W(h)ither Our CPF?

Posted: 25th November 2010 By Admin

By Alec Tok

If you are reaching the age of 55 or have already passed this juncture, you may be now wondering where all your hard-earned CPF money has gone to over the years. Unfortunately, you are not alone.

Many other Singaporeans are waking up to the fact that the Central Provident Fund, which they depended on for retirement, will fail to meet their basic daily living needs in the decades ahead. If you are beginning to realise being employed during your retirement is the only way to survive, you are not alone in this, either. Our government has said so plainly – Singaporeans cannot afford to retire.

This chilling truth was confirmed by a study (conducted by Mercer Consulting), which covered 214 cities across five continents, measuring the comparative cost of over 200 items in each location, including housing, transport, food, clothing, household goods and entertainment. It is acknowledged to be the world’s most comprehensive survey on the cost of living. It revealed that Singaporeans’ ability to replace their last earned salary at the point of retirement by accessing their retirement funds (CPF) is ‘particularly low.’ This highlights what many Singaporeans have discovered for themselves: our present CPF Scheme cannot provide a retirement income that can replace what we were earning while in the workforce.

Cast your mind back, and you will probably be able to pinpoint the exact time when our CPF Scheme lost its direction. In an attempt to subdue increasing resentment from voters reacting to the government’s authoritarian high-handedness and the fact that it seizes 40% of our incomes, a major change occurred. The government raised the amount of CPF funds that could be used to purchase first HDB flats and then private properties from 80% to 100%. This caused the prices of homes to skyrocket overnight. The situation was made worse by the government’s conflict of interest as the owner of 80% of the land (through the SLA), provider of 90% of the housing (through HDB) and provider of housing finance (CPF). It meant they had every reason not to take steps to rein in the growing bubble in property prices. This was exacerbated by their decision to expand our population at an exponential rate starting in the 1990s which put further pressure on the already limited supply. The rise in HDB prices (the resale index is up 342%) meant that Singaporeans commit themselves to decades of using their CPF contributions to pay for housing which started out as budget homes meant to house a young population in a developing young country. Furthermore most of household wealth became tied up in property. This results in a situation where the government has to keep prices rising if they are to avoid the kind of housing bust we have seen in the US, but on an altogether bigger scale. This is undoubtedly one of the reasons why the government continues to encourage massive immigration to Singapore because the implications of an end to their deliberately engineered boom are too horrendous to contemplate.

In addition the government further liberalised CPF usage to allow certain shares and equities to be bought and sold, medical bills to be paid for, and even children’s tertiary education to be financed, all with CPF money. No long-term planning was done for the health problems of an aging population with the result that we face a situation where ordinary Singaporeans will quickly exhaust their Medisave accounts to pay for medical treatment. Saddled by an incomprehensive Medishield coverage, many Singaporeans may have to go without the treatment they need, receive substandard treatment or face potential bankruptcy as well as the loss of their housing.

Underlying all this was a gradual erosion of the bond between the government and people which had been created by the government, thanks to its “High Pay For Government Ministers and Top Civil Servants” talent pricing scheme, and using the liberalisation of our CPF funds as a cure-all to placate Singaporeans’ anger and sense of outrage. In simple terms, the CPF was compromised by a need to stay in power at any cost.

Today, Singaporeans are paying the price for that decision – two incomes tethered to thirty-year mortgages, skyrocketing HDB prices which are out of reach for most and retirement becoming a luxury for the minority of generously paid Singaporeans.

What has made life worse is that amidst all that, our incomes have mostly stagnated or have even been reduced, resulting in our contributions to CPF lagging far behind the rising cost of living and inflation. The end result? Out of the 700,000 Singaporeans who were aged between 55 and 80 years old, when invited to join the CPF Life Scheme, only 30,000 signed up. I believe this is because Singaporeans have lost faith in the government, its policies and its direction. What’s more – a large number of Singaporeans will be retiring from work with insufficient savings in our CPF. A whopping 30% of us will not have the Minimum Sum of $40,000 in our CPF when we reach the age of 55, and thus, will be automatically excluded from the CPF Life scheme.

