-room flats, instead of having it capped at three-room flats as is the case now.


Option for CPF members to withdraw part of CPF in lump sum at 65
Prime Minister Lee Hsien Loong announced changes to the Central Provident Fund (CPF) scheme in his National Day Rally speech on Sunday

Mr Lee said the government will “allow people the option to take out part of their CPF savings in a lump sum, when they need to.”

However, he said this will be “subject to limits.”

“The amount withdrawn cannot be excessive – eg up to 20% of the total,” Mr Lee said. “It should only be during retirement, after 65. And the member must understand the trade-off – monthly CPF payments will be smaller.”


CPF flexibility, alternatives for non-graduates needed: SPP

While Prime Minister Lee Hsien Loong’s National Day Rally speech raised important issues, more needs to be done to address concerns about the employment of non-graduates and the use retirement monies by Central Provident Fund (CPF) members, said the Singapore People’s Party (SPP) in a media statement.

Responding to PM Lee’s speech, SPP agreed that there was a need to create alternative career paths. “Today, students who cannot qualify for local universities incur debts while studying at private universities. Sometimes, private degrees may not be recognized.” The solution, however, need not be to get non-graduates to level up and scale up the corporate ladder.

“In the UK for example, manufacturing firms offer apprenticeship programmes allowing non-graduates to become highly-paid specialists. Wage is the most important consideration.”


Presents from PM Lee

Prime Minister Lee Hsien Loong introduced four popular — possibly vote-getting measures — in his National Day Rally speech last night. The first was to enable owners of four-room flats to enjoy the lease buy-back scheme, extending beyond current availability only to three-room flats. This will enable half the public flats in Singapore to find additional source of income each month from the HDB until their residents die. Owners of larger flats had been asking their MPs for this for quite a while.

He also agreed to let retirees, upon reaching the age of 65, to take out up to 20 per cent of their CPF savings if they meet certain minimum sum requirements. He went to some length to explain the amount set ($155,000, to be raised to $161,000 next year). After his clear explanation, his comment that not many MPs were probably familiar with the maths involved drew some embarrassed twitter from the audience.

The third measure was the “silver support scheme” for the lower income retiree generation — the amount of which will be announced at the next Budget (In February 2015).



NSP: 6 PRINCIPLES AND 6 INITIATIVES TO IMPROVE THE CPF SYSTEM

Given the growing levels of public discussion surrounding the CPF system, the National Solidarity Party has published a paper outlining it’s position on the issue

The NSP explained that there is “more heat than light” in the current CPF debate and they wish to see a system with greater clarity.

NSP also highlighted that resorting to populist and reactionary ‘tweaks’ will not be able to deliver good results for Singaporeans.

This in mind, NSP set out 6 broad principles and initiatives to guide and reform the CPF system.


SDP: WE SAID THIS 15 YEARS AGO...


As early as 2000 (and even before) the SDP has been warning about the PAP withholding our CPF money.
We wrote this article 'Don't let the PAP retain your CPF savings' in 2000 in our newspaper The New Democrat and urged Singaporeans to vote the opposition so that we could keep a check on the ruling party.

But that was before the widespread use of the Internet which meant that the PAP's control of the media ensured that our message could not be communicated effectively to the public.

Because of this, Parliament was without meaningful opposition allowing the PAP to double the Minimum Sum today to $155,000.


Still room for improvement with CPF: PM Lee

The Singapore government is well-aware of the need for locals to retire with peace of mind, and is continually improving its processes to ensure the country’s retirement policies remain effective.

This was one of the key takeaways from Singapore’s Prime Minister Lee Hsien Loong’s National Day message 2014. Speaking at Alexandra Park Connector, Lee paid tribute to the pioneer generation who have brought Singapore to where it is today. He acknowledged for most Singaporeans, their Housing and Development Board (HDB) flats and Central Provident Fund (CPF) savings are the two primary ways to fund retirement schemes.

“The CPF has helped you to save for your old age,” he said. “It ensures you have a stream of income in retirement. The scheme works well for many of you, but it can be improved.”


NDR: PM leads by tweaking & ignores elephant in room

So the Prime Minister acted according to script and used the National Day Rally to talk about tweaks to CPF. He absolutely refuses to acknowledge the elephant in the room: low real rate of returns (and high real estate prices) is causing inadequacies in retirement payouts and with the Minimum Sum.

Property Pledge - First off, one cannot help but wonder the point of a property pledge to make up shortfall in the Minimum Sum. A CPF member does not owe anybody any money in his CPF account and yet is compelled to pledge a financial asset, his HDB flat, for no actual financial benefit?

Retirement Pay outs can be higher, Minimum Sum lower - Anyway, back to the amortisation spreadsheet which in “Government ‘kiasu, kiasi, kiabo’ over CPF Life” show the extremely conservative longevity assumptions used by CPF results in significant unused retirement capital going back to CPF. Let us look at what a university and a polytechnic graduate have in their respective CPF account by age 55 if they start work today using median starting salaries data from the MOM and at a salary adjustment of 4% pa.


