The Need For Flexibility In The CPF System

SINGAPORE: Singapore’s national savings scheme, the Central Provident Fund (CPF) system, should provide flexibility in areas such as lump sum withdrawals while maintaining its role of providing for retirement.

The CPF Advisory Panel chair, Professor Tan Chorh Chuan, shared this with the media on Saturday (Jan 10) after the end of the first round of focus group discussions, which sought views on topics related to enhancing the CPF system.

One of the questions posed during the discussion was how much should CPF members be able to withdraw at age 65. One of the participants of the focus group was Ms Triena Noeline Ong, who is 69 years old and director of etymology at International Book Publishing & Editorial Services. She said: “When I turned 55, which was some time ago, I could withdraw all the CPF that was permissible, which I did. Then it was the economic crisis, so I lost a lot of it. I feel that the lump sum withdrawal is not a good idea but if you have excess of the minimum sum, perhaps you could withdraw that.”

Another praticipant, social worker Benjamin Ho, was supportive of more flexible lump sum withdrawals. He said: “For legitimate reasons such as unemployment and other medical issues that are not covered at the moment… Would they be allowed to withdraw a certain amount of money? So that at least they are able to foot their debt and are able to start off on a more stable footing and plan towards retirement.”

About 40 people attended the focus group discussion, with participants from different age groups and diverse backgrounds. This is the tenth focus group discussion by the CPF Advisory Panel. Around 400 people have given their views thus far. During the discussions, participants were consulted on topics such as CPF payouts and lump sum withdrawals at 65 years old. The panel has also received about 150 written submissions.

“What we have heard is that many people would like the flexibility of a lump sum withdrawal, but yet they also recognise that there has to be some conditions set so that it does not erode into the long-term payouts, which are also very important,” said Prof Tan.

“Again, we will take this on board to make sure that we can provide some flexibility, but yet at the same time, ensure that we maintain the very important role that CPF has – to ensure some level of adequate support over the much longer lifetime that most Singaporeans now enjoy.”

Currently, a Minimum Sum of S$155,000 is set aside for CPF members who turn 55 from July 2014 to June 2015. When the member reaches 65, there is a monthly payout of about S$1,200 for life. In July 2015, the Minimum Sum amount will be adjusted to S$161,000.

Prof Tan said the discussions threw up a “wide diversity of needs” but the panel recognised that if it tried to encompass all concerns, it would make the system complicated. He added: “The CPF is one very important element of retirement adequacy provision, but it cannot also cater for all types of circumstances – otherwise the scheme would just become too difficult to understand and administer. So fundamentally, it requires us to stay very focused on what are the most important roles of CPF and how best can we provide that flexibility so that it can serve Singaporeans better.”

The panel will submit its first findings to the Government by early February 2015. These will touch on issues such as the Minimum Sum, lump sum withdrawal and payouts.

There will be further focus group discussions on how to provide more flexibility for members seeking higher returns, be it through private investment plans or annuities. These recommendations should be out by the middle of 2015.



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