CPF Changes

Prime Minister Lee Hsien Loong announced a few changes to the Central Provident Fund (CPF) accounts in his National Day Rally speech on Sunday. Some changes were good, others were not.

The one percentage point increase in interest for part of the savings in CPF is a good thing, especially for the lower-income people of Singapore. As most of the active CPF accounts have balances below S$45,000, there is a cap at S$60,000 for the higher payout. This is something I have questions on. I know of people who are drawing high salaries but have low CPF accounts due to various factors such as housing loans etc. Whereas there are Singaporeans who are drawing lower salaries but has high CPF accounts but that is due to the fact they are not paying for any housing loans. Giving this simple example, can the government really say that it is fair for the lower income Singaporeans to have less payout?

I also dislike the government making buying annuity compulsory. I knew it was coming when Mr Lim Boon Heng, Minister-in-Charge of ageing issues talked about it earlier in the week but annunities gives very little interest. What's more, you have to leave parts of your CPF alone for it to gain the annuity. And it's COMPULSORY! This is how it works. CPF members are allowed to convert their minimum sums to annuities with an insurance company and then get monthly payouts for the rest of their lives.

If the government want to convince me to leave part of my CPF for them, they better give me something much, much better than what it is currently giving. The fact that the scheme has not been popular is NOT because Singaporeans don't understand annuities or don't understand why they need them (I know what are annuities, thank you very much). It's also because the returns sucks! And now it is COMPULSORY?

However, all that is nothing compare the idea of raising the draw-down age for the minimum sum from 62 to 65. Currently, Singaporeans who have turned 62 can start withdrawing their CPF minimum sum and enjoy a S$790 monthly payout for the next 20 years. However, this will change in five years (in 2012) when the new "Draw-Down Age", or DDA, is raised to 65. As Chiam See Tong, MP for Potong Pasir said, "I think the government will have to do a lot convincing the people." Include me on that list! I know people are living longer, and we have to work longer. Why does that mean we have to start drawing on our CPF reserves later? I can't understand why working longer means drawing on our own money later, especially when the government intent to raise the retirement age! What about people who can't work till 65? The CPF was to be our retirement funds, but what good is a retirement fund if you can't touch it?

Details on the CPF changes will be spelt out when Parliament sits next month, expect more on this then.