Changes mean even low-wage workers can meet Minimum Sum, plus buy a home: Ng Eng Hen
THE latest Central Provident Fund (CPF) reforms will enable more than eight in 10 now entering the workforce to have the Minimum Sum they need for retirement.
Now, only one in three succeeds in doing so.
Manpower Minister Ng Eng Hen revealed yesterday that with the new system, even low-wage workers would be able to meet the Minimum Sum, and that is even after using their CPF to buy a home.
He was wrapping up three days of debate in Parliament on a suite of changes aimed at providing Singaporeans with a more secure retirement.
These include higher returns on CPF savings, later draw-down of the Minimum Sum, longevity insurance and a new re-employment law to help people work longer.
To Singaporeans worried about being stranded after age 62 with neither money nor jobs, he gave the assurance that the Government was 'fully committed to helping them work till 65'.
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Manpower Minister Ng Eng Hen has wrapped up the three-day debate in Parliament on CPF reforms stressing that the Government is 'not leaving Singaporeans to fend for themselves'.
Some 40 MPs raised various concerns such as, if Singaporeans would be worst off with the new system and if it is really necessary to have a compulsory annuity.
It expects the economy to create some 200,000 jobs this year and is confident it can absorb 20,000 older workers, he said.
Neither the Government nor its union and business partners under- estimated the practical issues that would have to be dealt with, but there were signs that change was under way, he said.
'There remains much work to be done, but it can be done. Laws will be passed, mindsets and practices changed.'
In all, 37 MPs joined the debate, with many calling on the Government to be more generous in its old-age support schemes.
The two changes that generated the most heat were the compulsory longevity insurance and the new CPF interest rate.
PAP MPs Ong Kian Min and Sin Boon Ann were among those who questioned if the extra one percentage point to be paid on the first $60,000 in CPF accounts was indeed the best that the Government could do.
Mr Sin said that CPF savings still seemed a 'cheap source of funds' for the Government.
Mr Ong called for part of the returns from investments managed by the Government Investment Corporation and Temasek Holdings to be shared with CPF members.
Dr Ng's response was a firm no.
Given that the CPF would be protected from market risks, he said the 3.5 per cent return a year on the Ordinary Account, and expected 5 per cent return on the Special, Medisave and Retirement Accounts, was 'more than fair'.
In fact, no financial consultant was prepared to offer CPF members as good a deal.
'There is no equivalent product in financial markets that offers such assured rates at no risk,' he said.
But he seemed to take a softer line with the proposed compulsory longevity insurance, which the public has been most strongly opposed to.
Yesterday, Dr Ng said that CPF members would have a choice as to how much of their Minimum Sum they wished to set aside for insurance to give them an income past age 85.
The scheme to be drawn up would provide 'basic, affordable and flexible options to meet the needs of different CPF members', he pledged.
But roundly rejected too were calls from opposition MPs Low Thia Khiang and Chiam See Tong for the Government to use tax revenue to fund a national pension plan.
It would be a fundamental mistake, he said, to depart from the principle of self-provision in retirement savings.
This was especially so because Singapore was among the world's fastest ageing societies. By 2030, there will only be four persons aged 15 to 64 to support every senior aged 65 or older, compared to eight now.
He did assure MPs, however, that vulnerable groups such as housewives and contract workers would be helped through government transfers such as CPF top-ups and housing grants.
Dr Ng said the reforms were a necessary response to changing circumstances and would strengthen the CPF system.
In supporting them, the House showed 'resolve and courage' in doing what was necessary for the good of future generations, he said to warm applause at the end of his speech.
With that, the debate ended. But the Government's work has, in a sense, only just begun.
Dr Ng acknowledged as much.
He appealed to MPs to employ Hokkien, poetry or whatever else it took to explain the new system to people and assure them their CPF accounts would grow faster as a result.
'With more savings, they can look forward to the future with confidence. This is what we are trying to achieve,' he said.
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