In Parliament on Monday, February 18, Singapore’s Manpower Minister Josephine Teo said that she is careful about making abrupt changes to the policy for automatic Central Provident Fund (CPF) payouts since it takes people “a long while” to get used to changes.
Teo explained that what members have known for a long time is that their payouts begin when they instruct the CPF Board. She said, “So this has been the longstanding instruction. Every time there is a change, it takes a long while for people to get used to it.”
She added that from 2019 onwards, members who have reached the eligibility payout age may avail themselves of a CPF Retirement Planning Service, which is a face-to-face personal service.
What she suggests instead of a change in age is for better communication for the policy to be implemented, in order to avoid confusion.
In answer to Lim Biow Chuan (Mountbatten) and Png Eng Huat (Hougang), she said, “If we keep to this consistent line, there is less risk of further confusing (people).”
Lim asked about the number of members who do not activate their payouts by age 70. There are a considerable number who do so, and he also asked if automatic payouts could start when members turn 65.
Teo said that while she had thoughtfully considered this, the CPF Board cannot do this as it would mean depriving members of the advantages of keeping their funds in CPF.
She acknowledged, however, that what the Board can do is communicate policy issues in a better way to members.
“There is much room for improvement in the way (the Board) communicates key issues like starting payouts,” especially since there has been confusion recently concerning the age of monthly payouts.
Due to letters circulating on social media, some people began to believe that the payout age had been changed and was now at age 70.
Others thought that if their application was not filed by age 65, then they could only do so again when they turn 70.
No less than nine Members of Parliament have asked, as a result, to let members start receiving payouts automatically at 65 years old.
Teo clarified that the policy will not change. CPF members have the choice of beginning to receive their monthly payouts at age 65 or receive them any time from the ages of 65 to 70.
She added that the board will make sure their communication becomes clearer in order to avoid the kind of confusion that recently occurred, including reviewing letters sent to members.
Teo also encouraged CPF members to go to CPF service centres found in different areas in Singapore to get specific questions answered.
According to the Manpower Minister, deferring payouts after age 65 is of no particular advantage to the Government, but it’s the members who benefit from deferred payouts, as they can avail of higher interest.
For every year that payouts are deferred, the CPF savings of each member can earn up to 6 percent interest.
She explained that this is why other members choose to defer their payouts, particularly if they are still employed or if they have other savings to live on.
While certain Retirement Sum Scheme (RSS) members in past years kept their CPF savings until death, she said that this brought about a new rule that said payouts cannot be deferred past 70, for members turning 70 from 2018.
According to Teo, 60 percent of RSS members reaching the eligibility age in 2017 did not activate their CPF payouts. At 70, around 50 percent still did not apply for their payouts to be activated.
She called this “unsatisfactory” and said that it’s possible they did not need their CPF or perhaps wanted it to keep earning higher interest. Yet other members could have been unaware that they could start their payouts earlier, and therefore did not apply for the payout.