Thursday, 12 February 2015

Social Media On CPF Advisory Panel Recommendations

PM on CPF: Many don’t jump around at Hong Lim Park
Speaking to Singapore journalists at the end of his four-day official visit to Germany yesterday (4 Feb), PM Lee commented that the recommendations announced by the CPF Advisory Panel are “good”

The panel’s recommendations include letting people withdraw up to 20% of their retirement savings at age 65, and an option for those who want to go beyond the Basic and Full Retirement Sums to pick an Enhanced Retirement Sum.

“These are just fulfilment and definition of what I had sketched out last year at the Rally,” he acknowledged.

Mr Lee said that the recommendations to make the CPF scheme more flexible are appropriate as people seek greater say and security for their savings in old age. He said that even today, quite a number of people leave their money in their CPF accounts instead of taking out what they can at their draw down age. “They quietly know this (CPF Scheme) is a good deal…”

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Rapid CPF Proposals

Has anyone digested the new CPF proposals from the panel led by Prof Tan Chorh Chuan? I certainly haven’t, but guess what? On the day of the publication of the new proposals, the manpower minister’s letter accepting every single proposal in their entirety was also published alongside!

Isn’t it amazing how the govt can properly evaluate and agree to such radical proposals as slashing the minimum sum by half in less than the time you and I take to read the entire msm article on the proposals? That’s why our ministers are worth millions of dollars per year, they’re so efficient!

But personally I find the rapid ‘acceptance’ of all the proposals rather strange. I’ve never seen such well-thought out proposals that are accepted without a single question. I’ve also never seen proposals accepted so rapidly. And I find it strange that this govt can just accept such wide-ranging proposals without even giving parliament a chance to debate the proposals. In fact, I’d have expected the govt to go on a road show to sell the new proposals to the public, to take months on the road, presenting the proposals at dialogue sessions, consulting, explaining, persuading and then refining the proposals before putting them to a parliamentary vote.

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CPF minimum sum – in Small, Medium and Large

I was thinking of doing a listicle, a brainless but, hopefully, funny way of conveying information. Except that the CPF review panel’s recommendations have left me brain-dead and I am not feeling terribly funny. Bear with me please because I think this is too big an issue not to destroy some brain cells over.

Now, the panel wants us to leave this gawdawful term “minimum sum’’ alone for the moment and work backwards. Let’s not think about how much money we have in our CPF when we turn 55, it says, but what we hope we will get when we turn 65, when monthly payments kick in.

Here’s how the panel wants the changes framed - If you are 55 now, in 10 years, you’ll need about $650 to $700 a month. The panel has factored in inflation AS WELL AS rising standards of living. So it’s not just for bread and water, but kaya and kopi as well.

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Balancing The Demands Of The Various Groups Of CPF Members

Basically what we are advocating is for there to be more options that will suit all groups of people, but CPF members must then be able to understand the various schemes and the implications of withdrawing earlier, or even toping up.

As it is, it appears that Singaporeans, ourselves included, are already having a difficult time understanding CPF (no thanks to the frequency of changes being made). There is no point having 100 different options for CPF members to consider, only for them to not understand the implications of each, and to end up unwisely choosing a plan where they are worse off than before.

To conclude, we think education and flexibility should go hand in hand to achieve the best results. CPF members must be willing to educate themselves about their money, and the government must be able to find a policy that should work consistently and not have to tweak it every other year. Only then would a range of options will work, and CPF members will be better off.

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CPF Scheme Still Stinks

Which part of "Return our CPF" did the 13-members of the CPF advisory panel not understand? The "basic" amount of $80,500 of the Basic Requirement Sum is still money withheld, money which should have been released at age 55. Way back in 1984, Toh Chin Chye had already named the beast:
"Mr Speaker, I think fundamental principles are being breached. The fundamental principle is this. The CPF is really a fixed deposit or a loan to Government, which can be redeemed at a fixed date when the contributor is 55 years old. If I were to put this sum of money in a commercial bank and, on the due date I go to the bank to withdraw the money, the manager says, “I am sorry, Dr Toh, you will have to come next year”, there will be a run on the bank! It is as simple as this, that the CPF has lost its credibility, the management of it."
Toh also identified where the thievery started from Medisave: “6% of your Special Account will be kept for Medisave and you cannot withdraw that, even if you were to die.” Some senior citizens have discovered, to their horror, that when their meagre Medisave funds are used for healthcare needs, funds from ordinary/retirement accounts were transferred over to make up the Medisave minimum, without their knowledge or expressed permission.

