NTUC's CPF Recommendations

By Fawwaz Baktee and Shukry Rashid

NTUC called on 21 January 2015 for the CPF system to be enhanced holistically, greater predictability on the Minimum Sum, more flexibility on the Lump Sum Withdrawal, and more options on the monthly payouts to better meet the retirement needs of workers.

These recommendations came after two months of engagement through focus group discussions with over 250 union leaders, rank-and-file workers, freelancers and self-employed, youths, active agers, low-wage workers as well as Professionals, Managers and Executives (PMEs).

“Most participants of the focus group discussions said that the CPF as a defined contribution scheme should continue. In no way would we want to convert it into a benefit scheme after seeing how those kinds of schemes have evolved and collapsed in other countries. The fundamentals of the scheme should remain,” said NTUC Assistant Secretary-General (ASG) Cham Hui Fong.

Sharing Feedback

The findings of the feedback will be shared with the Government through the CPF Advisory Panel to ensure that the needs and concerns of workers are taken into account.

ASG Cham also mentioned that when drafting the recommendations, NTUC “wanted to find ways to continue to help CPF members increase CPF earnings by looking at the contribution rates, and also ways to encourage CPF members to work longer.”

NTUC hopes that the CPF scheme continues to be sustainable to meet the needs of CPF members who are dependent on it for retirement.

Here are the highlights of what was proposed:

Building Up CPF Savings And Minimum Sum

Call I: Align And Level Up CPF Contribution Rates

• Further close the gap towards full alignment in total contribution rates for workers aged >50 to 55 years old, with current contribution rate at 35%. There is still a 2% point gap compared to workers below the age of 50, whose current contribution rate is 37%.
• Level up the total contribution rates for workers who are more than 55 years old.
• Government to review and share the revised long term contribution rates as the ones set in 2003 have been reached or surpassed.

Call II: Raise CPF Ordinary Wage Ceiling

• To raise CPF Ordinary Wage Ceiling from the current $5,000 to an amount of $5,500 to $6,000, and then progressively adjust the ceiling to correspond with the 80^th income percentile. This is timely as residents’ gross salary, excluding employer CPF, at the 80^th percentile was $6,000 in 2012.

Minimum Sum (MS) And Lump Sum Withdrawal

Call I: 10-Year MS Schedule With Mid-Term Review

• Government to set a 10-year Minimum Sum Schedule with corresponding CPF Life monthly payouts to be made known in advance for greater certainty and predictability. Additionally, to ensure its continued relevancy, a mid-term review of the proposed 10-year Minimum Sum Schedule should be conducted.

Call II: Greater Transparency 

• More transparency in any adjustments or changes to the CPF system. The adjustments and changes should also be explained to CPF members adequately in advance, including how the Minimum Sum will be calculated and CPF Life monthly payout is determined.

Call III: Percentage Withdrawal For All

• Additional flexibility of lump sum withdrawal at retirement to allow CPF members to use part of their CPF savings for large expenditure incurred during retirement. This lump sum withdrawal to be a percentage-based withdrawal of the Retirement Account balances, even for those who do not meet the Minimum Sum, to cater to CPF members with varying Retirement Account balances.

Source: NTUC This Week