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CPF: An ever moving target?

Leong Sze Hian/

I refer to the articles "Tan Kin Lian confirms intention to run for President" (Today, Jun 9) and "CPF Minimum Sum to be revised upwards to $131k" (ST, Jun 1).

The former states :

"Mr Tan Kin Lian has laid out his two main concerns: One, the safety of Central Provident Fund monies and whether the government has enough money to make payouts to Singaporeans at their respective withdrawal dates. The people are quite concerned. They say, is my CPF safe?"

This year's CPF Minimum Sum (MS) increase is by $8,000 from last year's $123,000.

This means that those who reach age 55 this year, with a combined CPF Ordinary Account (OA) and Special Account (SA) balance of less than $163,750, can only withdraw 20 per cent of their account balance.

For example, if you have $150,000, the sum that can be withdrawn is $30,000 (20% of $150,000).

Come 1 January next year, it will decrease to 10 per cent, and will be zero from 1 January, 2013.

So, for example, if you turn 55 in 2012, the sum that can be withdrawn is $15,000 (10% of $150,000).

Turning 55 in 2013 - $5,000 (Zero of $150,000, subject to a $5,000 minimum withdrawal amount).

MS $147,000 in 2013?

However, the above examples do not take into account any increase in the MS for the next two years.

So, if the increase is $8,000 a year, like for this year, the MS may be around $147,000 ($131,000 + $8,000 x 2 years).

Hence, in all probability, if you turn 55 in 2013, you may only be able to withdraw $5,000, if you have less than $147,000.

However, even if you have $147,000, you will also be subject to the Medisave Required Amount (MRA) which is projected to be about $37,500 in 2013 (currently $27,500 - increased by $5,000 this year).

MS + MRA $184,500 in 2013?

Therefore, if you have less than say $184,500 in 2013, because you are required to set aside your MRA from your OA in excess of the MS, you may only be able to withdraw $5,000.

The property pledge at 55 policy has also been changed - it is only for any MS shortfall, and no longer enables you to withdraw more money, like before.

Will the MS and MRA continue to increase from 2013?

How many Singaporeans will have $184,500, when the CPF Life Report said that only about 60 per cent of Active CPF Members are projected to have at least $67,000?

1,646,700 Inactive CPF Members?

By the way, since there were about 1,646,700 Inactive CPF Members in 2009, does it mean that they were excluded from the CPF Life Report?

Of course, even if you are unable to withdraw much of your CPF at 55, it may not be a problem, as long as you have a decent paying job from 55 to 65, when your CPF Life monthly annuity will start.

Re-employment Act?

Well, we have the Re-employment Act - the problem with this legislation to be effected next year, requiring employers to offer you re-employment at 62, based on any terms to be agreed between you and your employer, may be a substantial cut in pay and/or job scope.

Moreover, employers may offer you compensation of between $4,000 to $10,000, if they decide not to offer re- employment.

Actually, the other problem is that you may already be out of a job before 62.

If you think that a good education and experience may protect your job, I have schoolmates from Raffles Institution, who are taxi drivers, security guards, etc, despite having a degree from our national university.

Most starting jobs today, like those in food and beverage, retail, etc, only pay about $5.50 an hour.

Citing surveys that most employers are ready to support and embrace the new Retirement Act, may be cold comfort to Singaporeans who have experienced or seen job loss or pay cuts, at the discretion of employers.

A Retirement Act which allows employers to cut pay based on reasonable factors (like productivity, performance, duties and responsibilities, etc), other than age discrimination, is at best 'a joke', if you talk
to any Equal Opportunity Employment Commission in the world.

With regard to the article "NTUC reshaping to be pro-worker, pro-citizen" (ST, Jun 2), shouldn't the NTUC be such, in the first place? Or are we admitting that we were not, all along?