SINGAPORE: As Singaporeans live longer, the Central Provident Fund’s (CPF) philosophy of self-reliance remains as pertinent as ever, Senior Minister Lee Hsien Loong said on Saturday (Jul 5).
He added that while there is “no perfect CPF system”, Singaporeans are generally in a good state now.
As society’s needs and working patterns change, and life expectancies lengthen further, the government will have to adapt and update the CPF scheme to keep it “fit-for-purpose” for new generations, he said.
“This will be a perpetual process of innovation and adaptation. But that’s the nature of many public policy issues,” he said, adding that there is never a “once-for-all final solution”.
The CPF scheme is one such government policy that will always evolve and improve, but the same can be said of many others, including housing, healthcare, education and security, he added.
SM Lee was speaking at the launch of a commemorative book by CPF to mark its 70th anniversary at Our Tampines Hub. The launch was also joined by Minister for Manpower, Dr Tan See Leng.
At the launch, CPF also introduced a new one-stop financial guidance platform, Plan Life Ahead, Now! (PLAN), where members can access a personalised dashboard of financial planners.
In Singapore, each generation funds its own retirement needs, SM Lee said.
“While self-reliance works well for the majority of the population, we recognise its limits for lower-income workers and for those who have not been in the workforce, such as housewives,” he added.
In these cases, the government complements members’ savings with targeted state support, such as the Workfare Income Supplement scheme, Silver Support Scheme and tax incentives to encourage voluntary CPF contributions from family members, he said.
The government also provides additional support through packages for the Pioneer, Merdeka and Majulah generations, and periodic top-ups, which ensures a certain degree of intergenerational equity.
“But the basic principle remains: You must try your best to provide for your own future needs. And if that is still not enough, the government will be there to help you,” he said.
Looking back at the past 70 years of CPF’s history, SM Lee said “some very tough choices” were made in adjusting CPF rules and schemes.
For example, the government had to cut employers’ contribution rates by 15 per cent in 1985, after the total CPF contribution rate of 50 per cent from both employees and employers proved too high to sustain.
The government also had to repeat the process of cutting CPF contribution rates during the Asian Financial Crisis in 1997, and in the early 2000s after the 9/11 terrorist attacks in the United States.
It took them until 2015 to finally reach the total contribution rate of 37 per cent, which is about the “right level for the long term”, SM Lee said.
“NO OTHER PAINLESS WAY OUT”
In his speech, SM Lee recalled meeting the late Lord Paul Myners, a British financial expert and UK city minister, who had done a comprehensive review of institutional investments made by UK insurance companies and pension funds.
“He explained to me bluntly that with people living longer, there were basically only three ways for them to still have enough for retirement: One, save more while working. Two, spend less every month, to make their retirement savings last longer; or three, work longer and retire later,” he said.
“There is no other painless way out.”
All countries are confronted with this trilemma, and Singapore is no exception.
“But that doesn’t mean there is no way forward. It is still possible to make balanced, practical and politically workable arrangements in these three dimensions, to ensure Singaporeans’ retirement adequacy,” he said.
The delinking of the CPF withdrawal age from retirement age has made it easier to raise retirement and re-employment ages to encourage workers to work longer, he said.
While the current national retirement age is 63, many choose to continue working, perhaps in a lighter job, beyond that, he added.
The retirement age will be raised to 64 next year, and then progressively to 65 by 2030.
SM Lee said that every change to the CPF system must be “carefully thought through”.
“In the end, for the whole CPF system to function and endure, Singaporeans must have faith that the scheme is sound and that the rules ultimately serve their best interests,” he said.
Today, public trust in the CPF is “very high”, SM Lee added.
People “faithfully” make their contributions every month, and many members voluntarily top up their own and their family members’ CPF accounts with cash.
Even when members reach 65 years old – when CPF payouts start – about 30 per cent do not make any withdrawals.
“They are confident their money is safe, and they know that they are getting more than a fair deal,” SM Lee said.
NEW FINANCIAL PLANNING TOOL
SM Lee penned the foreword of the new book, called Save & Sound: 70 Years of CPF, which can be downloaded at CPF’s website. The book chronicles the organisation’s journey over the past seven decades and documents how the CPF system has evolved over the years.
Through its new one-stop financial guidance platform, CPF members can access a personalised dashboard which consolidates digital CPF planners, such as the retirement payout planner, home purchase planner and the health insurance planner.
The dashboard also pools together curated educational resources and features a new financial fitness questionnaire, where members can conduct self-assessments on their overall financial health.
Announcing the launch of PLAN with CPF, CPF Board CEO Melissa Khoo said the dashboard seeks to enable members to make more informed financial decisions across different life stages.
“As we mark our 70th anniversary, we want to build on the CPF Board’s legacy of service and innovation, and strengthen our commitment to support members through life’s milestones,” she said.
“We want to empower them to better optimise their CPF savings, and we hope that the curation of planning tools and resources are useful for them,” she added.
CPF will also hold a CPF70 and Life’s Supermarket exhibitions at Our Tampines Hub, which runs until Jul 10.
At Life’s Supermarket, visitors can try out PLAN with CPF and register for the CPF Talk series, which will cover sessions on housing, healthcare and retirement.
