Central Provident Fund My views about changes to the CPF scheme
I share my views about changes to the CPF scheme.

1. Should members be allowed to withdraw the CPF savings in full at age 55?

Yes, the members should be allowed to withdraw their savings in full at age 55. Most of them start work when at 25 or earlier. When they reach age 55, they have already saved for 30 years or longer. That is a very long time. 

During their working life, they might have incurred some debt, e.g. to pay medical bills, send their children for tertiary education or borrowed money to meet their living expenses during unemployment. 

They need the CPF savings at 55 to pay off these debts.

2.  Should the savings be kept for their use during their retirement years?

Yes, this is preferable. The savings should be kept for their use during the retirement years. However, the member should be given the choice of withdrawing the money to pay off their borrowings or keep the savings for retirement. It is their money. They should be allowed to make the choice based of what is best for them.

3. What happens if the member does not have sufficient savings to give them an adequate income for retirement?

The member can continue to work to earn an income. The ideal situation is that there should be sufficient jobs in the economy that are suitable for older people and can provide them with an adequate income. These jobs do not need to be full time jobs. They can be a half day job. 

Some of these jobs could be bus attendants, attendants at MRT stations, bus interchanges, hospitals and hospitals. They can also look after children or older people who need assistance. 

They can also be security officers in condominiums and office buildings working on a half day shift. 

They can also be cleaning officers. The work does not need to be physically demanding. They can use mechanized trolleys.

4.  Some members may take out their CPF savings and invest the money in businesses and shares that are risky. They could lose their savings. How can this be avoided?

The CPF can offer attractive investment schemes for the members to invest their savings after age 55. These investments can offer an attractive interest rate, say 4% per annum, for savings that are locked up for 3 to 5 years. They can also invest in shares through a diversified fund that can offer an attractive return over the long term. 

If CPF offers attractive investment choices, most of the members will re-invest their savings with CPF rather than make the investments outside of CPF.  The more savvy members may invest on their own, but most will re-invest the savings with CPF.

5.  What about the existing schemes where the savings can be used for property purchase and medical expenses?

These schemes can continue to be offered. However, they should be streamlined and simplified. We should avoid having too many complicated rules on the use of the savings.

6.  Can members be allowed to withdraw their CPF savings during unemployment?

Yes, this is a good use of the CPF savings. The amount that can be withdrawn should be set at a certain percent of the regular monthly income. If the savings are fully exhausted, the member should be allowed to borrow against the savings that were used to buy a property.

7.  Should the CPF Life annuity scheme continue to be offered?

This can be made an option for the member. It should not be made compulsory. 

The member is more likely to prefer an investment option to receive a fixed rate of interest or to withdraw the savings over a fixed term of years. They will find these schemes to be more transparent and more suitable for their needs.

Conclusion

I have suggested a few ideas to make the CPF into a fund that is more flexible in meeting the needs of its members. I hope that you like them.

Tan Kin Lian

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