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CPF And Your Retirement Needs

Posted on 25/08/2014 by achieve-admin

In this edition of the Views from the Top column in The Business Times, Achieve Group CEO shared his thoughts on the pros and cons of the changes to the CPF scheme – in particular, allowing retirees to withdraw a lump sum and the extension of the Lease Buyback Scheme:

“The extension of the Lease Buyback Scheme to four-room flats is definitely a welcome move as it helps the HDB owner unlock the value of the property. Going a step further, I’m advocating that it should be extended to five-room flats. When a flat owner dies, those inheriting the property will stand to gain. But the retirees should be the ones enjoying the fruits of their labour while they are still around. With regard to the lump sum withdrawal, this shows that the government has, first and foremost, heard the voices of the people by releasing the money to them and, second, is making it possible for them to enjoy their hard-earned savings.

While it is a good gesture to give people autonomy to enjoy their savings, my concern, on the other hand, is on the social implications if these retirees squander away their money. Or if they fall victim to scams, given the many stories we have heard of seniors getting cheated. Policymakers should review the CPF scheme to consider putting in place some mechanism to help members safeguard their money. Perhaps there should be certain criteria or parameters in place, such as having the withdrawals capped at certain percentages and at yearly intervals.

The issue of the Minimum Sum being raised is purely mathematics. Everyone will need to retire at some point and only a small percentage of people will have recurring income from investments. Some may not even have private health insurance policies to see them through. The majority may need to rely only on their CPF savings to support themselves. During the rally, PM Lee polled the audience and it was clear that most people feel they need about S$2,000 a month during retirement. Will the Minimum Sum of S$161,000 be able to sustain a monthly payout of S$2,000 till the last day of the person’s life? Thus, the raising of the Minimum Sum is absolutely necessary and, in fact, I feel it should be even higher and increased on a yearly basis to keep step with inflation. Having more money in the CPF account is a good thing, in case people live another 30 years after retiring because if the money runs out, the individual will be in a very sad situation. Some people don’t believe in buying insurance so this form of forced savings is good and necessary in order to avoid any potential blowup of social welfare issues. From a macro perspective, I feel these changes are very fair and show that the government is trying to protect its people.”

Source : The Business Times, 25 August 2014