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Tag: minimum sum

  • CPF Minimum Sum In Three Sizes

    CPF Minimum Sum In Three Sizes

    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.

    To get this kind of payout means leaving $80,500 in your CPF. That is, if you own your home. Why? You can rent it out if you need money. If you sell it because you prefer to rent a home, the CPF money you used to pay for it will still go back into your CPF – so it’s back up again. (Forget everything that has been said about being able to pledge your property ecetera. Serious.)

    If you do not own property, that $80,500 is doubled to $161,000 (Yup, that’s the minimum sum for those turning 55 next year) It means higher payout which is also to cover for expenses like rent, which a homeowner wouldn’t have to worry about.

    If you actually want to put in more money into your CPF, you can. Up to $241,500. Now, why would anyone want to do it? Because, hey, the CPF pays better returns than the banks or even commercial insurance companies. And yes, even higher payout of close to $2,000 a month

    So that’s why the panel doesn’t want to use the term “minimum sum’’ anymore but RETIREMENT SUM. Besides sounding like a ransom demand, it now applies to three different S/M/L sizes – Basic, Full and Enhanced.

    To recap:

    Basic is $80,500

    Full is $161,000 (doubled)

    Enhanced is $241,500 (tripled)

    In case you’ve forgotten everything about what happens at 55…

    1. You can take out everything in excess of Basic if you own your home. If you don’t even have a Basic, you can take out $5,000. Yup, nothing has changed.
    2. What’s new: that Basic sum will increase by 3 per cent a year so that you wouldn’t be so suddenly surprised by an announcement when you’re 54.

    But quite a lot can happen in 10 years time when you hit 65.

    1. You can decide to withdraw 20 per cent of the sum you left inside. It’s been accumulating interest after all (and you need to pay for your son’s wedding or your daughter’s overseas education). Remember though that getting a lump sum early means smaller monthly sums later on. So you can expect some incentives from the G to get you to leave your 20 per cent alone. Now, for those with really really low balances, it’s no-go.
    2. You can decide to leave your money in there because you really don’t need it yet. Instead, you can accumulate even more interest and get a bigger pay-out – about 6 to 7 per cent more – later. You can do this at most for five years. (The CPF isn’t supposed to make your fortune but provide for retirement after all.)

    Okay, so far, the panel hasn’t said anything about those with not enough to meet even the Basic. First off, they aren’t going to be penalized or have their homes taken away from them. They will still get an income until they die, albeit a smaller sum. Still, what can be done to help them?

    There are some things in place already such as an extra 1 per cent interest for those with $60,000 in CPF balances. Plus there is the Work Income Supplement for the lower paid which also goes into their CPF. (I guess we have to see what the Budget will bring but there is a Silver Support in the offing in which the G is expected to give cash/CPF bonuses to older folk)

    The good news is that increasingly over the years, more and more people will be able to meet the Basic sum. Right now, 55 per cent of CPF members can. And by 2020, 70 per cent will be able to do so. Hey, that’s what the panel says okay…!

    Those are the panel’s key recommendations but it also raised other matters for the G to consider. For example, the panel…

    1. Agreed with the NTUC’s suggestion to bring back up the CPF contribution rates of those aged 50 to 55 who are working. This was cut to encourage employers to employ older workers and it’s working well enough already it seems.
    2. Like the NTUC, it wants the salary ceiling for CPF contribution, which is now $5,000, raised. In two swoops, voila! More CPF money! (Although how employers will react to this I don’t know)
    3. Wants spouses to be allowed to start CPF Life accounts for their non-working partners.

    As you can tell, I am not commenting on the changes because I am still trying to wrap my head around them! At first glance, they seem populist, a bid to satisfy as many differing demands as possible (except the Return my CPF at age 55 lobby). Or it can be framed as a matter of choice and giving people a bit more control over their money. The panel prefers to use the word “flexibility’’. Flexibility is so complicated isn’t it? And that’s just Part 1 of the recommendations. Part 2 will be about “flexible’’ payouts.

    Don’t forget that there isn’t just one CPF Life plan, but a few…you pick one. I’ll bet anything that most people have forgotten this.

     

    Source: https://berthahenson.wordpress.com

  • The Need For Flexibility In The CPF System

    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.

     

    Source: www.channelnewsasia.com

  • More Flexible CPF Minimum Sum System In The Future?

    More Flexible CPF Minimum Sum System In The Future?

