THE labour movement has called on the Government to review the long-term targets for Central Provident Fund (CPF) contributions, in a move which many say will likely push up CPF rates.
National Trades Union Congress (NTUC) deputy secretary-general Heng Chee How said yesterday that the targets were set in 2003 and have already been reached or surpassed by current CPF rates.
New realities, like an ageing population, now have to be considered, Mr Heng said. The review could look at how CPF can strengthen the adequacy of retirement funds and savings to pay medical bills, he added.
However, any changes must also balance off the need to keep businesses competitive, he noted.
Economic experts MyPaper spoke to said they can see CPF rates only increasing, should the review be undertaken.
Associate Professor Hui Weng Tat from the Lee Kuan Yew School of Public Policy said: “Housing prices have increased so much that a lot of people are putting too much money (there), so that retirement inadequacy is becoming a real issue.”
CPF rates will have to be increased to ensure people have enough in their retirement savings, Prof Hui added.
CIMB economist Song Seng Wun noted that a CPF rate hike will be part of the economic restructuring, to ensure that workers are paid fairly and have more in their CPF for later years.
The Singapore National Employers Federation (SNEF) said that it agreed with the NTUC’s push for a review of the long-term targets – which will ensure employers will not be faced with unexpected cost increases.
But any increase in CPF rates would also compound the cost and wage pressures on employers, SNEF said, bearing in mind factors such as the “implementation of Employment Act changes, further tightening of foreign-manpower policies and increases in levies, charges and fees”.
Mr Heng said that, in the review of long-term CPF targets, NTUC also hopes for a progressive push towards parity between the employer and employee contributions within each of the age bands.
While in 1997 and 1998, most workers and employers contributed an equal share of 20 per cent each to the CPF, currently, most employers contribute 16 per cent and employees, 20 per cent.
DBS economist Irvin Seah said one should be mindful that the parity drive does not become “onerous” on the employer or employee. Higher rates will mean higher costs for employers and less disposable cash for workers.
Labour economist Randolph Tan, an associate professor at SIM University, said: “The main concern is whether it is a good idea to add to the pressures that have been mounting for employers…
“Although wages may be bid up when supply is tight, the problem with CPF increases is they cannot be easily fine-tuned,” he added.