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The magic number is 65

The problem with trying to please people is that you end up pleasing no one at all. And so the CPF review panel is finding itself in this conundrum almost immediately after its proposed changes were made public. How come?
  • People had expected some changes to the rate of interest, which is now at 4 per cent for Special Account. Hey, the fund manager, GIC, sometimes makes more than this so how come it’s not higher?
  • People thought that when there was talk about a lump sum withdrawal, it would be at age 55, not 65. After all, it wasn’t not too long ago that people can withdraw as much as half, instead of the measly $5,000 if you don’t have enough in the Minimum Sum.
  • People thought that the draw-down age was set at 62, which is the retirement age. Sure, there are the re-hiring laws but it’s no guarantee that you would be re-hired right?
  • People thought that more will be done for those with low balances but there’s nothing in the proposals about helping those with less than the minimum sum raise the amount. Nothing new at least.
  • People thought that they could make a property pledge to make up half of the minimum sum. But it seems the property pledge which had people worried about having their homes taken away from them isn’t a big deal at all. It’s unnecessary. That’s good news but sheesh…why even have it in the first place?
Notice I use the word “people’’ – so yes, I’m generalizing here. “People’’ were expecting some massive changes to the CPF system but it looks like tweaks here and there. That’s because “people’’ forgot about the parameters that had been set for the review panel.

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How you should respond to the CPF changes

The CPF Advisory Panel has made their initial recommendations and it is likely to be adopted (duh!) What should you do?

If you are the low income earner who is unable to meet your minimum sum, most of the recommendations are of no help to you. And the option to withdraw 20% of your RA at 65 is not without costs.

It does provide you with a choice, but whether you want to exercise that choice will depend on your situation - do you have a need for that money at 65? And that is for you to decide based on your personal situation. For the gamblers in you, here's a tip. Or some scenarios to consider.

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2 suggestions I like from the CPF Life review panel
Option to contribute more into CPF Life to get a bigger payout - This option would come in handy when I reach 55 years young in 8 years' time.

If at 55 I can't find any good parking space (everything overpriced) for my "spare cash", I would very much like this option to increase my CPF Life payout.

I think this may also appeal to cash flow fanatics out there - especially those who are worried sick they may run out of cash during their happy hour years ... Cash flow for Life anyone?

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More flexibility proposed by CPF Advisory Panel. Why I think they are good
After a few rounds of gaining feedback from subject matter experts as well as the community through focus group, the CPF Advisory Panel, lead by Professor Tan Chorh Chuan submitted the FIRST batch of recommendations on how to improve the CPF

The panel provide names for the entry minimum sum for the folks who turns 55 next year. It used to be that the government explains that if you have a home and you pledge 50% of the home, you will only need to satisfy 50% of the $155k limit.

Now its re-branded as Basic and Full Retirement Sum. If you pledge your home, you will only need to satisfy $80,500 in your CPF minimum sum, which is made up of your CPF SA account and if SA is not enough, CPF OA. This is Basic Retirement Sum.

If you do not pledge your home, you will need to satisfy $161,000. This is the Full Retirement Sum. Much clearer. Your pay out is smaller if you opt for basic.

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CPF is the people’s money, a life time of savings. What makes the few elected individuals think they have the right to decide on what to do with the people’s money?

Tell us, the people who put their money in the CPF, who are you and what right have you, how clever are you, to keep our money at your fancy, that you know best how much the people can have their money back, and how much to return to the people?

WHO ARE YOU? WHAT ARE YOU? Are you God, supernatural, human beans of abnormal intelligence? To me you are just boys and girls who happened to be elected by the blind voters to form the govt. Period. Do not act too smart or smug. You are ordinary like every Sinkie, nothing more, nothing less. Stop behaving and acting like smart asses.

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The CPF Advisory Panel, which has been conducting dialogues and feedback sessions with focus groups on the CPF System, has submitted a set of recommendations to the government on the CPF system.

The government has accepted their suggestions and will put the issues up for debate during the budget debate later this month in Parliament.

Below is a quick look at some of the suggestions made by the panel.
  • Basic Retirement Sum
  • Full Retirement Sum
  • Enhanced Retirement Sum
CPF Advisory Panel Suggests Raising the CPF Minimum Sum More in Future
CPF Advisory Panel Suggests that People should Lock Up even more Money in CPF

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Letter of Disappointment

When you get a government job, I understand that you get a Letter of Appointment. Similarly, when you are appointed to some role like a member of the CPF Panel of Advisors, I suppose you will get a Letter of Appointment.

So when you are discharged from that job or that appointment, do you get a Letter of Disappointment?

Maybe I am being unfair, but I really think the panel should all get Letters of Disappointment.

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4 things that CPF fails at

DollarsAndSense recently attended one of the focus group discussions held by the Central Provident Fund (CPF) to understand the scheme better. We noticed four recurring themes that kept coming up during the discussion, and have summarised them with the acronym “UPCC” for a truly Singaporean reading experience.
  • U – Understanding Singaporeans
  • P – Predictability
  • C – Clarity
  • C – Communication
Understanding Singaporeans - The CPF system fails to understand the very people people it safeguards. We can, to a certain extent, emphatize with this shortcomings though. The scheme was conceptualized taking people’s expectations, needs and requirements to be homogenous, but people are far from homogeneous creatures. There is only one national social security system – the CPF, catering for all 3 million Singaporeans. Can any one system ever fit the needs and requirements of everyone?

