Central Provident Fund How to deal with inadequate CPF savings
The government is worried that citizens do not have enough CPF savings to meet their old age needs.  

They deal with this problem as follows:

a) Ensure that a large proportion of CPF contributions are set aside for old age in the special account
b) Restrict the withdrawal of the CPF savings 
c) Introduced rules to require the CPF savings to be withdrawn in monthly sums over a lifetime, i.e. the CPF Life scheme

They are worried that the citizens will have insufficient savings and have to rely on the state for welfare.

In spite of the restrictions, a certain percentage of the citizens will end up in this scenario. In most cases, they did not have adequate savings during their working life. This could be due to low earnings or an extended period of unemployment.

It is a bad approach for these CPF savings to be set aside solely for old age needs. In some cases, there citizens may need to access their savings earlier to meet their current needs, due to unemployment. Their current needs are more important than their future needs. 

If CPF savings is allowed to be withdrawn to meet the financial needs of the citizens and their families due to unemployment, there will be less need for an unemployment insurance scheme to be introduced.

Although an unemployment insurance scheme is useful and may be necessary, it has its set of problems. Some people may take advantage of the scheme to get access to money from the state. They may be less inclined to do so, if they have to take out their savings.

In my view, early withdrawal from CPF to meet financial needs caused by unemployment is a better solution, compared to unemployment insurance. 

If CPF savings are withdrawn early, they may be depleted. The citizens will have no savings for their old age needs.

This is not a new problem. We have already experienced it. The only difference is that more people will fall into this category, if they are allowed to withdraw their CPF savings earlier. 

I suggest the following approach to deal with the problem of old people who have inadequate savings:

a) Give them the opportunity to do useful work for a modest wage to meet their living needs. These work should not be strenuous and should take 4 or 6 hours. Examples of these jobs are to provide customer service at train stations, bus interchanges, buses, public buildings, schools, etc. They are useful work. I shall describe it as "elderly work".

b) The elderly who are sick or in poor health can get a similar monthly allowance without having to work. The number is expected to be small. Most of the elderly are likely to be healthy and able to work.

c)The needs of the elderly are modest. Their children have grown up and do not need their elderly to provide for them. The modest income that they can earn from their work should be able to meet their needs.

The "elderly work" should be given to those who are in financial need. It should not be given to those who have adequate means.

A larger proportion of the population will have sufficient savings and can afford to retire without having to work. They should not compete for the "elderly work".

If we have a new mindset and approach towards the problem of unemployment, we can use the CPF as a solution. There is no ned to implement an unemployment insurance scheme, which has its own set of challenges and issues.

Tan Kin Lian
 




 

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