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Allow workers to withdraw part of CPF savings at 55: Lim Boon Heng, 1984

In 1984, Parliament debated the recommendations of the Committee on the Problems of the Aged, a Blue Paper by the Ministry of Health.

In that debate, Mr Lim Boon Heng, then Member of Parliament for Kebun Baru, spoke on the proposed changes to the Central Provident Fund scheme - in particular, the proposed raising of the withdrawal age from 55 to 60.

Below is an extract of Mr Lim's speech.

You can read the full speech here.

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Now, let me turn to the controversial proposal to raise the withdrawal age of CPF. First, I think it is unreasonable to raise the withdrawal age of CPF before there is general acceptance of raising the retirement age. How is the worker expected to live from 55 to 60 if he is without a job? The Minister has earlier said that he has got other savings. But to which group of workers in Singapore is he referring to? To the lower income group or the upper income group? I am not sure that the lower income group will have that much savings, We can only consider the step of raising the withdrawal age of CPF, even if it is desirable, when we are sure that the worker will continue in his job till the age of 60.

Secondly, Singaporeans expect to withdraw their CPF balances at 55 years, and have made their plans accordingly. Some wish to invest in business or place it in banks where they may get better returns, or utilize part of it to fulfil religious obligations, such as a pilgrimage to Mecca, or even reward themselves for the long years of labour by a holiday trip once in his life-time.

The Committee contends that "the lump sum of CPF money gives them an illusion of financial security". It makes the assumption that the people as a whole are unwise, more likely to squander the money and, therefore, ought to be protected against their own weaknesses. I hold the opposite view. The vast majority of Singaporeans are hard-headed and realistic. They also happen individually to think that they themselves know best how to invest their money for maximum returns.

It is this wish to maximize returns on their CPF savings that makes it so difficult for them to accept the possibility of later withdrawal. If they think that keeping their CPF balances with CPF is better than depositing with a bank or invest in stocks and shares, they would willingly leave their money with CPF. For example, raise the interest rate to 20% and see how many would withdraw their savings from CPF? I think the CPF Board would have a hard time asking them to withdraw. But what is it that the Committee was trying to achieve in suggesting deferring the withdrawal of CPF funds? It is not to keep the worker's CPF savings but to help him manage his savings. This is as far as I understood from the Minister's explanation. The question then is, to what extent should the Government protect the citizens against their own mismanagement? Should not the Government intervene as little as possible and allow the individual the satisfaction of managing his own money?

The contributor to CPF has worked and planned on the basis of receiving a lump sum at 55. He does not need the entire sum at 55. Perhaps we can allow him to withdraw part of the CPF savings at 55 years, say, 25%. This would meet the requirements of most workers - to meet their living expenses, even to go overseas on pilgrimage or on holiday. At the same time, let us take measures to encourage employment till the age of 60 years.

At 60 years, let us allow a worker to withdraw the balance, except for a certain sum. This sum has to be calculated. It should be enough to allow him and his spouse to live on bare necessities. They should not starve. Perhaps the sum would be enough to pay for rice and pickles or bread and water. And whatever he has above this sum, let him withdraw all of it and invest it. If he is able to manage it well, he can live a more comfortable life. In this way, it is likely that only a small number of CPF contributors will have balances below this fixed sum at 60 and will be unable to withdraw their CPF savings. I think this proposal is fairer to the worker and we do not burden the State with more responsibility than is necessary with the affairs of the individual citizen.

Even if we succeed to raise the retirement age to 60 or beyond, and Singaporeans are conscious of the need to conserve their savings to see them through retirement, can we be sure that the elderly will be financially independent? There will still be those who do not have enough savings at 60. Who will take care of them?