Central Provident Fund Allow CPF savings to be withdrawn fully at age 55
I wish to give my views about the call for CPF savings to be withdrawn fully at age 55.

I support this call. 

Here are my reasons.

a) A worker starts to contribute to CPF in the early 20s. By age 55, he would have worked for more than 30 years. That is a long time.
b) He may need to CPF savings to pay off existing debt. This may be incurred during a period of unemployment or to pay medical bills or send children for overseas education. 
c)  He may wish to use some of the savings for overseas travel, while he or she is still fit to travel.

If he is allowed to withdraw the full savings in the CPF, he will face the following risks:

a) He may make some bad investment or lose all of the savings.
b) He may overspend his savings and have nothing for old age.

I suggest the following approach to reduce the above risk:

a) CPF should allow the member to reinvest the saving as a fixed deposit for 1, 2, 3 years at an interest rate that is higher than the rate provided by the banks. 
b) The government should provide bonds with a tenure of 5, 10 or 15 years for people above age 55 to invest and earn interest.
c) The CPF member can opt to buy the CPF Life annuity, but it should be optional. 

If there are attractive options provided by CPF or the government, the CPF member is likely to reinvest the savings in these options. They are not likely to take the risk of investing their savings in other risky investment. 

This is a better approach than forcing the CPF member to buy a CPF Life annuity which they distrust.

The CPF should recruit sufficient people to provide financial counseling to CPF members who have reached age 55 and are allowed to withdraw their savings.

My suggestion will not totally remove the risk that the CPF member will be cheated out of the savings or will lose them in bad investments. We have to accept this risk. It is not a perfect system.

Tan Kin Lian

Remove to vote (agree, disagree) to my suggestion.

 

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