Posted by theonlinecitizen on November 22, 2011
~by: Leong Sze Hian~
I refer to the article “More CPF protection for children with special needs” (see HERE ST, Nov 22).
Under the new Special Needs Savings Scheme (SNSS), the savings of a CPF member who dies can now to be distributed to their disabled offspring in monthly payouts, instead of the current lump sum cash payout.
What happens if the disabled child has an urgent need for a lump sum withdrawal, such as for medical expenses, or his or her monthly expenses need to be increased for inflation?
Whilst it has been hailed as a good alternative for parents with disabled children, because the CPF proceeds will earn the current relatively high interest of four per cent, one should note that the four per cent guarantee which has been extended almost yearly from 1 January 2008, will end on 31 December 2012.
CPF rate as low as 2.5 per cent?
In fact, the current formula of adding one per cent to the average 10-year Government bond yield to derive the CPF Retirement/Special/Medisave accounts’ interest rate has consistency been below four per cent.
The floor rate is 2.5 per cent. This means that in future, the rate may be as low as 2.5 per cent.
Members of Parliament (MPs) have also called for the SNSS to be more flexible as the nominee disabled child must have attended a special education (SPED) school, or require assistance in at least one activity of daily living (ADL), such as dressing and feeding.
Higher per cent only until you die?
This strict criteria seems to go against the vigorous promotion of CPF top-ups, with the new change to allow any person, company or association, to make voluntary contributions to a member’s account.
Why encourage top-ups, and yet make it difficult for nominees to continue to receive the four per cent CPF interest rate, after a member dies?
In fact, in this connection, the CPF Act was amended last year, to pay the lower 2.5 per cent interest on deceased members’ CPF monies that are still not paid out to nominees, six months after a member’s death.
