CPF Series
Article 3: Howe Now

30 January 1994, The Straits Times

This article traces how the CPF Minimum Sum scheme was born.

The 1984 Howe Yoon Chong Report of the Committee of the Aged, often referred to simply as the ‘Howe Yoon Chong Report’ represented the genesis of the CF Minimum Sum Scheme that was introduced in 1987 and continues today, rising yearly, much to frustration of each new cohort that turns 55.

In this 1994 article, Cherian George recounts how Singaporeans absolutely ravaged the report’s principal recommendation – to raise the CPF withdrawal age from 55 to 60 and then to 65.
The problem at hand that led to the recommendation? In Cherian’s words, “[H]ow to ensure that the minority of CPF members who were incapable of managing their own finances did not squander their savings prematurely, thus becoming a burden to society.”

The Minimum Sum Scheme was mooted a few weeks after the public uproar that ensued following the report. Whether they accepted it or not, Singaporeans woke up to the philosophy of regular payouts from age 60 until 1994, through the Minimum Sum Scheme rather than a lump sum payout, until 1994 when the article was written.

Then, the Goh Chok Tong government declared that the Minimum Sum, pegged at $34,600 in 1994 would be raised progressively by $5000 each year to $80,000 by 2004. The Minimum Sum is now almost double that for the latest cohort of CPF members who turn 55. Then PM Goh’s message in 1994 was not too different from Manpower Minister’s message in parliament this week – “Our CPF withdrawal age at 55 is totally out of step with today’s reality and life expectations.”

How far should concerns over a minority’s potential actions in frittering their monies determine the structure of the CPF Board’s retirement policies? Is it realistic to expect greater education to minimise the prospect of CPF members who mismanage their CPF monies? Are there any realistic solutions to address the fear (real for any government) of Singaporeans with no CPF savings in their old-age and who do not have other retirement income sources (e.g. rental of HDB unit, family support etc.), taking into account the moral hazard/s involved?

What I find odd about the Minimum Sum Scheme is that it keeps going up for each cohort on account of inflation, but the rates on our CPF monies don’t seem to rise on the account of inflation in tandem – this anomaly needs some bridging.

Minimum Sum Scheme and the percentage of active members who met the Minimum Sum from 1996-2006 (note the reducing number) – http://mycpf.cpf.gov.sg/NR/rdonlyres/27ACA8E5-7D0D-431F-B74B-D8D3A3E43463/0/CPFTrends_MSS.pdf

Pritam Singh

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