We refer to the article “Permanent top-ups, greater flexibility for investment suggested for CPF system” (Channel NewsAsia, Aug 14).
Less than 30% met Minimum Sum?
It states that “More than half of workers reaching 55 years of age are not able to achieve the Minimum Sum – the amount needed to give them a regular income upon retirement at 65 – even after they pledge their property value. Less than 30 per cent are able to meet the Minimum Sum entirely in cash.”
Less than 15% met Minimum Sum?
– Does the above statistics refer to all Singaporeans at 55, or just locals (Singaporeans and permanent residents (PRs)) excluding inactive CPF members or the self-employed?
We estimate that only about 15% or less, of Singaporeans who reached 55 last year, were able to meet the combined CPF and Medisave Minimum Sums of $198,500, entirely in cash.
More top-ups?
As to the suggestions for more permanent top-ups to CPF – the reason why top-ups in the past may have failed is because most of the top-ups were to the Medisave account – and thus did not help to provide more actual funds for retirement. Perhaps all it did was to enable the Government to continue to spend nothing on healthcare, from a cashflow perspective, as top-ups went to paying ever increasing healthcare fees and Medishield premiums and deductibles.
Average weighted interest rate?
With regard to “Currently, CPF monies earn an interest rate of between 2.5 and 5 per cent. The Ordinary Account, which can be used to pay for homes or education has a guaranteed floor rate of 2.5 or 3.5 per cent for balances of up to S$20,000. More than half of all CPF members enjoy the full 3.5 percent interest rate on their Ordinary Account. And two-thirds of members earn the full five percent on their Special, Retirement and Medisave Accounts. Some argue returns should be higher, but financial experts warn that with higher returns, come higher risks.”
– Why is it that there is still no transparency as to what is the average weighted interest rate on all CPF accounts every year for the last 15 years. These statistics may give us a better indication as to how much excess returns have been taken from COF members, and that we have been taking all the risk to enable the Government to reap the excess returns.
Eating up the equity of the lower-income?
In respect if “the Government plans to make it easier for retirees to get cash out of their flats in a prudent and sustainable way. One option is the Lease Buy Back Scheme, which helps low-income elderly households unlock part of their housing equity to receive a lifelong income stream.”
– the fact that the take-up rate for these schemes are so low, is the best indicator that they don’t work. After all, who would be stupid enough to give up the bulk of their flat’s equity and future capital appreciation for so little money in return?
Only 20% have confidence in CPF?
Perhaps the best scorecard that the CPF system has failed is highlighted in the article “Just one-fifth of Singaporeans confident CPF will meet retirement needs: Survey” (Channel NewsAsia, Aug 14).
S Y Lee and Leong Sze Hian
P.S. Come with your family and friends to the 3rd Return Our CPF protest on 23 August 4 pm at Speakers’ Corner https://www.facebook.com/events/648543138548193/?ref=2&ref_dashboard_filter=upcoming
