Contribute more to borrow from own CPF?

By Leong Sze Hian

I refer to the report “Plans to help older low-wage workers” (Channel News Asia, Feb 9).

According to the report, it states that “It recommended an unemployment credit, in which a worker who has been laid off can take a loan from his Central Provident Fund (CPF) account for three months. The loan amount would be determined by the last-drawn salary of the worker, and would be subject to a cap of three months.”

Is that not the same as the worker (each of us) borrowing his or her own money?

Pay 1% to be eligible to borrow?

The article also states “To fund the scheme, workers would have to contribute one per cent of their monthly income. The government would co-fund the scheme by making the same amount of contribution”.

This recommendation may be somewhat nonsensical, as workers are being asked to give up yet another one per cent of their income into their CPF despite already having the highest pension contribution rate of 35 per cent in the world.

Lower-income workers may already be rather cash-strapped, and giving up another one per cent of their disposable income may only make their lives even harder.

Must be over 65 and low-income?


Since it is being hailed as “better support programmes for low-income workers who are above 65 years old”, why should workers who are in the low income group and above 65 be forced to give up one per cent of their income just to be eligible to borrow their own CPF money for up to a mere three months, in which they have to pay back when they regain employment?

What happens after three months then if the worker is still unable to find a job? This also leads me to question: How much will a three months period really help a worker?

Most unique unemployment benefit in the world?

This may be the shortest and lowest unemployment benefit, with the most stringent criteria (over 65 and lower-income) of any country in the world. But then again, does borrowing your own money for three months even qualify as an “unemployment benefit”?

I shall seek to illustrate the ridiculousness of this recommendation with an example: It may be akin to a bank telling you that you must pay one per cent of your salary every month so that you will be eligible to borrow money from your own account on the conditions that you are over 65 and defined as low-income, and the self-loan is only for a maximum of three months, in which you have to pay back into your own account when you regain employment.

CPF = Cash Poor Forever?

Of course, the difference between a bank and CPF may be that you may be only able to withdraw your money from age 65 onwards as a monthly life annuity under the CPF Life scheme.

To also address another statement: “Those earning below S$1,000 may be exempted from contribution, with the government paying the full amount into the account”. Does this mean that the majority of workers (all those earning $1,000 and above) have to contribute the extra one per cent?

Another seemingly inequitable flaw in the scheme may be that those people who are over 65 but who do not fall under the CPF’s definition of “lower-income” may never enjoy the scheme. Consequently, it may mean most Singaporeans having even more money in the CPF, which for many may never be enough to meet the yearly increasing CPF Minimum Sum and Medisave Required Amount at age 55.

2% total extra contributions?

“Another proposal is for a Wage Insurance Scheme which subsidises 50 per cent of salary difference between new and old jobs, when an individual who is involuntarily unemployed take on a lower-paying new job. Like the Individual Unemployment Credit proposal, this insurance scheme is funded via a one per cent co-payment by workers and the government.”

Does this mean a total of an extra two per cent contribution for workers?

Workers pay for policy failures?

If a lot of people are being involuntarily unemployed and have to take on a lower-paying new job, it may simply mean that our labour and economic policies may be failing.

Do we have any statistics to indicate how prevalent this problem is?

In my view, the solution may be to review the policies that may be causing the problem instead of forcing workers to contribute more of their income.

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