Govt not leaving citizens to fend for themselves, he says
Dr Ng: S'poreans will see their CPF accounts grow faster after the changes SINGAPORE has to adopt the proposed CPF changes to stay viable in the face of radical demographic shifts, said Manpower Minister Ng Eng Hen yesterday.
Dr Ng emphasised that the government is not leaving Singaporeans to fend for themselves. 'We will spend at least $1.1 billion each year to build up their CPF savings through Workfare and higher CPF. We will provide up to $1.2 billion in deferment bonuses. These changes are real. They will see their CPF accounts grow faster after these changes.'
On Monday, the government said CPF members will receive an additional one percentage point interest on the first $60,000 in their accounts, while the draw-down age for the Minimum Sum will rise to 65 in 2018. There will be a new longevity insurance (LI) scheme.
These changes came as the population here is ageing and 'each person must save enough to last his life span,' Dr Ng said.
He said that LI was a solution to the problem, as 'you need only set aside a small fraction of your retirement savings, and it will guarantee you a monthly income for life, starting from 85 years'.
Earlier, some members had also called for CPF savings to be drawn down earlier for workers who fail to be re-employed.
However, the minister said such a move will only compromise the retirement adequacy of the worker, and he will not be able to receive higher interest on the sum if it had been left until the 'drawn down age'.
An exception is made for workers who are unemployed due to their medical condition, where the CPF Act allows for early withdrawal.
Earlier, MPs including Sin Boon Ann had suggested that a portion of CPF money be set aside for management by established fund management corporations to reap better returns for members.
However, Dr Ng disagreed, warning that the higher returns would come with higher risks.
He said: 'You can reduce cost of distribution and administrative charges. You can diversify your risks through a balanced portfolio but no one can insulate you from market risk.'
In contrast, the CPF system minimises risks, and 'the minimum guarantee can stand up to market scrutiny and competition'.
In fact, he pointed out, 'there are no suitors asking to take over our funds and guaranteeing equivalent returns ... because it is more than fair.'
Dr Ng also brushed aside the idea of a national pensions system, saying that it would 'bring upon us the very problems that those with socialised pension schemes are trying to get out (of)'.
He said the CPF system is strong and fully funded, and warned that the government should not 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,' he said.
However, the minister was open to some ideas like inflation-linked payouts or for some amount to be returned if the CPF member dies earlier, adding that these options could be offered as 'an additional rider to the basic product'.
Some MPs have appealed for more help to be given to groups such as housewives, contract workers, odd-job labourers and caregivers for disabled children.
Dr Ng said that 'through Comcare, financial assistance schemes, additional housing grants, the CDCs, top-ups during budget surpluses, we do assist them'.
He added that since 2001 special transfers from the government have totalled $11.7 billion, including the GST Offset package.
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