In response, our government tries to assure us that our assets have appreciated in value, we are richer than we were before and we are even better off than our neighbours. I do not believe this to be true. I see it as a case of asset inflation, where we pay a lot more for the biggest ticket item, leaving nothing for having or even bringing up children, starting a business or making retirement a possibility.

The Reform Party is convinced that nothing short of an overhaul of the CPF Scheme and a return to providing low cost housing to the average Singaporean by the HDB is going to solve the problems created by the indiscretionary depletion of our CPF funds. We propose keeping the growth in the prices of HDB flats pegged to the growth in median incomes by increasing supply, so that if we earn more, we can have better homes, and not vice versa. In the longer term we want to give the private sector a much bigger role in providing housing for the majority of the population so as to improve affordability and quality through competition. We propose that part of CPF be augmented and converted into a Basic Pension Scheme, in which every Singaporean who has worked in Singapore and paid CPF for twenty years or more is entitled to a pay-out. Part of the funding for this could come from our plan to give our citizens a stake in Temasek and GIC. We also want a Basic Universal Health Insurance Scheme to be funded out of CPF to replace the current inadequate Medisave and Medishield schemes. After providing for these two requirements the Reform Party believes that each saving decision should be an individual decision and not be determined by the government.

The Reform Party also intends to restore your ability to withdraw the employee contributions portion of your CPF savings at 55 if you so wish while still providing incentives to persuade you to buy an annuity.

However when making any decision we have to be sensitive to the past decisions of the incumbents which have created a situation where most of our household wealth is tied up in property. At the moment most of people’s CPF contributions is used to service their housing loans. Any attempt to divert part of CPF into paying for basic pensions may result in people being unable to service their loans and a precipitate fall in property prices. This could create a serious recession along the lines of what has occurred in the US. However the Reform Party believes that such a scenario grows more likely with every year that this government continues to stoke an unsustainable property boom. Our steps to reduce the rate of increase of prices and peg it back to the same as or less than the growth in median incomes are designed to achieve a reallocation of resources without causing any adverse consequences for the domestic situation.

If you have been feeling that your worst fears are coming true lately, you are not alone. We at The Reform Party feel the same way. So do many Singaporeans. The time to rescue ourselves from a bleak future is now. Vote us into Parliament, so that we can achieve a better Singapore for you confidently. Support us and ensure that we Singaporeans are heard, loud and clear. We want our CPF back to what it was meant to be: saving, day by day, so that when the time comes, we can stop working, look back and not have to feel as if our life’s work has all been for nothing. The time has come for us to stand up for a better Singapore.

9 Responses to W(h)ither Our CPF?


Actually we dont see the practicality to this situation @The RP should address the problem of why are PR’s in singapore able to withdraw their CPF funds when they surrender their PR status,there should be a bench mark set to a number of years in singapore so that PRs are at per with singapore citizens,the Gov should set a benchmark for PR to withdraw their CPF to a min of 15 yrs stay in singapore which currently is not justified as to how long can they stay in singapore,this would only contribute to more mis-use to PR’s in a long run .

Azfar on

Hi Alec, I have a few comments to make – perhaps it would come in useful in refining your arguments:

1) You mentioned that “Medisave and Medishield Accounts” would soon be exhausted under some conditions. I am not sure what you are referring to when you mentioned “Medishield Account”, but in any case, Medishield is a hospitalization insurance plan. So technically, it cannot be “exhausted” in the conventional sense of exhausting the money in a savings account. But one can certainly reach the claim limits stipulated in the insurance plan and no longer be eligible to be reimbursed through Medishield. If you meant the latter, you are accurate in your description.

2) A “Basic Universal Health Insurance Scheme” funded out of our CPF accounts, as proposed, already exists in the form of Medishield. People who contribute to their Medisave accounts, including the self-employed, are automatically inducted into this basic health insurance plan(it’s an opt-out scheme). Though it’s not compulsory, it does meet the criterion of universality, if by that you mean to include only CPF account holders. Perhaps a better policy prescription would be to extend the limits of coverage of Medishield, or to make Private Shield Plans somewhat compulsory so that Singaporeans are better protected against hospital treatment costs.

