CPF: Moving forward

Excerpt from a commentary by NMP Laurence Lien in the Straits Times on the CPF controversy where he argued for more transparency and an improvement in the perceived lack of public accountability. Transparency breeds trust, he wrote:

“Apart from more transparency, I believe the Government should commit to being revenue neutral over the long term on the investments of CPF funds. Based on GIC’s current asset allocation, the Government should be able to accumulate excess returns on invested CPF funds over the long term and pay out bonus returns periodically.

“The Government can also provide an option for CPF members to take on some risks willingly to invest in a fund that has a higher expected return than the Special Account, but whose price will be subject to market risk.

“Some Singaporeans argue for the return of CPF funds to members at age 55. A number of well-regarded pension funds around the world, for example, the Chilean pension fund, require members to use the balance in their individual accounts to purchase an annuity and/or set up programme withdrawals over a retiree’s expected life span. Annuities help to prevent either overspending or underspending.

“The majority of CPF members should not be so focused on the minimum sum or on wresting control of it. They should instead look at total retirement planning in order to answer questions such as: How much money do they require for retirement? What is the potential shortfall? How much must come from personal savings? How much longer do they need to work?

“Higher-income CPF members must realise sooner, rather than later, that the CPF was not focused on them and that CPF savings alone are likely to be inadequate.

“The Government needs to work with those who are self-employed, or who have been outside the workforce for many years, to systematically shore up their retirement adequacy.

“Income security in old age presents dilemmas and hard choices for policymakers everywhere, not just in Singapore. The sooner everybody – government and people – starts working together, with openness and cool heads, to address it today, the better off everyone will be in the future.”