The Minister for Manpower has defended Prime Minister Lee Hsien Loong’s National Day Rally speech on the changes to the Central Provident Fund (CPF) scheme.
Mr Lee, who had announced that CPF members may be allowed to withdraw part of their CPF Minimum Sum in a lump sum upon reaching 65-years old, was criticised by economist Hui Weng Tat for not going far enough with the changes to ensure Singaporeans had enough for retirement.
Mr Hui, who is an associate professor at the Lee Kuan Yew School of Public Policy at the National University of Singapore, criticised Mr Lee’s speech in an article published in the Straits Times on Tuesday. (See here: “A “cosmetic change” to “pander to popular demands”: NUS economist“.)
He had slammed the CPF changes as “piecemeal” and a “cosmetic change” to “pander to popular demands.”
He also accused Mr Lee of having “an overly-optimistic view of current retirement adequacy.”
“It does not address the fundamental issue of the retiree not having enough in CPF savings,” he said of the changes.
In his defence of Mr Lee, the Minister for Manpower, Tan Chuan Jin, said Mr Hui had “misunderstood” Mr Lee’s comments on retirement adequacy.
In a letter to the press on Thursday, Ms Chong Wan Yieng, press secretary to the Minister for Manpower and writing on Mr Tan’s behalf, said, “Far from painting too rosy a picture, PM Lee emphasised the need to recognise trade-offs in planning for retirement.”
Mr Hui had argued that it is more “prudent and necessary to institute policy measures to tackle the problem of insufficient savings comprehensively at its source”, instead of “dealing piecemeal with post- haste measures of trying to augment retirement income through unlocking the value of property.”
In her letter to the press, Ms Chong said “we have to see the property as both a home and an asset.”
She said that the “CPF and home ownership work hand-in-hand to provide for Singaporeans in retirement.”
“The Government helps citizens to own their homes, and pay for them using their retirement savings in the CPF, so that the home can be a nest egg for them to draw upon in old age,” Ms Chong said.
She explained that “having reached the end of their working lives” and with their children setting up families of their own, “our seniors’ needs will tilt away from housing towards retirement.”
“At this point options to unlock the value in their homes become valuable,” she said.
Turning to Mr Hui’s assertion that the low take-up rate of the current Enhanced Lease Buyback Scheme “already provides strong hints that the typical Singapore family would prefer to have the option of bequeathing their property to the next generation”, instead of mortgaging their flats for income, Ms Chong said the scheme “should not be dismissed offhandedly based on current take-up rates.”
The scheme, which is now extended to four-room flats, was introduced in 2009. Last year, only 240 flat owners subscribed to the scheme.
Ms Chong said:
“We do not expect all eligible Singaporeans to take up the Lease Buyback Scheme. Those who wish to bequeath their homes are free to do so, especially if their children support them or they have other sources of retirement income.”
Ms Chong concluded:
“The fact that most eligible home owners have not taken up the Lease Buyback Scheme may well be a positive sign that most seniors do in fact have other support, and are adequately provided for in retirement.”
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Here is Ms Chong’s letter in full:
THE commentary (“CPF changes do not go far enough”; Tuesday) misunderstood Prime Minister Lee Hsien Loong’s comments on retirement adequacy at Sunday’s National Day Rally.
The worked example of the hypothetical Tan family was not meant to show that $2,000 per month will definitely be sufficient for retirement – $2,000 was the majority view of the audience, but for each individual, the actual figure would come down to a matter of personal needs.
The conclusion that PM Lee drew was that the Central Provident Fund (CPF) Minimum Sum of $155,000 is not excessive. And if Mr Tan uses his flat for half the Minimum Sum, then the income he will get from CPF Life is only $600 per month, much less than the $2,000 per month he would need.
Far from painting too rosy a picture, PM Lee emphasised the need to recognise trade-offs in planning for retirement. For example, when explaining the option of increasing CPF Life payouts to keep up with the cost of living, PM Lee cautioned that this would come at the cost of lower payouts in the early years.
As he pointed out, CPF and home ownership work hand-in-hand to provide for Singaporeans in retirement. The Government helps citizens to own their homes, and pay for them using their retirement savings in the CPF, so that the home can be a nest egg for them to draw upon in old age.
This is why we have to see the property as both a home and an asset.
Having reached the end of their working lives and with their children having formed families of their own, our seniors’ needs will tilt away from housing towards retirement. At this point, options to unlock the value in their homes become valuable.
By extending the Lease Buyback Scheme to four-room flats, the Government seeks to provide an additional option to more Singaporeans. This effort should not be dismissed offhandedly based on current take-up rates.
We do not expect all eligible Singaporeans to take up the Lease Buyback Scheme. Those who wish to bequeath their homes are free to do so, especially if their children support them or they have other sources of retirement income.
The fact that most eligible home owners have not taken up the Lease Buyback Scheme may well be a positive sign that most seniors do in fact have other support, and are adequately provided for in retirement.
Chong Wan Yieng (Ms)
Press Secretary to the
Minister for Manpower