3) Although it may seem like the poor take-up rate for CPF Life is a rejection of the people behind it, it may actually be a case of poor financial literacy among some Singaporeans. Annuities are complex instruments that require people to forsake current consumption to safeguard future consumption. The take-up of an annuity requires the understanding of the risks involved in not taking it up, and the real costs of taking it up. This requires a certain degree of financial literacy and understanding, lacking which it would be hard to make decisions. The bottom line: Singaporeans did not take up CPF Life in droves because they were uncertain about what it actually does, and not necessarily because they have lost faith in something or somebody.

I think we have to understand that our current embedded system of social security is a laissez-faire system that relies mostly on the individual taking responsibility for his own welfare. While this has its pros and cons, it certainly has avoided the problems associated with welfare systems that are heavily state-dependent.A good policy prescription would be to mitigate the negative effects associated with such a laissez-faire system through greater education, outreach or tighter labor policies rather than to shift the whole system towards a “Basic Pension Scheme” and risk facing issues of heavy public debt.

My two cent’s worth. All the best!

votingrp on

Dear Azfar,

Thank you for your pointers.
1. You are indeed right in pointing out the different between Medisave and Medishield. Certainly there are some refinements to be made with the Medishield coverage if it will to become our national health insurance scheme.

2. The low take up rate of CPF Life is not a low literacy issue. Figures from CPF indicates that some 30% of the people reaching 55 do not have the minimum required ($40,000) to join the scheme. An extension of the minimum sum required ($40,000 to $60,000) from age 55 to 65 only yielded another 10% more eligibility. CPF Life is most crucial for this group of people and yet most of them are not eligible. Not amount of literacy on the scheme is going to change the situation.

RP is also of the view that we are a young nation building an identity together. So our mantra of leav no man behind is very important. While we talk about developing into a first world nation economically, growth must be inclusive.


hahaha on

Good effort RP!
Whatever research you use to come up with alternatives, it is clearly without the benefit and privy to confidential Official Secrets that only our government possess. That is also a BIG competitive advantage for them.
Only with multiparty politics can we see the reality of the future of this country!

Bill on

The average person in Spore will accept meekly the threat of not having their due during retirement because we think it is our lot in life to suffer. For 50 years the people have been shaped, moulded and conditioned to feel and think like this in many areas of their lives. The possible exception to this rule are the elite and the super wealthy.

Life, for us, is to alleviate suffering and not the pursuit of happiness. Life, least of of all society and govt, does not endow us with the right to pursue a degree of happiness. Whatever happiness we experience is a by product of our slavish efforts. We will even live with the burden of a 2 year national service because it is our lot in life to suffer the loss of 2 years.

We can only hope, for the emergence of a leader of statesman like proportions, to help us change the way we think.

Low Soon Peng on

I WILL vote Opposition!! For a better future.

Kai Weng on

To quote Leong Sze Hian:
“Well if you’ve been listening to me on radio over the last two years, if you don’t have very big desire to make a lot of money it’s quite easy to survive in Singapore.

Let me give you some numbers – let’s say if I need to spend a thousand dollars a month, and I need to increase that by two per cent a year for inflation, until I’m 88 years old. By 88 more than 80 per cent of men would have died already. And the capital I need is only about $200,000. If you add up my CPF and non-CPF assets, even excluding the house, I think quite a lot of people would have $200,000. And if you ask me, a thousand dollars is more than enough. I take public transport. I eat Indian vegetarian food mostly.

If you look at statistics you always wonder – why do so many Singaporeans have no money when they retire? If you drive a car, you spend an extra $1000 a month, from 25 – 65, if you compound that $1000 at 6 per cent, it’s almost $2 miliion. So when you drive a car, you have $2 million less when you retire. Or put it another way, if you don’t drive a car, you can live a life that’s much less stressful.”

Post a Comment