CPF reforms have been carefully considered: Mr Lee
CAN the Government be more generous in providing for Singaporeans' retirement funds? That was the theme of several questions grassroots leaders put to a ministerial panel at a dialogue yesterday.
Some felt the new interest rate for the Special, Medisave and Retirement Accounts — pegged to 10-year yields from Government bonds plus 1 percentage point — was too low.
Others, as Prime Minister Lee Hsien Loong noted, had called for part of the returns from Central Provident Fund (CPF) investments to be managed by the Government Investment Corporation (GIC) and Temasek Holdings.
Said Mr Lee: "People say, GIC makes so much money, you should give me the same like GIC.
"But GIC invests long-term — they buy shares, the stock market goes up, the stock market goes down … (In the) last few months, the stock market has gone down.
"I am sure GIC's portfolio would have gone down. And not just your interest is less—that means your capital gets less."
In fact, he revealed, he was initially not in favour of the move to pay Singaporeans an additional 1 percentage point interest on the first $60,000 in their various CPF accounts.
"I was persuaded by MOM (Ministry of Manpower) and MOF (Ministry of Finance), against my preference, that it's better for the Government to take on this responsibility for the first $60,000 because it's a big burden," said the Prime Minister.
The extra 1 percentage point is something Singaporeans will find hard to get anywhere else because it is "100-per-cent risk-free", he added.
The latest CPF reforms were finalised after carefully calculating that the Government can deliver on what it has promised, said Mr Lee, adding that a British pensions expert recently told him there were only three ways to solve the problem of living longer and providing for old age.
They are, work longer and enjoy a shorter period of retirement; save more while working; or choose to have less money when one grows old.
Some asked if the Government should just step in and help old people with funding when their money runs out.
"This sounds very appealing, in fact it sounds very fair somehow," said Education Minister and Second Minister for Finance Tharman Shanmugaratnam.
"But it will have the opposite result of what we want to see," he said, as people would make less effort to save.
Mr Shanmugaratnam also noted that the Government has helped Singaporeans build up their retirement funds in many different ways — be it through housing grants, the Workfare Bonus Scheme, or CPF top-ups.
Indeed, a third of the savings of low-income earners at the point of retirement comes from the Government, he said.
As for concerns over those without a CPF account, Mr Lee encouraged husbands to top up for their wives or vice versa.
"All the women should tell their husbands that the Government's CPF interest rate is now very high, better than the POSBank anytime, so better take your money from your POSB (account) and put it into my CPF account," he quipped.
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