The CPF Advisory Panel (CPFAP) held its first public focus group discussion at *Scape in Orchard Road yesterday (15 Nov).
PM Lee announced this CPF public consultation exercise at his National Day Rally speech in August this year. He said that a panel would be formed to study enhancements to some key aspects of the CPF system so as to make it more flexible to meet the needs of Singaporeans and provide additional options in retirement.
Subsequently, the government announced that CPFAP would be chaired by Professor Tan Chorh Chuan, President of NUS. The panel has 13 members, including academics, financial industry practitioners, and community representatives from the unions, social sector and grassroots [Link].
The panel has been instructed to look into the following areas:
How the Minimum Sum should be adjusted beyond 2015, in order to meet the objective of delivering a basic monthly retirement payout for life;
How to enable CPF members to withdraw more as a lump sum upon retirement, and the circumstances for their doing so, taking into consideration the impact on retirement adequacy for different groups;
How to provide an option for members who prefer CPF payouts that are initially lower but rise with time to help with increases in the cost of living; and
How to provide more flexibility for members who wish to: (i). Seek higher returns while balancing the higher investment risks involved, through private investment plans; (ii). Invest in private annuities when they retire as an alternative to CPF LIFE.
The panel will likely hold up to 10 focus group discussions to seek public views on enhancing the CPF system over the next 3 months. It is expected to give its initial recommendations in early 2015. It will complete its study within a year.
Most want a simpler CPF system
During yesterday’s discussion, a variety of suggestions were given by the 50 or so participants on what is considered adequate for retirement. Most participants expressed their desire for more certainty and a simpler CPF system.
Presently, CPF members have to set aside a minimum sum of $155,000 in their CPF Retirement Account when they reach 55, under the mandatory CPF Life scheme. They can only get monthly payouts from their Retirement Account after the age of 65. The monthly payouts depend on how much one has in one’s Retirement Account as not all Singaporeans will be able to set aside the minimum sum of $155,000 when they reach 55.
To illustrate, under the CPF LIFE Standard Plan, setting aside the minimum sum of $155,000 at age 55 provides $1,200/month in retirement, while $75,000 provides $620/month [Link].
However, during the discussion, most participants felt that a payout of more than the current $1,200 was needed.
“If you still have housing loan (installments) to pay, $1,200 is not enough,” said Mr Hasnah Salleh. “For example, if your housing loan is about $400 to $500 a month, it already takes up about half of $1,200.”
Some wanted $3,000 a month as there are some people in their 60s who are still servicing mortgage loans.
When asked how much a CPF member could withdraw in a lump sum at 65 from his Retirement Account should this be allowed, half felt there should be no withdrawal. Others suggested 30% or capping the amount at $20,000. It was mostly agreed that the low-income group should be given the option to withdraw a lump sum.
With regard to the idea of varying the amount of payouts over time rather than giving flat payouts like the current plan, some wanted increasing payouts due to inflation while others preferred decreasing payouts (i.e. bigger payouts at first with the amount reducing over the years).
“Some of us felt a declining payment schedule would be best because we felt that when we are young(er), we probably need more money to spend on whatever interest that we have – travelling or to help with children’s education,” said Colin Loh. “But when we are old, we probably don’t need much anyway.”
One quipped that by the time he reached his 80s, he did not expect to still have his teeth and would “just eat porridge everyday”.
Daniel Yap said, “Declining payment opens the country up to a lot of risks, in terms of social transfers. There is going to be a point where your payments don’t meet the basic subsistence level, and when that happens, the government has to make up for that shortfall somehow.”
A participant, banker Pang Lead We, criticised making the CPF Life annuity scheme compulsory. He said that when CPF Life was introduced in 2009, and made mandatory for all who would turn 55 in or after 2013, it became a system of monthly payments. “It is like going to the bank and signing up for a fixed deposit scheme, only to be told later that they have changed it to an annuity plan,” he said. “I don’t think that is very fair.”
“In the end, some judgement has to be made because no matter where you stand, there will be a trade-off,” said Prof Tan Chorh Chuan, chairman of the CPF Advisory Council.
PM Lee announces setup of CPFAP after Roy
The announcement by PM Lee to set up CPFAC in August this year, came 3 months after his lawsuit against blogger Roy Ngerng made worldwide news.
In May 2014, Roy wrote and published a post titled “Where Your CPF Money Is Going: Learning From The City Harvest Trial” on his blog “The Heart Truths”. Later that month, PM Lee, through his lawyer Davinder Singh, protested that the blog post accused PM Lee of “criminal misappropriation of the monies paid by Singaporeans to the CPF” and that the allegations were “false and baseless”. A demand was made of Roy to issue an apology and take down the blog post.
Roy later apologised and offered $5,000 in damages as required in the Letter of Demand sent by Mr Singh. Roy’s apology was rejected by PM Lee as being “insincere” and his $5,000 offer was considered “derisory”. Eventually, PM Lee filed a defamation suit against Roy on 29 May 2014.
In response, Roy made an online plea for help in raising his legal fees through crowdfunding. Within 4 days, he was able to raise more than his targeted $70,000 from the public. It was later reported that Roy had managed to raise more than $110,000 in total from over 1,000 contributions. While PM Lee did not address the case directly, he wrote on his Facebook page [Link]:
I agree with Minister Yaacob Ibrahim that freedom of speech does not come free from the need to be responsible for what one says, either online or offline.
On 7 June 2014, the first CPF protest was held in Hong Lim Park with several thousand fed-up Singaporeans participating. Many were angry with the increase of the CPF minimum sum year after year and wanted the full amount of their CPF savings returned to them promptly at 55, as the CPF scheme originally intended. Roy, who was one of the speakers at the protest, demanded transparency and accountability for Singaporeans’ CPF monies.
Anyway, the next CPF focus group discussion has been scheduled at the same venue on Saturday (22 Nov, 9am). Those interested to attend may sign up at www.cpfpanel.sg.