In Parliament on Tuesday, Minister of Manpower Tan Chuan Jin explained the reasons behind the CPF scheme, and in particular the Minimum Sum (MS) scheme.
He said that in Singapore, “assurance in old age revolves around a few key considerations: healthcare, housing and retirement needs.”
“The CPF,” he said, “is our key pillar in the social security system. It is a mandatory savings account that helps us put aside money today to cover our needs in old age.”
He explained that the reason why the MS has been raised since the scheme’s introduction – this, he said, was because of an increasing life span.
“When the CPF was first introduced almost 60 years ago, members could withdraw their money at age 55 in a lump sum. That was because at that time, someone could expect to live only another six to seven years after that.”
“The situation is very different today where one could expect to live a further 30 years or more. Allowing a full withdrawal from CPF at age 55 will put us at real risk of outliving our savings in old age.”
Mr Tan added: “To blindly keep to the earlier model of full withdrawal at age 55 would be wrong and irresponsible.”
He then explained that “if you do not meet your Minimum Sum at 55, you do not need to top up the shortfall in cash nor do you need to sell your property to make up the shortfall.”
“Only half of the Minimum Sum needs to be set aside in cash. The savings above that amount can be used to finance housing purchases, or be withdrawn through a property pledge,” he said.
“This means a member turning 55 this year only needs to set aside $77,500 in cash and the rest can be withdrawn through a property pledge.”