I refer to the article “CPF rates for older workers ‘may go up‘” (Straits Times, Feb 11).

CPF rate increase to 36% for aged above 50 to 55? 

It states that “Union leaders, he said, are not pushing for the 3.5 per cent gap to be closed “in one go, because we do understand it should be done progressively”, he told reporters after an official visit to restaurant chain Eighteen Chefs.

The CPF rate of these older workers is 32.5 per cent compared to 36 per cent for younger workers.

The National Trades Union Congress (NTUC) is also expected to make known this week its plans to push for CPF rates to be tweaked to help Singaporeans save for medical and other financial commitments in their old age”

Increase to Medisave & Special Accounts?

– Is this good news for workers?

Well, if the expected increase is the same like the last round of increases – whereby all the increase went to the Medisave and Special Accounts – it may mean that there may be no increase in the disposable income of workers.

One of the reasons why real wage increase has been so low in the last 5 or 10 years, may be that employers may reduce wage increases because their overall wage bill has gone up due to the increase in the CPF contribution rate.

This is perhaps underscored by the remarks “Some businesses, however, are worried at the prospect of a CPF rate increase.

Mr Luke Pang, group manager of dessert and pastry chain Canele, said: “We may have to increase prices.”

Mr Kurt Wee, president of the Association of Small and Medium Enterprises (ASME),asked for early notice of any rate increase “because many employers are already in a tight and difficult situation”.

He was referring to the tight labour market and rising rents.”

0.3% real wage increase p.a. last decade?

In this connection, the real income growth per annum for the 20th percentile, was only 0.3% from 2003 to 2013.

1% real wage increase last 5 years?

The real income growth per annum for the median income, was only 1.0% from 2008 to 2013.

More money for the Government to utilise?

How much will a 3.5% increase in the CPF contribution rate, increase the amount of total CPF contributions from the current $26.1 billion in a year?

Ratio of withdrawals to contributions?

Will this reduce the ratio of total CPF withdrawals to contributions in a year further? The ratio is currently about 0.45 – that is only about $1 is withdrawn for every $2.20 contributed.

According to the Department of Statistics’ Monthly Digest of Statistics September 2013, withdrawals of CPF for all purposes was $11.7 billion in 2012, and contributions for the year was $26.1 billion.

This may mean that even more CPF funds may be available for the Government to utilise.

Govt does not spend a single cent on CPF?

From a cashflow perspective, the Government may thus continue to not spend a single cent in our CPF system, as it continues to be funded entirely by the people through their own CPF contributions.

Moreover, the $248.1 billion of CPF funds, as of December 2013, may continue to enable the Government to keep any excess returns from our CPF money, instead of returning them to the people by way of higher returns like in the pension funds of practically every developed country in the world.

In this connection, all the apparent spending on CPF like Medisave top-ups and Workfare, may be more than offset by the excess returns.

Leong Sze Hian

P. S.

In this connection, come to the following public forum for a better understanding of the issues pertaining to our CPF and Budgetary processes:

•  
• • Organised by Empowering Singaporeans, and supported by MARUAH, Function 8 and WorkfairAmidst worries of contracting global demand and rising prices at home, Empowering Singaporeans, a group of concerned Singaporeans will host a forum prior to the government’s third Budget Statement widely thought to be at the midpoint before the next General Elections which must be held at the latest by January 2017.Finance Minister Mr Tharman Shanmugaratnam, in a wide-ranging interview, recently disclosed his thoughts …See More

   

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