Back-track for Budget 2015 – retirement adequacy

parliamentDeputy Prime Minister Tharman Shanmugaratnam will be presenting Budget 2015 in Parliament today. We thought it would be good to take stock of what The Online Citizen have covered so far on one of the key issues DPM will likely present on that affect all of us – retirement adequacy and the Central Provident Fund schemes.

The CPF has been in the spotlight for the past few years, with one main area of contention: The ever-increasing minimum sum, which has put access to retirement savings out of reach for half of policy holders.

To begin, the question as to what constitutes an “adequate” minimum sum has never been properly addressed, which means that the basis for calculating this sum is viewed with scepticism.

The inability of the CPF to address the retirement needs of policy holders had been discussed at length, not least at a forum conducted by the Institute of Policy Studies. The need to decouple retirement funds from money needed for the medical and housing expenditure of citizens had been discussed, but to date no plans have been made in that direction.

Interestingly, the issue of CPF being used for too many things has been highlighted back in 1984, when Dr Toh Chin Chye raised questions in Parliament about the practice of holding back retirement savings from citizens.

As such, the pushing-back of the withdrawal of the minimum sum, either through the extension of the retirement age or the increase of the minimum sum, could be seen as a reneging of the government’s promise to citizens. Even so, the “easing” on restrictions has already received chastisement from certain sectors of society, as it might not really help low-wage workers.

The recent review of the CPF scheme, which allows more flexible access to CPF retirement funds, appears to be more in the same direction – moving the retirement funds around without actually increasing the size of the pot, nor allow citizens to manage their own retirement funds.

Tagged to the CPF scheme is also medical needs, which the government had hoped to address in its recent introduction of the Medishield Life scheme. However, this has also been riddled with its own problems, which many Members of Parliament have raised when the bill was introduced.

Apart from issues about the ability of the scheme to address medical needs at affordable rates for policy holders, another nagging issue for Medishield Life would be the access to information of policy holders, which sceptics have noted to be morally unjustified as it unfairly infringes on the rights of citizens as consumers of the scheme.

DPM Tharman has suggested that Budget 2015 will provide greater assistance to the elderly through the Silver Support scheme. It remains to be seen if this would be successful, given that the overall CPF scheme as we know of it has not changed much to help existing policy holders, who will become the future silver generation.

DPM has also promised help to the young and middle-aged – not unexpected moves following the Pioneer Generation Package introduced in Budget 2014. With the history of what we have seen in earlier policy tweaks, there will be room to evaluate his proposals.