    Factoring in one’s income level, gender and marital status in setting the Minimum Sum for different individuals could be one way to inject flexibility into the Central Provident Fund (CPF) system for different members. In addition, contribution rates and ceilings should also be tweaked to ensure retirement adequacy, said experts, in response to the Government’s consideration to move away from the one-size-fits-all format.

    If members are free to choose how much they want to save based on what they think they need in their later years, it may result in the state having to give out more in public assistance for vulnerable groups or make the CPF system even more complex, they added.

    “Giving them too much choice isn’t necessarily good because we can’t ever predict the future for ourselves,” said Institute of Policy Studies research fellow Christopher Gee, who specialises in policy implications on retirement adequacy, housing and healthcare.

    In an interview last week, Manpower Minister Tan Chuan-Jin hinted that the advisory panel set up by the Government to review the CPF is mulling the introduction of varying levels of Minimum Sum and payouts because “actually, people do have different needs and people are looking at different requirements”.

    The panel is expected to submit its preliminary recommendations to the Government in February.

    Yesterday, experts interviewed welcomed the idea of moving away from a common Minimum Sum for all CPF members.

    The Minimum Sum is the amount each member has to meet at age 55 to be able to make withdrawals. It is set at S$155,000 now, but will be increased to S$161,000 next July.

    Pointing out that the Minimum Sum could be set at a “more realistic” level for lower-income groups, Nanyang Technological University economist Walter Theseira said: “It is extremely difficult for them to have any chance of meeting the Minimum Sum. But we have to accept that if we want to give them more flexibility to withdraw their money earlier, we probably have to help them more in retirement.”

    Assistant Professor Theseira suggested that one’s gender and marital status could come into play, noting that other countries have retirement adequacy systems that are conceived on a family basis, unlike Singapore’s CPF system, which is more individualistic.

    “Under the United States’ Social Security system, the state gives additional benefits to married households. You can claim half of your spouse’s benefits (from the state) or all of your own, depending on which is higher,” he said. “It is extra income just for being married. Our system is not like that.”

    Associate Professor Hui Weng Tat from the Lee Kuan Yew School of Public Policy noted that a higher Minimum Sum for the middle-class group would provide a more comfortable retirement. But the “relatively low” contribution ceiling of S$5,000 now would have to go up in tandem, he noted.

    On the minister’s point that the advisory panel is also studying having payouts that increase progressively to mitigate the effects of inflation, Assoc Prof Hui said the change would require the returns on special government bonds (which CPF monies are invested in) to be inflation-indexed or inflation-protected.

    Such a practice is already common in overseas bond markets, Assoc Prof Hui pointed out.

    Asst Prof Theseira also noted that rising payouts means purchasing power is preserved over time and not that one can consume more goods as one ages. “(It means) I can buy the same basket of food today as I can 10 years from now,” he said.

    Meanwhile, Mr Gee suggested that contribution rates and ceilings should also be tweaked to boost retirement adequacy.

    As employer contribution rates decrease with age, “there’s less incentive for employees to continue working and this goes against the idea of encouraging people to work longer”, he said.

    Allowing withdrawals only when an individual retires — instead of from age 55 as is the case now — could be an option. “The reality is that people are living longer. The average Singaporean could retire at 55 years old and live for another 30 years,” Mr Gee said.

     

    Source: www.todayonline.com

  • Government To Set Up CPF Advisory Panel In Feedback Exercise

    Government To Set Up CPF Advisory Panel In Feedback Exercise

    The government is setting up a CPF Advisory Panel to ask the public about what they feel about the CPF System.

    In a media release, the Ministry of Manpower explained that they want to hold Focus Groups to gather feedback on four main issues. These issues are:

    How the Minimum Sum should be adjusted after 2015, whether members should be allowed to withdraw a lump sum, how to increase the choices of the amount of cash payouts and how to give members more flexibility to get higher returns.

    The CPF Panel will be holding the discussions over the next few months and members can get more information and sign up at www.cpfpanel.sg.

    It seems that the government is finally listening and taking feedback from the public after much public discussion and dissatisfaction.

    The public have organised their own gatherings, spoken up on many occasions at Hong Lim Park through the monthly CPF protests and one activist, blogger Roy Ngerng, is even being sued by the PM for writing about CPF.

    Why is it that now, the government wants to listen but fails to acknowledge that they have only finally decided to do so after citizens made so much noise about it?

    Is this the way the government “gathers feedback” in Singapore – Ignore the people when they speak up and even try to silence them by revoking permits and issuing legal threats only to turn around and open up public dialogues months later and pretend that it is their idea to listen to the public?

     

    Source: wwww.therealsingapore.com