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18 Jul 2019
Movement for change
Suggestion View - 274
Sort out the CPF mess

The CPF has become a mess. Although the members put in a lot of their savings into CPF, it is not able to produce an adequate retirement income for members. 

The rules on the use of CPF for housing and the access to grants are  extremely complicated.

What can be done to sort out the mess?

Here are my solutions:

a) Simplify the CPF rules. Fix the contribution by employer and worker at 20% each. Do not vary according to age.

b) Allow the member to use his own contribution for rental or purchase of a house. Remove all the restrictions regarding the tenure of the leasehold.

c) The employer's contribution is to be used solely for retirement. Allow members to invest in approved funds with low expense ratio or to keep in CPF to earn an interest rate of 4%.

d) Remove the Medisave account and transfer the money to the Special Account. Introduce a single payer scheme largely funded by taxation and keep the co-payments at a low level. Wind up the existing insurance schemes.

e) Allow members to take out all of the retirement savings at 55, but give them attractive options to reinvest the savings in a life annuity or a fixed annuity with payouts over a fixed period. Employ mentors to advise the members on their financial planning.

It may take many years for this mess to be sorted out, but we should have a clear idea about the ultimate scheme.

Tan Kin Lian

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