In the this part of our series, we’d like to review the various Retirement Adequacy policies of the various parties that are contesting this year’s General Election. Most of the opposition parties are fighting for a relaxation of the CPF scheme but some of the proposals are not as simple as “return my CPF at 55”.
But before we get into it, perhaps it’s good to mention the difference between Retirement Age and Re-employment age. After Mr Lee Hsien Loong’s announcement during the National Day Rally that the government is looking to increase the re-employment age to 67, there has been much pushback over whether the government is trying to make people work till their 67 (or their deaths).
Simply put, the retirement age is the age at which an employer can legally ask you to retire. If you are below the retirement age, it is illegal for a company to dismiss you because of your age. On the other hand, the re-employment age is the age that employers must offer re-employment to eligible employees, should the employees wish to continue to working.
The Workers’ Party
Let’s start with the likely biggest opposition party in Parliament. The Workers’ Party aims to lower the CPF Payout Eligibility Age to 60. We figure this is actually a good idea. While it’s not the same as “return my CPF at 55”, it is a balance between returning the whole sum at 55 and starting payouts at 65.
The WP also proposes to delink the Payout Eligibility Age from the Retirement Age and Re-employment Age. They also proposed that CPF should allow members to choose not to start the payouts at 60 and continue to earn interest on their savings. This will enable people to get higher payouts at a later date.
On CPF interest rates, the WP want information on CPF returns and investment returns of GIC to be made known to the public. Additionally, they would like a third of the difference between CPF interest and GIC’s investment returns to be made into CPF Special Accounts.
Lastly, the WP wants to provide an inflation protection for CPF Life. This would be paid for by the issuing of inflation-indexed Government bonds to CPF.
The WP’s proposals actually sound pretty good to the lay person and perhaps, it is. It provides some elements of flexibility but also ensures that people do not simply get a lump sum of cash at the retirement age. I believe some of these recommendations are already implemented in slightly different forms. In the recent CPF Advisory recommendations, members are now able to defer their payout start age to earn higher monthly payouts for the rest of the years.
Singapore Democratic Party
The SDP proposes to abolish the Minimum Sum Scheme and return monies saved at 55. Now this will sound like an awesome plan but a trade-off would be lesser payouts than the PAP or WP’s proposals.
National Solidarity Party
The NSP proposes to return CPF savings at 55. Additionally, they propose that family members of people that may squander away their life savings be entitled to put up a case that the person’s CPF savings be withheld.
The problem with this is that even for many families, it is difficult to tell when a person is in danger of squandering their life savings away. Hence, essentially, this policy change relies on a family’s ability to guess whether a person is in danger or not. Additionally, similar to SDP’s, this will also end up with lesser payouts than the PAP or WP’s proposals.
There is not much to say about the Reform Party’s proposals for CPF. The manifesto states that there would be reform of the CPF, with a basic Old Age Pension paid into CPF. They would also like CPF to be returned at 55.
Questions exist over the sustainability of an old age pension of $500 a month and similar concerns to the SDP and NSP’s proposals apply here.
People’s Action Party
As the incumbent government, the PAP’s manifesto mentioned the policies that have been introduced to ensure that there is greater retirement assurance in Singapore. It mentions the Silver Support Scheme, Lease Buyback Scheme, Silver Housing Bonus, CPF Medisave Top-Ups and GST Voucher Seniors’ Bonus. The PAP also introduced CPF Life to suit the range of retirees.
The Pioneer Generation Package was also introduced to honour the pioneers that have built Singapore up since even before independence.
Now, we actually do believe that CPF Life is a great thing. While we are not experts in math to calculate whether CPF Life is perfect, here is a link to check out on whether CPF Life is really a bad thing.
In the end…
CPF is never going to be a be all and end all of retirement savings. All of us need to decide which of these parties’ best fits our needs. Looking through the proposals, it appears there is a clear divide between the parties. Should there be payouts over time but a higher amount overall or a smaller payout but in a lump sum? Thats the question’you must ask yourself now.
Here’s some of our other posts