~ by Leong Sze Hian ~

From the 1 July 2012, the CPF Minimum Sum (MS) and Medisave Minimum Sum (MMS) will be raised to $139,000 and $38,500, respectively.

The gradual phasing-out of the MS withdrawal rule, which is currently set at 10%, will be fully implemented on 1 January 2013. Those who reach the age of 55 will now be able to withdraw $5,000 if they have less than $139,000 in their CFP balance.

Let’s investigate a little further as to the number of people who will have a minimum sum balance when they reach 55. In 2011, 45% of CPF contributors had pledged their property when they turned 55, which translates to 1 in 8 who were able to meet the minimum sum balance.

According to the Department of Statistics' Labour and Productivity report, there were 182,700 active CPF members aged 51 to 55 out of the total active CPF members of 1,700,400 in 2010.

There were also 1,642,900 inactive CPF members. It makes me wonder what percentage Singaporean CPF members who reached 55, active and inactive, were able to meet the MS? I estimated this figure to be about 1 in 8 (around 12.5%). 1 in 4 active CPF members were able to meet the MS in cash.

The next question is, how many Singaporeans who turn 55 from 1 July 2012, are estimated to have a total of $177,500 (MS plus MMS) or more in their CPF? It seems to me that a large proportion of our population cannot meet the MS.

These statistics may be significant because whilst it is good to adjust the MS over the years to account for inflation, longer life expectancies and Singaporeans' rising expectations of their post-retirement quality of life, we should also be mindful of the implications, particularly for lower-income elderly Singaporeans, if increasingly lesser people are able to meet the increasing MS and MMS.

With current inflation at 5%, I find it rather contradictory to say that most Singaporeans may not be so adversely affected by inflation because majority already have a house and do not have a car (i.e. no COE), whereas the inflation used for increasing the MS and MMS is based on the full Consumer Price Index (CPI), inclusive of housing and transport?


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