The CPF Minimum Sum (MS) will be raised to $155,000 from July this year. The CPF Board’s intention for the MS is to provide members with a monthly income of about $1000 (for those who have the entire MS in their retirement account) for 20 years from the drawdown age.
But there has been a lot of well-documented unhappiness about this MS scheme. For example, in December last year MP Lily Neo posted on her Facebook about how one of her resident was unhappy because Dr Neo “could not get CPF to allow him to withdraw his savings”. During the “Free My Internet” protest at Speakers’ Corner last year, I also observed a number of older men protesting with placards which read, “Free my CPF”.
Prior to the introduction of this MS scheme in the year 1987, CPF members could withdraw all their savings in their ordinary account upon reaching the age of 55. The MS was $30,000 in that year. In the year 2000 the MS had risen to $65,000, or by 116 percent in 13 year. And Moneysmart pointed out in their article about how MS was further increased by 138 percent in the next 14 years, and is now at $155,000.
I am all for doing away with the MS scheme and allowing CPF members to withdraw the entire amount in their CPF ordinary account when the time comes, for the following reasons:
The money in a member’s CPF account is hard-earned by the member alone. Upon reaching the withdrawal age, the Member can buy an annuity with it, or invest it in whatever way he or she wants and the Government should have no business dictating how the member should spend it.
As Moneysmart pointed out in their article, wages in Singapore are unlikely to keep up with the annual CPF MS increase.
Not a lot members have MS in their CPF upon reaching the age of 55. If you only receive $200 or $300 monthly from the MS scheme because you don’t have enough MS, how will that support the member in having a basic standard of living in their retirement?
Mr Lee Yock Suan, then-Minister for Labour, in introducing the MS scheme in 1987 said that the MS scheme is only a form of encouragement, and that it is the duty of children to look after their parents in their old age – which means that according to the PAP Government, with or without the MS scheme older people will be fine.
If the Government wants older Singaporeans to live with dignity in their retirement, it should help them better plan for retirement. For example, legislation could require CPF members to buy insurance for retirement, which will guarantee him/her an income of at least $1000 upon retirement. Where the CPF member does not have enough in contribution to CPF to purchase such an insurance because his/her income is low, the Government can think of a top-up mechanism where the difference in paying for the premiums is shared by the Government and the employer of the CPF member.