By Ian Tan Hanhonn

Despite Singapore’s improving retirement adequacy, the Central Provident Fund (CPF) system must constantly evolve to meet the ever evolving needs of its members, said Minister for Manpower Josephine Teo.

She was speaking at the National University of Singapore (NUS) Faculty of Arts and Social Sciences 90th Anniversary Gala Dinner on 15 November 2019 at the Carlton Hotel.

A former student of the faculty from 1987 to 1991, she highlighted that an important issue for ageing societies is retirement adequacy.

“The key question is how to care for people when they are no longer in active employment,” she said.

Do Singaporeans have Enough to Retire on?

Using the CPF payouts as an indication, Mrs Teo believed that most Singaporeans do have enough to retire on.

She cited that the CPF’s Basic Retirement Sum (BRS) proportion of active CPF members who met their BRS at age 55 has improved from 38 per cent to 62 per cent.

This was despite the BRS being gradually raised to keep pace with inflation and improvements in standard of living.

Quoting a study by the Ministry of Finance, Mrs Teo said that Singaporeans born in the 1970s had a median balance of $110,000 in their Ordinary and Special Accounts by the time they were in their 40s; a balance nearly three times higher than those born in the 1950s.

“In the future, we can expect more members to have reached BRS before retirement,” she said.

She also assured that not everyone who did not meet the BRS meant that they do not have enough for retirement.

Stating that besides CPF payouts, most people have different sources of income during their retirement. Some may have private savings, receive help from family or get allowances from their children.

Why do Some Members have such Low Payouts?

Addressing why some CPF members have such low payouts, Mrs Teo attributed it to jobs such as housewives and odd-job labourers which were more common in the past. These members had shorter runways to benefit from measures such as Workfare and the Progressive Wage Model.

She also added that the withdrawal rules also allowed older members to deplete their CPF at the age of 55.

She said: “They could withdraw most or all of their CPF savings then in a lump sum, if they owned a property. Very little or nothing would be left for monthly payouts.”

Helping Those with Less

Mrs Teo also shared her views about how the Ministry would be helping boost CPF payouts, particularly for those who earn less, with the first thing being about helping Singaporeans earn more through work.

Aside from ensuring good job opportunities are available, the Ministry also has a vision of “productive longevity”, whereby they want to enable people to contribute meaningfully for as long as they wished.

“Besides helping Singaporeans earn more, it is equally important to help them save more,” she said.

She also cited that CPF contribution rates for older workers will be gradually raised, a move first announced by Prime Minister Lee Hsien Loong during his speech at the National Day Rally this year.

“The progressive CPF interest rates of up to 6% per year will benefit all members, and tax reliefs will also be given to people who top up their own retirement savings or that of their loved ones,” she said

To Sum Up

Mrs Teo believes that the current system is a system that works well. It is neither insolvent nor does it exact a toll on the younger generations to care for the elderly retired.

“The CPF must remain a “live system”, always evolving and ever-responsive to emerging needs,” she said.