Central Provident Fund Change CPF to make it flexible
When the Central Provident Fund was created in the 1950s, the aim was to accumulate savings for retirement.

CPF has changed over the years. It is now used for a variety of purposes, such as home purchase, medical expenses and insurance. 

The govt still insists that CPF should be primary for retirement and has introduced schemes to defer the payout of a certain portion of the CPF savings to be drawn out throughout a lifetime.

The delay in withdrawal of CPF has caused a lot of problems to certain groups of people. They need to take out their savings earlier, on reaching age 55, for certain emergencies, or to enjoy their lifetime savings on travel while they are still able to.

Should the CPF scheme to be made flexible? I believe that they are sound reasons to make this change. 

We have to recognize that the working environment has changed considerably over the past five decades.

In the past, most people have a stable job that pays an adequate wage to meet the cost of living, which was relatively low compared to now. Furthermore, there is a much lower risk of losing a job due to retrenchment or business reasons. Indeed, lifetime employment was the norm for many workers.

The job environment is quite unstable today. I estimate that more than half of the workforce can expect to lose a job for reasons beyond their control during their working career, and the chance of getting a job that pays the same level of earnings is low.

They may have incurred some debts to tide over an extended period of unemployment and need the CPF savings to pay off the debts.

The health care cost is also high. Some workers would have incurred a high debt to pay the medical expenses of a family member, including the parents.

It is preferable to allow the CPF member to draw out their savings in full on reaching age 55. For those who do not need to withdraw the savings, the CPF should offer them an attractive intereset rate to keep their savings in the CPF for a term deposit or for a monthly withdrawal plan. The interest rate should be more attractive than the rate paid by private financial institutions.

Indeed, there are grounds for some CPF savings to be withdrawn, on application, before age 55, to meet emergencies, such as an extended period of loss of employment or hefty medical expenses.

If CPF can be withdrawn fully at age 55, or earlier on application, there is the risk that some workers will not have adequate savings for their old age.

This risk is already present under the current scheme. Many workers do not have adequate savings for their retirement. They have to work longer to earn an income to supplement their savings. 

We have to accept this risk. Most workers can work to an older age, maybe to 70 years or beyond, but they should take a job that is not physically demanding.

Rather than hold back the CPF savings of the older workers to make sure that they are adequate for their old age needs, the govt should recognize that they may need the savings to be used earlier. The choice should be left to the workers. 

I prefer the CPF scheme to be made flexible to allow full withdrawal at age 55 and earlier withdrawal, on application, before age 55.  The worker should be encouraged to keep their savings in the CPF beyond age 55 by earning an attractive interest rate.

Tan Kin Lian

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