CPF study’s conclusions: Too good to be true?

Photo: TODAYonlinePhoto: TODAYonline

Most people who did not withdraw their CPF which they could after age 55, may have done so for reasons other than what the CPF Board wants us to believe? 

I refer to the article “6 in 10 tapped into CPF funds after 55: CPF Board” (Channel NewsAsia, Aug 28).

It states that “About six in 10 people who were eligible to make withdrawals from their Central Provident Fund (CPF) did so upon turning 55.

A subset of the respondents, totalling 7,200 people who are CPF members aged between 55 and 70, were asked if they had made cash withdrawals from CPF after turning 55 years old.

About four in 10 respondents said they did not make any cash withdrawals after turning 55.”

As to “A sizeable proportion did not make withdrawals after turning 55 years old, hence allowing their funds to continue earning higher CPF interest rates compared to bank savings deposit rates,” the CPF Board said” – some of the reasons why some may not withdraw are:

… they may not be aware that money that can be withdrawn, but not withdrawn only earn 2.5% interest, and not the 4% in the Retirement Account

… if you log in to your CPF account – there is no reminder that you have money which you ‘chose’ not to withdraw

… the CPF Board does not write to you say every year, to tell you that you have money which you have ‘chosen’ not to withdraw

… you may not be aware that at 2.5% – it is the lowest real rate of return of all national pension funds in the world, since 1999

With regard to “According to the CPF Board, those who withdrew from their CPF funds – 58 per cent of members – took out a median amount of S$9,000. The average amount withdrawn was S$33,000” – why is the median amount ($9,000) so low?

In respect of “More than half of those who withdrew the money deposited it in a bank or finance company, said the CPF Board.

The median amount deposited was about S$8,000, added the board.

This trend of leaving withdrawals in bank savings accounts could “indicate a desire for liquidity” in the older cohorts as members could only make one withdrawal a year prior to 2014, the CPF Board said.

CPF withdrawal rules have since relaxed and members can receive their withdrawals within a day through PayNow” – why didn’t the study do the obvious – which is to separate the findings of older and younger members?

Also, why wasn’t the obvious question asked – did you withdraw because of ‘liquidity’ concerns? Do you know that the policy has changed to ‘can withdraw anytime and as frequently as you like’?

As to “Forty per cent of those who withdrew funds said they used the money for immediate needs like household expenses and loan repayments.

The board noted that respondents in this group had more children on average or reported poorer health as compared to the rest of the people polled. Some had used the funds for their children’s education expenses.

“A relatively higher proportion of members in this group also reported poorer health status, with some indicating that the funds withdrawn had been used to pay for medical expenses,” the board said” – is this possibly an indication that many elderly persons may be so cash-strapped (medium withdrawal only $9,000) that ‘healthcare may not be so affordable after all’?

With regard to “The survey also revealed that about 16 per cent of CPF withdrawals was used on big-ticket items like overseas trips or home renovations. However, it was noted that a larger proportion of the respondents in this group were employed at the time of the survey.

Some of them could have viewed the accessibility to their CPF funds as “a source of additional funds to spend on big-ticket items to benefit themselves and their family”, the board said” – could this be an indication that many elderly employed may have such low savings and salaries that they had to rely on the ‘$9,000 median withdrawal” to spend on “big-ticket items like overseas trips or home renovations”?

cpf trends chart
“The common uses of CPF cash withdrawals according to a study cited by the CPF Board. (Image: CPF Board)”

Perhaps the CPF Board should use an independent party to analyse the study’s data – otherwise, as some of my friends said “aiyah, we find these quite hard to believe lah – got bias, got conflict of interest or not”?Leong Sze Hian

About the Author

Leong Sze Hian has served as the president of 4 professional bodies, honorary consul of 2 countries, an alumnus of Harvard University, authored 4 books, quoted over 1500 times in the media , has been a radio talkshow host, a newspaper daily columnist, Wharton Fellow, SEACeM Fellow, columnist for theonlinecitizen and Malaysiakini, executive producer of Ilo Ilo (40 international awards), Hotel Mumbai (associate producer), invited to speak more than 200 times in about 40 countries, CIFA advisory board member, founding advisor to the Financial Planning Associations of 2 countries. He has 3 Masters, 2 Bachelors degrees and 13 professional  qualifications.