CPF partial withdrawal at age 65 – a populist compromise

In what amounts to a populist compromise regarding the Central Provident Fund (CPF) scheme, Prime Minister Lee Hsien Loong says that the Government will “allow people the option to take out part of their CPF savings in a lump sum, when they need to.”

And they will only be allowed this “after 65”. The withdrawal refers to the Minimum Sum itself, which currently stands at S$155,000. Mr Lee disclosed at the rally that this will be increased to S$161,000 next year.

Members are currently allowed to withdraw any sum above the Minimum Sum upon reaching 55. The Minimum Sum itself can only be drawn out, in instalments, at the draw-down age of 63, which will be increased further to 64 next year, and 65 thereafter.


Why CPF is Failing

When the PAP inherited the CPF system from the British, they did not change the basic flaw in the system, which was to allow members to withdraw all the funds when they reached the then retirement age of 55. Later in the 1980s when they tried to move the withdrawal age to 60 in tandem with the retirement age, there was strong resistance from the ground. Consequently, they lost the second parliamentary seat to opposition in 1984.

I suspect that in order to achieve the same purpose, the mandarins then created the minimum sum and special account structure. They designed the minimum amount to increase over time such that when the baby boomers retire, it would balloon to a substantial amount. Today I believe those mandarins would have been very pleased with themselves as for more than 50 percent of CPF members who reached 55 almost all their funds in the ordinary account are transferred to the special account to meet the minimum amount requirement. However, they did not anticipate the public outcry arising from it.

The CPF as a retirement scheme has two problems, firstly the withdrawal age of 55 is outdated as people live longer and need to work longer before they can withdraw their CPF. Furthermore, withdrawal at 55 is uncoordinated with the current retirement age of 62 today. Secondly, the lump sum withdrawal is not in line with the principles of pension, which is an annuity. The CPF members should convert the lump sum into an annuity. It looks like the government understands all these concepts. They put in place the minimum sum and CPF Life annuity.

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PM Fails As A Financial Planner

he PM tried to play financial planner during his rally speech on Sunday and failed. His advice for a fictitious Mr Tan just fell flat after it was examined by an associate professor of the Lee Kuan Yew School of Public Policy in an article in The Straits Times.

Hui Weng Tat’s main contention is that the $2,000 a month the PM felt Mr Tan will need in his retirement years will put him among the lowest 10 per cent of resident households.

“The prospect of such retired households being forced down to the lowest decile on retirement certainly does not paint a very optimistic view of adequate retirement living in Singapore,’’ the professor said.

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Thoughts on National Day Rally 2014

I attended the National Day Rally on 17 August 2014 at ITE. After the speech, reporters from various media outlets asked for my views on the Prime Minister’s CPF announcements. These are some of my brief thoughts. My parliamentary colleague Yee Jenn Jong (NCMP) responded to the media’s questions about education.

While I understand the PM’s explanation that sufficient CPF balances are needed for people to have a decent monthly pay out after retirement, many low-income (or no-income) Singaporeans simply cannot save up enough to meet the Minimum Sum of $155,000 or $161,000, even with the property pledge included. We need to do more help those who cannot meet the Minimum Sum. I am glad to hear about the new Silver Support scheme. It is an acknowledgement that some poor elderly Singaporeans need more Government support, and that self-reliance or family-reliance has its limits.

I would like Government to focus more on ways to improve retirement income without asking the elderly to sell their homes and downgrade. It is good that the Lease Buyback Scheme (LBS) has been extended to 4-room flats. The LBS has not seen a very good take up rate so far, in large part because it was restricted to only 3-room or smaller flats. But as I had stated in my 2012 Budget debate speech, I would prefer for LBS to be extended to all flat sizes. This will help more elderly folks monetise their flats without having to sell and move out of their flats, which many of them attach a lot of sentimental value to. This is what I said in 2012:

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National Day Rally 2014 – Where are we now?

Singapore’s governments, today and in the past, have always pride themselves as “caretakers for the future generation”. We have large reserves, built up over many years of disciplined budgets and spending, jealously guarded. Not a cent has been touched, for this – the government says – is money that belongs to the children of today, who’ll be our productive citizens and carry the burdens of tomorrow.

I start with this nugget of information because my address will be focused on the future. The foresight to anticipate and plan for the unanticipated seems to be a lost art. It’s a craft I hope to revive.

We have a capable government. By and large, they keep Singapore humming along each day. The trash gets picked up every morning; the water flows when you turn on the tap; there’s food to be bought at the market.


