CPF changes are fundamental and long-term, and will better prepare Singapore to support its larger older population, said Manpower Minister Ng Eng Hen on Wednesday. Wrapping up the three-day debate in Parliament on CPF reforms, Dr Ng also said all CPF members, especially the lower- and middle-income groups, will be better off with the higher CPF interest rates.
He stressed that in making the CPF changes, the government is not leaving Singaporeans to fend for themselves.
Singapore's ageing population has made it vital for Singaporeans to work longer and save for their old age.
With several government initiatives underway, Members of Parliament are asking whether re-employment will work.
Is the new interest rate structure for CPF fair? And why must the longevity insurance be compulsory? Replying to the questions in Parliament, Dr Ng made it clear that the government is not moving from self-provision to shared responsibility.
He said that even the annuity scheme, alternatively known as longevity insurance (LI), is designed to strengthen this principle of providing for one's own needs.
"What is required, and has always been the case, is that each person must save enough to last his life span. Indeed this is the cardinal principle that we all accept for the individual accounts for CPF," Dr Ng said.
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CPF reform fundamental and long-term: Ng Eng Hen
He continued: "We are strengthening our CPF system by putting into place a missing critical piece with LI. This system must be put into place for many generations after us.
"We should not begin with the philosophy that it should be subsidised. The CPF system works and is sustainable because it is based on savings, not tax. Each must save for himself for his own needs. We must not depart from this fundamental strength of the CPF system."
Under the new interest rate structure, the CPF Board is disbursing S$700 million more each year.
Dr Ng said: "All CPF members will get more, but those with small and middle sized balances will benefit the most. Even after the 4% floor is removed after two years, the interests paid will be better than the current system." Dr Ng also addressed arguments that those who are unable to be re-employed be allowed to draw down their CPF savings earlier.
The Manpower Minister cautioned Singaporeans against going down that road. But he acknowledged that with rapid economic restructuring, some workers may lose their jobs at some point of their working life.
"If CPF savings, rather than other personal savings, were used to tide over such periods of unemployment, the end result is that the retirement adequacy of the worker is compromised," Dr Ng said.
"He would not be able to enjoy the higher interest that the CPF Board pays, had the money been left there until the DDA (draw-down age)."
He also warned that starting a nationalised pension scheme from Singapore's reserves would be a fundamental mistake.
He reasoned that such a move would take Singapore many steps backwards and bring about problems such as those faced by socialised pension schemes, which are now trying to find a way out.
He said: "Our CPF system is strong and fully funded because individuals save for their own needs and spend what they saved. Government can top up from time to time when it has budget surpluses.
"But that is radically different from saying that the government should now take on the responsibility of providing for the retirement needs of every Singaporean. It will slow us down, deplete our reserves and impoverish us. We would then have little resources to help anyone.
"Even longevity insurance is not asking others to shoulder your needs. You have to pay a premium first to share risks, so there is a cost to you that you are providing for yourself."
The Minister stressed that the changes to the CPF system are being made not because the government is running out of money, but the main aim of the reforms is to ensure Singaporeans have enough money for as long as they live.
Dr Ng said: "Our projections show that under the new system, 84% of new entrants to the workforce would have enough to meet the Minimum Sum for retirement, even for low-wage workers and even after buying their first home."
The government is spending some S$1.1 billion each year through Workfare and higher CPF disbursements. Another S$1.2 billion is being set aside for deferment bonuses.
So Dr Ng stressed that Singaporeans will see their CPF accounts grow faster.
The discussions on the CPF reforms do not end with the parliamentary debate. The Minister has urged MPs to continue engaging their constituents about the changes. - CNA/ir
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