Saturday, 23 February 2019

Josephine Teo: CPF Board can do better

In communicating messages on payouts
Manpower Minister Josephine Teo speaking in Parliament on Feb 18, 2019

While the Central Provident Fund (CPF) Board has "stepped up" its outreach efforts, there is "much room for improvement" in how it relays information on key issues such as starting payouts for those who are retiring, said Manpower Minister Josephine Teo in Parliament on Mon (Feb 18).

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

The answer is yes.
"For example, we will review the letters sent to (CPF) members who are approaching their Payout Eligibility Age (PEA), so as to avoid misunderstandings which confused members unnecessarily,"
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Why sudden change in age for automatic CPF payouts not a good idea, says Josephine Teo
Manpower Minister Josephine Teo said that from this year, all members reaching their eligibility payout age can attend a CPF Retirement Planning Service, a face-to-face personal service. PHOTO: GOV.SG

Manpower Minister Josephine Teo explained on Mon (Feb 18) in Parliament why she is wary of making a sudden change in the policy on the age that Central Provident Fund members can automatically receive monthly payouts from their retirement account.

This is partly because members have been told for years that payouts start when they instruct the CPF Board. "So this has been the longstanding instruction," she said.

"Every time there is a change, it takes a long while for people to get used to it." She suggests instead focusing on improving the communication for the policy as it stands.

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Claims that CPF 'retirement payout age' shifted to 70 not true: CPF Board

Social media posts and messages claiming that the Government has shifted the payout age for the Retirement Sum Scheme (RSS) to 70 are "not true", the Central Provident Fund (CPF) Board clarified in a Facebook post on Saturday (Jan 19).

"You may have recently come across social media posts and messages that claim that the Government has quietly shifted the 'retirement payout age' to 70 for the Retirement Sum Scheme," said the CPF Board.

"This is not true and here are the facts," the board said.

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Make full CPF payout by age 70

The issue of Central Provident Fund (CPF) payouts is of great interest to all Singaporeans since it concerns everyone's hard-earned money.

Recent comments on the issue by Manpower Minister Josephine Teo raise a few questions (No change to CPF payout age: Josephine Teo, Feb 19).

If the interest rate earned by CPF savings is indeed risk-free and well above market rates, then it stands to reason that many more people would opt for the deferment of payment.

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CPF Monthly Payouts Default At Age 70: What Could Have Been Done Better? Is It Still A Reliable Retirement Plan?
Retirement Sum Scheme Monthly Payouts For Singaporeans Turning Age 70 From 2018 Onwards

To clarify the above misunderstanding amongst Singaporeans, here’s what we found out after reading through some of the information on the CPF website.

For Singaporeans turning age 70 from the year 2018 onwards, here are some things you need to take note of:
  • The CPF Board has automatically start payouts at age 70
  • If you wish to receive their payout at an earlier age, you will need to opt out of it.
In short, your CPF monthly payout automatically kicks in at age 70 though you are eligible for payout at age 65, if you wish to kick start your monthly payout anytime earlier, you need to do something about it.

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54-year-old veteran lashes out at CPF Board for constantly changing its retirement payout age

A 54-year-old veteran named Khris Ang recently took his Facebook page to vent his dissatisfaction over Central Provident Fund (CPF) Board after it had been changing the retirement payout age multiple times over the years.

In his post, the former senior engineer said that when he started working, he had no option but to put in his monthly contribution into his CPF account. However, he mentioned that it’s a bad habit that CPF Board has acquired as it keep deferring the payouts.

He revealed that when he first started working, the deal was everyone can get a complete withdrawal when they reach the age of 55. This according to Ang is “an absolute peach sweet and juicy” deal for CPF Board.

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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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Live long and prosper with CPF Life

While I prefer the old scheme's 20-year fixed payout, it's CPF Life that will provide me a monthly income for as long as I live.

Ten years ago, the Central Provident Fund (CPF) Board introduced CPF Life after studies showed that Singaporeans were living longer and longer, with many past age 85 when their monthly retirement payout would have run out under the old Retirement Sum Scheme.

CPF Life is the national annuity plan, providing lifelong income throughout retirement, which is the logical thing to do to avoid a situation in which one's savings or income runs out before one's life does.

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“It’s common sense, automatic payout should start at 65” says Calvin Cheng on CPF

Former Nominated Member of Parliament (NMP) Calvin Cheng is known for his pithy no-nonsense remarks on social media.

The comments he made on the withdrawal of the Central Provident Fund (CPF) following the announcement of the Budget 2019 were no different, and hard-hitting.

Cheng wrote, “It should be the other way round. Automatic payout at 65 and people can request to start only from 70.”

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How The CPF Minimum Sum & Payout Eligibility Age Have Changed Since 1987

CPF Minimum Sum Increased From $30,000 In 1987 To $181,000 In 2020.

The Minimum Sum (MS) and Payout Eligibility Age (PEA) are key components of the Central Provident Fund (CPF), which most working Singaporeans contribute towards every month. Both introduced in 1987, the MS and PEA have undergone drastic changes over the years.

These changes were introduced by the government to ensure the system evolves with the needs of its citizens. In particular, the MS has increased from $30,000 to $181,000 while the PEA has increased from 60 to 65 years old. With that, here’s a more in-depth look back at how both have changed over the decades.

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Toh Chin Chye’s criticism of raising CPF withdrawal age 34 years ago resounds as calls to hike withdrawal age renew

Late pioneer politician Dr Toh Chin Chye’s sharp criticism of raising the Central Provident Fund (CPF) withdrawal age over three decades ago resounds even today as the world’s largest human resources consulting firm, Mercer, recently renewed calls to raise the CPF withdrawal age given growing lifespans.

Mercer’s recommendations came after the release of this year’s Melbourne Mercer Global Pension Index (MMGPI) which ranked Singapore’s pension system the best in Asia for the 10th consecutive year and the 7th best pension system in the world.

Singapore’s pension system is primarily centred around the CPF system – an employment based savings scheme in which employers and employees contribute a mandated amount to the Fund each month. It is compulsory for all Singapore citizens and permanent residents to contribute to CPF.

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CPF: "The gift that keeps on giving"
CPF Board ad encouraging members to gift loved ones

The advertisement, called ‘Birthday Gift’, was launched earlier this month. In a 30-second long clip, a couple can be shown celebrating the wife’s birthdays after the first year of marriage, the fifth year of marriage and the tenth year of marriage. The husband gifts the wife a bouquet of roses on her birthday after their first year of marriage and expensive jewelry four years later.

On her tenth year of marriage, the husband gifts his wife “a gift for the years ahead”. The wife is extremely joyful to discover a statement from CPF Board, showing that her husband has topped up her Special Account under the Retirement Sum Topping-Up Scheme.

The wife exclaims “Wow,” before teasing her husband, “So how are you going to top this next year?” as the advertisement asserts, “The future is closer than you think – Be ready with CPF”.

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You don't need much space to have sex
Josephine Teo on ‘no flat, no child’ belief

That was the feisty rejoinder from Sr Minister of State Josephine Teo, who oversees the National Population & Talent Division, to a question on whether young people are not getting their flats early enough to have children.

The suggestion was that this could be a chicken-&-egg problem. To qualify for the Parenthood Priority Scheme, which gives 1st-time married couples 1st dibs on getting a flat, they must be expecting or have a citizen child below 16.

But to have a child, some say they need to have a flat first.

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Josephine Teo: CPF Board can do better
CPF: "The gift that keeps on giving"
CPF Advisory Panel Recommendations
Labour chief Lim Swee Say clarifies CPF comments