PAP Transformation Series – 13 suggestions to transform the CPF

Last updated on October 19th, 2015 at 06:56 pm

Leong Sze Hian, Alex Lew /

“Nothing's sacrosanct in Government review of policies.”PM Lee Hsien Loong.

I refer to the articles "Tharman open to ideas, say economists" and "Big change, great expectations" (ST, May 20).

I would like to applaud the Prime Minister for his bold changes to the cabinet.

I believe what Singaporeans would like to see going forward is what changes will be made to address the myriad of issues raised in the elections.

As about half a dozen ministers have said that the PAP needs to be transformed, I would like to make the following suggestions to review CPF:-

1) Explore the possibility of pegging the CPF accounts' interest rate to the Government Investment Corporation's (GIC) historical returns of about 7.9 per cent per annum over the last 20 years (in US$ terms) less one per cent, instead of 2.5 per cent on the Ordinary Account (OA) and average yield of the 10-year government bond plus one per cent on the Special, Medical and Retirement Accounts (SMRA), plus an extra one per cent on the first $60,000.

This is more equitable as the Government sells bonds to the CPF Board at the respective OA and SMRA rates, and gives most of the CPF funds to GIC.

Malaysia's Employees Providend Fund (EPF) paid a dividend of 5.8 and 5.65 per cent in 2010 and 2009, respectively, and historically between 4.25 to 8.5 per cent.

2) Review the policy change to phase out the age fifty-five 50 per cent withdrawal rule by 2013, when those who have less than the prevailing CPF Minimum Sum (MS) of $123,000 and the Medisave Required Amount (MRA) of $27,500, can only withdraw $5,000 at age 55.

Singaporeans who are in financial hardship from age 55 to 65, before their CPF Life annuity will begin at age 65, should be allowed to make some withdrawals.

3) Reverse the policy change on the Property Pledge at age 55 for up to half the prevailing MS, to enable Singaporeans to withdraw more CPF using the pledge like before, instead of only pledging to meet any MS shortfall now.

4) Review the Available Housing Withdrawal Limit (AHWL) suspending the further use of CPF for housing repayments when the Valuation Limit (VL) of the HDB or private property is exceeded, and the CPF account holder has less than half the prevailing MS in his or her OA and SA. This typically affects the lower-income more, as their OA and SA contributions are generally lower. Hence, it may be more difficult for their OA and SA to catch up with the yearly increasing MS to meet the AHWL.

5) Review the policy of not allowing the OA balance at age 55 for housing repayments. Some Singaporeans who were not aware of this policy had to sell their homes, despite having funds in their OA at age 55, as some may not know that they have to use up their OA for housing before 55.

6) Change the CPF Minimum Sum Payout Calculator to include the extra one per cent on the first $60,000 in the Retirement Account, so that Singaporeans making a decision on whether to opt in to CPF Life can do so on a fair orange-to-orange comparison basis.

7) Review the current policy of making the entire Workfare contribution to the self-employed to their CPF Medisave Accounts, with no cash payout. This discourages older lower-income self- employed Singaporeans from contributing to CPF to qualify for Workfare.

8) Instead of making periodic CPF Medisave top-ups to older Singaporeans, use the funds to pay for their Medishield premiums instead. Otherwise, such top-ups may be easily consumed by rising medical costs.

9) Review the CPF Medishield policy of excluding congenital illnesses for new-born children.

10) Disclose how many self-employed are in arrears on their compulsory Medisave contributions?

11) Why is the actuarial study done on CPF Life not made public? How do we know what assumptions and methodology are being used in the computations and projections in the scheme?

12) Review the policy of exempting employers from having to pay their 16 per cent contribution to CPF for foreign employees. This policy puts Singaporeans at a disadvantage, as employers save 16 per cent of salary costs when they employ foreigners.

13) Plug the loop-hole of some employers not paying the employer's CPF contribution for their part-time workers, such as part-time lecturers at the university, who go for reservist training.

I would like to urge and call upon all stakeholders to work with and support our new Manpower Minister, Mr Tharman Shanmugaratnam, to reform our CPF.

This entry was posted in Current Affairs, Letters, Opinion.
This entry was posted in Current Affairs, Letters, Opinion.