Scheme is not a subsidy programme, everyone must save enough for himself, not rely on others, they reiterate
The recent changes unveiled to beef up the CPF - specifically the move to require workers to buy longevity insurance - are intended to be fair to all Singaporeans, according to a panel of ministers yesterday at a dialogue session led by Prime Minister Lee Hsien Loong. Addressing a widespread concern that the proposed longevity insurance - or annuities - will benefit only the rich, since it is believed the better-offs tend to live longer, Manpower Minister Ng Eng Hen, a panel member, said it is 'very clear that the number one rule is: we want to be fair to everyone'.
The government wants each Singaporean member to put aside enough CPF savings to take care of himself and not rely on others to support him, he said at the dialogue which focused on the hows and whys of the CPF reforms.
Dr Ng said the annuity scheme, which will be examined by an independent committee before it is put in place, will be run professionally. People who live longer will pay higher premiums, he said.
The CPF reforms - including a one percentage point increase in interest for the first $60,000 of CPF monies and a re-pegging of the return in the Special Account to 10-year Singapore bond rate - are introduced to raise savings and retur+ns to meet the needs of Singaporeans who are now expected to live longer.
Mr Lee, in his National Day Rally speech last month, and Dr Ng, in Parliament last week, said the changes will benefit lower income groups most, but the move to require Singaporeans to pay for a longevity insurance plan to take care of their needs if they crossed the age of 85 has led to grouses on the ground.
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The insurance plan is based on a common pooling of resources where the payouts will go to contributors who live beyond 85. Many Singaporeans seem to have trouble coming to grips with the idea of living long enough to enjoy the scheme's benefits. And they cannot accept that heirs of contributors who die prematurely will not inherit their money.
Second Finance Minister Tharman Shanmugaratnam, also on yesterday's panel, said the CPF has worked because it is a savings plan, not a tax.
The CPF can be self-sustaining only if subsidies are not introduced into it, he said.
According to Mr Tharman, subsidies should come only from the government's Budget, through taxes, measures like the GST offset packages and others like the Workfare Income Supplement or the flat buyback programme.
But such subsidies are dished out only if the Budget can afford them, he said, because the government wants to ensure that 'one generation doesn't subsidise another'.
'We are not averse to subsidies but we want to do it in a disciplined and sustainable fashion,' Mr Tharman said.
The CPF has worked because it is a savings plan, not a tax. The CPF can be self-sustaining only if subsidies are not introduced into it. We are not averse to subsidies but we want to do it in a disciplined and sustainable fashion. - Second Finance Minister Tharman Shanmugaratnam
Prime Minister Lee said the government had since 2002 studied alternatives to the plan to raise interest rates on the first $60,000 of CPF balances for account holders across the board.
One such alternative had account holders choosing between three investment schemes with different risk-reward profiles: a safe scheme with low expected returns, a balanced scheme with higher expected returns, and a risky scheme with the highest expected returns.
But Mr Lee was persuaded against his preference and convinced that 'it's better for the government to take responsibility for the first $60,000', he said.
This would ensure that the poor have at least enough for their old age. 'After we have done this for a few years, we can start thinking of more varied private pension schemes, then you can get more', said Mr Lee.
Warning that investments with uncertain returns could lead to losses, he said: 'If you retire at the wrong time and the market went down and stayed down for four to five years, you would be in trouble.'
Only one-quarter of people who invested under the CPF Investment Scheme have done better for themselves, while three-quarters would have been better off earning the 2.5 per cent interest from CPF, he said.
But in any case, CPF is but one policy among many that the government uses to help the lower-income groups, said Mr Lee.
Another such move linked to the recent CPF changes is re-employment. Though employers will be required to re-employ workers above the age of 62 only from 2012, Lim Swee Say, NTUC's secretary-general and Minister in the Prime Minister's Office, said a Singapore Human Resources Institute survey showed 50 per cent of companies already practise this.
And of the 3,200 Singaporeans who turned 62 in the last 18 months, a fifth were working in the same or similar jobs with the same pay, a tenth had different jobs with the same pay, and 70 per cent had the same or similar jobs with lower pay, Mr Lim also said.
Of the CPF changes as a whole, he said that unless people recognise that they are more and more likely to live longer, they would not appreciate the policies.
Statistics show that of those who are now 62 years of age, half will live beyond 85 years, one in seven will live beyond 95 years, and one in 20 beyond 100 years, he said. 'Until we believe in this, we will be talking about things half-heartedly.'
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