Extra interest, bigger Workfare top-ups and bonuses tied to draw-down
age among moves to help S'poreans save for old age
ALL CPF members will enjoy higher returns from next year.
And seven in 10 will enjoy an extra one percentage point in interest on all their balances. These are members with $60,000 or less in their Central Provident Fund (CPF) accounts.
The new interest rate is part of a suite of changes to help Singaporeans save more for old age.
These include bigger Workfare income top-ups for older low-wage workers, and new bonuses tied to postponing the draw down on members' CPF Minimum Sum.
Manpower Minister Ng Eng Hen yesterday fleshed out the details of several measures first announced by the Prime Minister in his National Day Rally speech last month.
Of these, a proposed compulsory annuities or longevity insurance scheme has proved the most unpopular
Yesterday, Dr Ng promised a flexible scheme that will take into account people's different needs.
A new committee, helmed by National Wages Council chairman Lim Pin, will study how best to ensure those who live beyond age 85 - the age when people's CPF Minimum Sum runs out - have an income until their deaths.
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Minister's Statement
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CPF reforms great but ...
More than 10 MPs rose in Parliament in support of changes to the CPF system today, with many describing it as a rational and generous move.
But concerns over the effectiveness of some of the amendments were also raised. Top of the list- questions over the compulsory annuities scheme, the re-employment law and deferment of the draw-down age for CPF minimum sums.
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MOM: Higher interest and better returns with CPF changes
The CPF savings in you Special Medisave and Retirement Accounts (SMRA)- which the government had already said will be pegged to a longterm bond rate - will now grow according to the yeild of the 10-year Singapore Government Securities (10Y SGS).
And judging from the 10Y SGS benchmark in the past 12 months, CPF members will earn an average return of 5 per cent for SMRA balances below $60,000.
Manpower Minister Ng Eng Hen revealed this in Parliament today when he announced further details to the CPF changes.
Dr Ng even held out the possibility that CPF members could stretch out their Minimum Sum payouts to 30 years, up from the current 20, thereby reducing the need to buy the insurance.
The 14 MPs who joined the debate yesterday supported the changes, several describing them as bold. But they also took pains to reflect workers' worries, sprinkling their speeches with Hokkien phrases to convey ground sentiments that ranged from confusion to suspicion over the Government's motives.
They said unhappiness centred on the compulsory longevity insurance and the raising of the CPF Minimum Sum draw-down age.
Now set at age 62, it will be raised to 63 in 2012, 64 in 2015, and 65 in 2018.
Dr Amy Khor, chairman of government feedback unit Reach, said some were saying in Hokkien that they would end up with 'boh chi, boh kang' - that is, 'no money, no job'.
Setting the context for the changes, which he said were necessary even if unpopular, Dr Ng noted that Singaporeans were living much longer than before.
Of those who turned 62 last year, one in two will live beyond age 85. And more than half of those who stop work at the current retirement age of 62 will have to prepare for over 20 years of retirement.
Singapore's ageing population also means that there will be fewer younger folk to support the elderly.
The ratio is now eight people aged 15 to 64 for every senior aged 65 and over. But the ratio will fall to four to one in 2030.
According to a United Nations study, by 2050, Singapore's population will be the fourth oldest in the world.
Dr Ng said: 'We must therefore tackle this challenge now, as we have done with other national issues which can affect our nation's well-being and future.'
Many had asked about the Government's role in improving retirement security, he noted.
It will foot the bill for the changes, he said, to the tune of $1.1 billion a year for higher CPF returns and Workfare payouts, and a one-off outlay of $1.2 billion for the bonuses tied to draw-down age.
While the problem of retirement adequacy was a looming challenge for many countries, he said Singapore was one of the few 'tackling this problem head-on, with eyes wide open and the public engaged'.
The Government's three-pronged retirement support plan consists of ways to help people work longer, improve CPF returns, and make savings last for their whole lifespans.
There will be a new re-employment law by 2012 and higher Workfare income top-ups for low-wage earners aged over 55.
CPF returns will also go up from next year.
Savings in the CPF Special, Medisave and Retirement accounts will also be pegged to a new rate: that of 10-year Singapore Government Securities plus one percentage point.
Dr Ng said the Government will justify the new system to the President and explain that there will be no draw down on past reserves. Second Finance Minister Tharman Shanmugaratnam will speak in Parliament on the issue.
In tandem with the raising of the Minimum Sum draw-down age, the Government will pay special bonuses to those affected by the change, or who volunteer to delay the use of their CPF savings.
Dr Ng said that taken together, the changes would strengthen and make for a better and sustainable CPF system.
They would ensure all CPF members, especially the lower- and middle-income, will be better off and that 'as many as possible will have savings for as long as they live'.
The Parliament debate on the CPF changes continues today.
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