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More flexibility in system, but more simplification, explanation needed: Experts

The recommendations by the Central Provident Fund (CPF) Advisory Panel may provide more flexibility to CPF members seeking more control of the use of their savings, but whether it helps Singaporeans better understand a scheme often criticised for being too complicated is debatable, said experts whom TODAY spoke to.

Much effort would have to be made to help Singaporeans understand the implications of making a lump-sum withdrawal at 65 and which of the three Retirement Sum levels — proposals unveiled by the panel — best meets their needs, the experts felt.

Institute of Policy Studies research fellow Christopher Gee said the three recommended Retirement Sums — starting with a Basic Retirement Sum of S$80,500 — means three more terms for people to absorb in place of the current Minimum Sum.

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New ‘changes’ to CPF scheme: So What!

The CPF Review Panel thinks it knows what the government wanted to hear and promptly deliver its recommendations. The government thinks it heard what irate citizens wanted and promptly accepted the CPF Review Panel’s recommendations. Such is the sclerotic habits of political self-validation.

In the 2014 National Day Rally, the Prime Minister said there will be flexibility and so now 50% of CPF can be withdrawn at 55 subject to condition of property ownership and then 20% at 65. The government think it has met halfway the demands of the “Return Our CPF” crowd. High fives and pat on the back all round for stopping the rot of voter anger.

The elephant in the room - How mistaken can they be. The “Return Our CPF” may have been a loud message but once citizens’ concerns over CPF are awakened, the problem has gone way beyond the simple desire to withdraw their CPF at age 55. The elephant in the room is retirement inadequacy and the cause is simple enough that it is worth repeating ad nauseam

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9 articles on CPF in 1 newspaper - I refer to the “onslaught” of nine articles in the Straits Times (Feb 4) on the CPF advisory panel’s recommendations.

For example, the article “CPF proposals: Advisory panel offers ideas to make pension fund more flexible” said “The biggest change is splitting the Minimum Sum into three levels. CPF members can choose to lock away a basic sum of $80,500, a higher sum of $161,000 or an enhanced sum of $241,500 at age 55.

The monthly payouts at age 65 range from $650 to $1,900.” Using those who turn 55 in 2016 as example

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CPF Advisory Panel merely echos what PM said last year
CPF Advisory Panel Chairman, Professor Tan Chorh Chuan

A 13-member CPF Advisory Panel announced several recommendations to enhance the CPF system, which was accepted by the government today (4 Feb).

Other than some added flexibility, the main recommendations touched on the amount of payouts and the additional lump sum withdrawal available to CPF members at 65. The minimum sum now called with a new name, “Full Retirement Sum” is set to $161,000 at 55 if one doesn’t have a property. The payout is $1,200-1,300 per month from 65 onwards.

If one has a property to be pledged or with CPF charge, the minimum sum, now called “Basic Requirement Sum” for this case, is $80,500 or half of “Full Retirement Sum”. This gives a basic payout of $650-$700 per month from 65 onwards.

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Singaporeans could be given greater flexibility to put in more money into their Central Provident Fund (CPF), if they want to enjoy a higher level of payouts in retirement. This is among the issues studied by a panel tasked to review the national savings scheme.

Other issues reviewed by the panel included adjusting the CPF Minimum Sum for inflation and standard of living, and having an additional lump sum withdrawal from age 65. The panel will submit its first set of recommendations to the Government next week. This will cover two areas - how to adjust the Minimum Sum beyond 2015 for future retirees, and lump sum withdrawals at age 65.

Appointed by the Ministry of Manpower, the CPF Advisory Panel is studying possible enhancements to the CPF system, to make it more flexible in meeting the needs of more Singaporeans and provide additional options in retirement.

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“CPF has lost its credibility, the management of it” by late Dr. Toh Chin Chye in 1984
Dr. Toh Chin Chye, founding chairman of People’s Action Party

On 29 Jun 1984, The then Minister for Health, Howe Yoon Chong, proposed to move a Motion in parliament for the House to approve the recommendations of the Committee on the “Problems of the Aged.”

The recommendations were contained in a Blue Paper prepared by the Committee under the Ministry of Health in Feb 1984.

The most controversial recommendation in the paper was to recommend “that the age at which CPF contributors be allowed to withdraw their savings should be deferred first to 60 and later to 65″.

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The Singapore Daily
– Singapore 2B: Letter of Disappointment
– Reflections on SG: Govt Says Pre-Funding MediShield Life Is A New Feature
– My Singapore News: CPF – I want to defer my withdrawal to age 90
– Ryan Goh: Early retirement: some math
– Dewdrop Notes: Overwhelming Support For CPF Flexibility
– Just Speaking My Mind: No Significant Change to CPF
– The Heart Truths: PAP Continues to Whitewash the Truth about the CPF
– Bertha Harian: The magic number is 65
– Singapore 2B: How you should respond to the CPF changes
– Political Writings: Rapid CPF Proposals