The Story of the Fishball Stick

Quite a few viewed the National Day Rally speech on Youtube, at 9.15 pm the visitor count was 6,093. Maybe they were hoping to capture a personal video of another "mee siam mai hum" moment for posterity, the type of glitch that seem to pepper his public performances. He did mention the Minimum Sum was going to be raised to $161 twice, but the staid non-reaction of the selected audience in attendance let that pass. However, it was difficult to miss the saga of the fishball stick

Once upon a time, there was an entity that went by the acronym of PWD, which stood for Public Works Department. If you had a mosquito problem that needed defogging, a pavement that needed to be resurfaced, or a road that needed to be dug up, you had only one number to call. Think of it as the ghost-busters of public space, the sentinels of a well maintained environment, once upon a time.

Prime Minister Lee Hsien Loong told the captive audience he found out (what we all already know) that it took 3 government agencies to address one miscreant piece of wood, presumably used for piercing fishballs. Mercifully it was not bagged and sent to a government laboratory to determine whether it could have been satay or yakitori.


Are the CPF Announcements Good Enough?

Lee Hsien Loong spoke at the National Day Rally today about the CPF. In his speech, Lee Hsien Loong claimed that the CPF Minimum Sum is “not too much”

However, as I have calculated, the median CPF payout inside Singaporeans’ CPF is only about $55,000. This means that 50% of Singaporeans would have less than $55,000 inside our CPF.

The CPF Minimum Sum this year is $155,000. Thus the average Singaporean would only have 35% of the CPF Minimum Sum! Thus the CPF Minimum Sum is actually “too much”! Or actually, we are earning “too little” on our CPF to be able to save!


CPF enhancements – Govt makes even more money?

We refer to the article “National Day Rally 2014: CPF changes good but devil is in the details” (Straits Times, Aug 17).

Enhancements to CPF? It states that “One is making four-room flats eligible for the Lease Buyback Scheme. The other is giving low-income elderly a yearly bonus to help them with their expenditures during their retirement years through a new Silver Support scheme.

At the same time, Mr Lee also said that CPF members will be able to withdraw a lump sum from their savings, possibly up to 20 per cent, after they reach 65 years of age.”

Govt still not spending a single cent on CPF? - This much awaited announcement on enhancements to the CPF system, was arguably disappointing, because fundamentally, the Government may still not be spending a single cent on our CPF system, since all contributions are made by the people.


Impishly, PM Lee…

Prime Minister Lee Hsien Loong was almost playful in the way he broke the news. He explained why the government held back some of the money people saved for retirement – and then made an. announcement which had the audience cheering as if they had just heard a punch line.

The news was online almost as soon as he said it. “Lease buyback scheme extended to four-room HDB flats,” said the headline on Today online. The Straits Times website had words to the same effect. The headlines gave the news, but couldn’t convey the playfulness with which the prime minister bantered with the audience.

He did not look as if he was addressing a sensitive issue as he talked about the Central Provident Fund (CPF). I missed the latest controversy, having been away from Singapore, but some people are unhappy, as the prime minister himself said, because they are not allowed to take out the money in a lump sum. The government insists they should have something to fall back on in their old age.


A simple CPF question

How many people died without touching their CPF savings? Or how many people saved for a life time but never benefit from this saving to live for a day when they could feel relieve that it is time to enjoy their life long savings, to fantasise for a day of plenty?

Or how many people only could smile but die without really be happy spending their money after a life time saving it?

This is simply hideous.


Singapore Daily:
– The Lycan Times: All that fuss about the CPF
– Just Speaking My Mind: CPF Belongs to the People
– Reflections on Change: Talking Point — CPF Reform
– Dollars and Sense: What has changed to our CPF scheme?
– My Singapore News: CPF – Still didn’t get it
– The Independent, SG: Why CPF is Failing
– Living Investment: NDR 2014 – To get a degree or not to get a degree?
– The Independent, SG: PM Fails As A Financial Planner
– Bertha Harian: After the rally…the buffet
– Another dot in the blogosphere?: The problem with silos
– Signs of Struggle: What makes non-graduates valuable?
– Singapore Man of Leisure: Embrace Meritocracy; Not Paper Chase
– SporeanStockmarketInvestor: NDR 2014: Retirement (funding) adequacy
– Just Speaking My Mind: Tweaks to CPF
– Inve$tment Moat$: Disappointing National Rally 2014
– Musings From the Lion City: One Step Forward, One Step Back
– The Independent, SG: A PM in search of a legacy
– Pressrun.net: Impishly, PM Lee
– Blogging for Myself: NDR 2014: A shrinking Johari Window
– Loh and Behold: The Case of the Fishball Stick
– A Singaporean In Australia: The Taichi Department
– Chemical Generation Singapore: NDR and CPF
– My Little Corner: Freezing minimum sum for CPF?
– ♥ Honest © Honorable ® Holistic ♥: 50 tweets by Han Hui Hui during #ndrsg
– Guanyinmiao’s Musings: Great Aspirations