By SY Lee and Leong Sze Hian
We refer to the article “Parliament: Government has been looking at enhancing CPF Life “for a long time”” (Straits Times, May 29).
The article states that Prime Minister Lee Hsien Loong has said the Government has been looking at how to improve the scheme “for a long time”, a day after He had said the aim is for Central Provident Funds (CPF) Life payouts to keep pace with rising costs of living.
If we have “been looking at how to improve the scheme “for a long time”” – Why is it that  that both the current CPF Life plans which replaced the 4 CPF Life plans in 2012 – have reduced monthly annuity payouts compared to the old Minimum Sum Scheme (MMS) – when the pre-2012 CPF Life Plus and Life Income plans, projected similar and higher payouts than the MMS?
Forum letter that never got a reply?
In this connection, Leong Sze Hian wrote the following letter which was published in the Straits Times Forum of March 8, 2012 – to which we believe there was no reply:-

“TWO of the existing Central Provident Fund (CPF) plans for seniors, Life Plus and Life Income, project similar and higher monthly annuity payouts than those of the current CPF Minimum Sum Scheme (‘CPF Life plans to be simplified from 4 to 2′; Tuesday).
In fact, the most popular plan so far for those who voluntarily opted for CPF Life was Life Plus, probably because the payouts were higher than those for the Minimum Sum Scheme (MSS).
I believe most Singaporeans were persuaded to buy in, in order to support the CPF Life scheme, because of the higher payouts offered by these two plans.
So it may be a disappointment that both the new plans have reduced payouts compared to the MSS’.
The most popular plan gave higher payouts than the MSS, so how is it possible that feedback from CPF members led to the crafting of just two plans, both of which pay less than the MSS?
As the bequest drops rapidly to zero at around age 77 and 83 for Life Plus and Life Balanced, respectively, does combining the two into the new Standard (default) plan mean that the bequest will drop to zero at an earlier age than 83?
This may have implications for lower-income widows as their life expectancies are longer than those of their husbands on CPF Life plans, given that a third are expected to live beyond 90.
Instead of relying merely on the feedback of those who opted in so far to decide on the new plans, the actuarial report on the CPF Life scheme should be made public. In this way, all stakeholders can help to analyse and offer feedback or suggestions on the scheme, including the design, life expectancy and return, as well as the assumptions and computations.”

“Where an increase (in returns) should come from”?
It is noted that Mr Tan has acknowledged the MPs’ concerns over whether CPF returns are adequate, but said the question was where an increase should come from.
But isn’t the answer rather obvious – that the Government should pump some money into our CPF system, since the Government does not spend a single cent now because all CPF funds come from CPF members’ contributions?
Mr Tan said that some have asked whether CPF interest rates should be higher in order to withstand inflation and that is a fair consideration. He went on to say that others have suggested seeking higher returns by taking on more risk and asked, “Is that something we want to do?”
So if the government is not taking the risk, then who is?
Since the CPF rates are probably the lowest real rate of return historically, for all national pension funds in the world – perhaps it is CPF members who are in a sense, taking all the risk, with the Government keeping and utilising the excess returns derived from CPF funds over the years?
Apple-to-apple comparison please?
In respect of Mr Tan’s comment that the CPF interest rates provided today are already far higher than equivalent rates provided by similar products in the market today.
May we know what are the “similar products in the market today”? In any analysis on the interest rate on our CPF – shouldn’t the comparison obviously and logically also be benchmarked against other national pension funds, instead of “similar products in the market today”?

Subscribe
Notify of
0 Comments
Inline Feedbacks
View all comments
You May Also Like

Rather than trying to control “fake news” why not prevent it from surfacing in the first place by making everything open and above board?

According to reports, Prime Minister Lee Hsien Loong (PM Lee) has, through…

Town councils’ new IT contract has “boundary change” clause?

By Leong Sze Hian I refer to the article “Japanese company wins…

Former Foreign Affairs Minister's editorial historically inaccurate

by Zubin The recent editorial by former Foreign Affairs Minister George Yeo…