Workers’ Party (WP) MP reiterated his party’s proposal to lower the Central Provident Fund (CPF) payout eligibility age (PEA) from 65 to 60, in a social media post published on Friday (4 Dec).
Associate Professor Jamus Lim visited some of his constituents at the Anchorvale division of Sengkang GRC on Thursday night (3 Dec) and was particularly struck by his conversation with the Wong family, who discussed the hot button CPF savings topic with the first-term MP among other issues.
Calling the matter of CPF savings a “topic that appears to cut across generations,” Prof Lim said: “For the older generation, there are questions about whether existing limits for Medisave utilization are adequate, especially in light of rising medical costs.
“With CPF often tapped on to purchase flats, those still in the workforce increasingly worry about retirement adequacy, especially as rising house prices means that a larger share of incomes are now devoted just to securing a roof over their heads, rather than contributing toward retirement.”
He added: “And for the youngest generation, their parents’ CPF is sometimes tapped on to help with school fees, which even further chips away at their parents’ retirement pot.”
Prof Lim, an economist, went on to draw attention to the suggestions the WP has put forth with regards to CPF usage in its manifesto. He specifically mentioned the party’s proposals to lower the PEA to 60, enable easier withdrawal of excess balances during crisis times, allow easier extended-family transfer of CPF balances, and widen Medisave uses for the elderly.
The WP has been calling on the authorities to lower the PEA for several years now. Back in 2015, then-Deputy Prime Minister and Finance Minister Tharman Shanmugaratnam called the opposition party’s proposal to lower the PEA from 65 to 60 “unwise”.
Mr Tharman, who now serves as Senior Minister, said then that it is human nature to focus on current needs rather than plan for the future but countries that have introduced earlier payouts for their retirement saving schemes have found them unsustainable:
“It has been tried in other countries and, everywhere it has been tried, the result has been that those who take up this option of early payouts end up less prepared for retirement.”
Citing Denmark as an example, Mr Tharman said the country implemented earlier payouts more than 30 years ago, but the pressures of an ageing population have led the Danish to phase out this option. He said:
“We will all place greater priority on…the benefits we can get today… than what we will get well into the future. We all underestimate how long we will live…that is the human predicament.”
Claiming that the outcome of earlier payouts to some is that the rest of society eventually has to support them, Mr Tharman suggested that the pension and retirement age is automatically linked with rising life expectancies in many countries. He added:
“We should recognise these challenges honestly and not take positions for their populist appeal, when we know fully that putting such proposals into practice will merely set us back in tackling the larger challenge of ensuring adequate income throughout the retirement years.”
Mr Tharman had also said that the government is compassionate towards those who need to withdraw CPF funds earlier and is looking to inject more flexibility into the scheme by allowing Singaporeans to make lump-sum withdrawals of up to 20 percent of retirement savings at the payout eligibility age.
He said: “(The CPF system) is not a perfect system…(but) it is fair, it is sustainable and it takes risk away from individuals who cannot bear that risk.”
Defending his party’s proposal, then-WP Non-Constituency MP Gerald Giam responded in Parliament that the suggestion to start payouts earlier is not the same as asking for a full lump-sum withdrawal at the age of 60. The idea is to extend the period in which CPF payouts are given to members, he said, adding that it is optional.
Mr Giam, who is now an elected MP, said: “Our main point is life is unpredictable and we cannot presume to know the financial situation of every person at age 60. There may be some members who really have a need and we should give them that flexibility.”
Responding, Mr Tharman reiterated that other countries’ experiences have shown that it is human nature to “take advantage of the option to get something early, even if it is at the expense of what we need later on.” He added: “When it comes to flexibility and choice, we should make haste slowly.”
Five years on, the WP has won more support among Singaporeans and clinched an unprecedented 10 seats in Parliament while the CPF PEA remains. /TISG
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