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23 Jun 2019  (555 Views) 
Movement for change

Allow members to take out CPF savings at 55
I suggested that CPF members be allowed to take out all of their savings at 55. 

This suggestion has the support of about 86% of respondents to a poll. The other 16% were worried that some of the members will spend away all of their savings and have to rely on welfare from the state. Roughly, one in six has misgivings about this idea.

I believe that most people will take a sensible approach when they are allowed to take out their savings at 55. 

However, we need to provide the following support services to these people:

a) Allow them to see a mentor (paid by CPF) who can guide them on suitable ways to use their savings. 

b) Provide attractive options for them to keep their savings in CPF.

What are these attractive options?

a) They can re-invest their savings with CPF for a duration of 3 to 10 years and earn an interest rate of 4% per annum. They can take out their interest or allow it to be re-invested with the principle.

b) They can invest a lump sum for 5, 10 or 15 years to be withdrawn in monthly installments, giving a yield of 4%.

c) They can buy a life annuity (i.e. CPF Life) to get a monthly income, payable for life, based on their age. The income is calculated on a yield of 4%. 

If this attractive options are available, most members will opt to reinvest their savings with CPF, rather than invest it outside. 

Some, who are financially savvy, may wish to invest their savings on their own. The majority will keep the savings in CPF.

Some members may have a need to use their savings to pay off some debt. They should be allowed to do so. It is their money and their choice.

Given the choice and with proper advice given by the mentor, many people may opt for a life annuity.

Here is an example. If they invest $300,000 to earn 4% interest, they can receive $1,000 a month and have return of their capital on death. Under a life annuity, they can get $1,800 a month (say) but their capital will be not returned on death.

The people who buy the life annuity voluntarily will not question about why the life annuity does not pay any interest on the savings, or why they will not get any return of their capital on death.

Someone suggested that the member should be allowed to get 50% of their savings at 55 and the remainder 10 years later. I also agree to this approach

Tan Kin Lian

Vote - do you like the suggestion given here?



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