Source : The Straits Times, Aug 19, 2007
PRIME Minister Lee Hsien Loong has announced a raft of measures aimed at bridging the widening income gap among Singaporeans.
Addressing some 1,700 people at the annual National Day Rally held at the University Cultural Centre, Mr Lee noted that the 'gap is widening between the best and the rest'.
He added income gap is also linked to the ageing population and many of the poor are likely to be elderly.
To widen the social security net, Mr Lee said the CPF system has to be adjusted and brought up to date.
Improving CPF
The first strategy is to improve CPF returns.
The CPF Board will pay a higher interest of one percentage point more on the first $20,000 in the Ordinary Account (OA) and up to a total of $60,000 on combined Accounts.
The status quo will remain for CPF balances beyond $60,000.
Currently, CPF pays interest of 2.5 per cent for the OA and 4.0 per cent for Special, Medisave and Retirement Accounts.
Mr Lee said the one per cent more in interest, will 'make a big difference'.
'A young man who starts work today at 21, earns $1,700 per month, and buys a four-room HDB flat, will earn about $20,000 more interest at age 55,' he said.
That's one-quarter more interest than before he pointed out.
The initiative will cost the Government $700 million a year initially. The amount will grow in future as members save more in their CPF.
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CPF Changes For A Healthy Nest Egg
Prime Minister Lee Hsien Loong has announced a raft of measures aimed at bridging the widening income gap among Singaporeans
Key to the changes - the CPF system - which will be tweaked to ensure Singaporeans have enough retirement funds even as they live longer.
Imelda Saad has more from the Prime Minister's National Day Rally.
Delaying drawdown
On the flip side, Singaporeans will have to wait longer to draw down their CPF savings upon retirement.
Currently, members can draw down from their Minimum Sum and collect monthly payments from age 62.
But Mr Lee noted that even with higher interest, the money will run out if the draw down is too early.
To make CPF savings last longer, the Draw-Down Age (DDA) for the Minimum Sum will be raised from 62 to 65 over a six year period, between 2012 and 2018.
The timing coincides with the legislation to offer retirees the option to continue working till age 65.
Impact on age groups
Mr Lee said those 58 years old and above will not be affected by the change to the DDA.
The DDA will go up a little for those slightly younger.
The DDA will go up to 65 for those 53 years old and below.
To ease the impact on older workers, the Government will pay a one-off bonus interest, called a Deferment Bonus, to the CPF Retirement accounts of members in their 50s.
A Voluntary Deferment Bonus will be paid to those who voluntarily defer their DDA, even if they are 58 years old and above.
Compulsory annuities
To ensure Singaporeans have enough retirement funds should they live after their Minimum Sum runs out at age 85, Mr Lee said 'some form of annuity' will be made 'compulsory for CPF members'.
This will affect those currently below the age of 50.
Mr Lee said the Government will study the issue, consult the industry and educate CPF members before working out a detailed scheme.
Further details of the CPF changes will be released when Manpower Minister Ng Eng Hen addresses Parliament in September.
Incentivising S'poreans to work longer
The Prime Minister also spoke at length on the issue of the ageing population.
Signalling the Government's strong push to get people working, Mr Lee said higher tiers of Workfare will be introduced for older workers aged above 55, with up to double the payout for younger workers.
For example, a worker aged 60 earning $1,000 currently gets $100 a month from Workfare Income Supplement (WIS), or 10 per cent of his/her salary.
This amount will double to $200 a month or 20 per cent of the salary, under the revised scheme.
Mr Lee said the change will give workers more take-home pay and more CPF.
By 2012, employers will be required - under a new law - to offer re-employment to workers who reach the retirement age of 62.
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