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Singaporean ethnic minorities getting the short end of the stick due to raised age limit for CPF withdrawal eligibility?

Just last month, a TOC reader revealed that the Central Provident Fund (CPF) had written to him, reminding him to "either apply for a monthly retirement payout at 65 years old, or delay it to 70 years old for a better payout sum".

Mr Zol added that while he was not surprised by the letter "as it had been reported in the news and critiqued by many Singaporeans including an ex-PAP MP Mr Inderjit Singh", he was taken aback by the prospect of receiving a monthly payout of only $482 starting June this year "under the CPF Retirement Sum Scheme, and this payout would last about 28 years".

By then, he wrote, "I would be 93 years old".

Mr Zol elaborated: "I then wrote in and requested for a 20-year payout so as to increase my monthly payout, the reason being Singapore’s life expectancy was 85.4 years (based on statistics reported in the media.) The CPF simply rejected it and cited “current policies” as the reason.

He added: "However, if you search the CPF website on “CPF-Your Assurance in Retirement”, this article states that “.... you can choose your desired amount of monthly payouts to meet your retirement needs...”.

CPF members earn up to 3.5% per annum on the Ordinary Account and up to 5% per annum on the Special, MediSave and Retirement Accounts.

Additionally, CPF members aged 55 and above will earn a supplementary 1% extra interest on the first $30,000 of their combined balances.

Mr Zol, however, stressed that "the 4% interest may not even cover inflation in Singapore and the progressive increase in GST for now is 7% to 9%.

"If using present value to evaluate the 2 options (ie. start the plan at 65 or 70 years old), the best decision is to withdraw all my CPF money now" at 65, he suggested.

Recent statistics from the Immigration and Checkpoints Authority's Registry of Births and Deaths appear to support Mr Zol's theory.

In the Registry's 2017 Report on Registration of Births and Deaths, it was stated that while the average age at death seems to exceed the age of eligibility for automatic CPF monthly payouts of 70 years old across all ethnic groups at 76.6, it can be observed that the average age at death for Malays barely scrapes the 70 years old threshold at 70.6.

The average age for Indians and other ethnic groups fall below the 70 year old threshold at 69.5 and 65.9 respectively.

Only the average age of Chinese appears to be markedly above the 70 year old threshold at 78.0.

This would mean that many ethnic minority Singaporeans might not get to use their CPF monies during their lifetime.

While the CPF Board retains Members' money at 55 for the purpose of the CPF LIFE annuity scheme, Members will only be able to obtain monthly payouts after the "payout eligibility age" at 65 from CPF Life, and only after making an application to the CPF Board as illustrated by Mr Zol earlier.

Singaporeans "want to keep working and save more", possibly unwise to "reduce payout eligibility age": Manpower Minister Josephine Teo

Despite the statistics listed in the 2017 Report on Registration of Births and Deaths, the Government's stance regarding the CPF payout eligibility age appears to be firm and unwavering.

Manpower Minister Josephine Teo told Parliament on 15 Jan that an "early withdrawal an option for all, then in effect, it is really a reduction of the pay-out eligibility age".

She added that while "a Tripartite Workgroup on Older Workers was formed to review, among other things, the longer term relevance of and the next moves on the retirement and re-employment ages", her Ministry does not plan to lower the CPF payout eligibility age as it "was raised to 65" last year.

"The Medical Grounds Scheme will also continue to be available to eligible members who may need to withdraw or start their payouts earlier than age 65," said Mrs Teo, adding that the criteria of eligibility "include being permanently incapacitated, terminally ill, or having a severely impaired life expectancy due to illness".

"Such applications have to be accompanied by the relevant doctors’ certification," she said.

Responding to Nee Soon Member of Parliament Lee Bee Wah's question regarding the percentage of successful appeals for earlier withdrawal of payouts by CPF members who had to retire early in the past three years, Mrs Teo revealed that "about 65% of applications under the Medical Grounds Scheme were successful" during the period, while "the remaining 35% were not successful because applicants did not meet the eligibility conditions". 

"Unsuccessful applicants were referred to other avenues of help, such as Workforce Singapore (WSG) and the Social Service Offices," she added.

Mrs Teo also argued that "the introduction of re-employment legislation in 2012" has "made it possible for many Singaporeans to work beyond the age of 62".

She suggested that lowering the CPF payout eligibility age would be unfair to Singaporeans who want to continue working at a later age in order to receive greater payout sums from age 70 onwards.

"In the last decade, the employment rate for residents aged between 60 and 64 has risen from 47.2% in 2008 to 60.4% in 2018.

"The unemployment rate for the same age group has remained consistently below 3% in the past five years.

"Of those eligible for re-employment and who wished to continue working, over 98% were offered re-employment.

"In 2017, the re-employment age was raised further from 65 to 67," she noted.

Dr Lee had also asked the Manpower Minister on behalf of her constituency's residents as to whether the CPF Board "will consider another option" in allowing CPF Members to make early withdrawal in circumstances where there are no "medical grounds" to do so.

She queried if there will be an option for CPF Members to instead do so on the grounds that they do not currently have enough money and are thus in need of withdrawing their CPF money earlier than the eligible payout age, even if it results in lower monthly payout sums.

Mrs Teo replied: "May I ask the Member whether she thinks that it is possible for us to do that – allow some people to have a lower age, and then require other people to stick to the pay-out eligibility age of 65? The option has to be made available to all?"

Dr Lee nodded in agreement, after which Mrs Teo elaborated: "I think we have explained it before. If you make early withdrawal an option for all, then in effect, it is really a reduction of the pay-out eligibility age.

"Today, the pay-out age can already be voluntarily deferred to 70 but the pay-out eligibility age remains at 65. That is the earliest that the person can withdraw," she stressed.

Consequently, Mrs Teo argued that Dr Lee's suggestion "is really not an option but a reduction" in essence.

She added that the new CPF payout eligibility age at 65 "is not unusual at all" by "international standards".

"Among the 35 OECD [Organisation for Economic Co-operation and Development] countries, well over half have pension withdrawal age at 65 or above.

"In fact, the highest today, as far as I know, is 67.

"In the light of increasing longevity, people living longer and the likelihood of them working longer, some countries have already set in motion the raising of the pension withdrawal age.

"In the case of the Netherlands, for example, the pension withdrawal age will go up from 66 to 67 in the year 2021.

"In the case of Denmark, it will go up, if I recall correctly, from 65 to 67 in 2022. In the case of Germany, it will go up to 67 by 2031.

"Against such a backdrop, we must really ask if it is wise to lower our own pay-out eligibility age for all – there will be no option, it will have to be for all – especially considering how we now have re-employment legislation that puts an obligation on the employers to offer work up to 67," she said.

Mrs Teo argued that on top of longer lifespans amongst workers being a strong justification for not lowering the CPF payout eligibility age - and in fact for raising it last year - Singaporeans have demonstrated that they "want to keep working and save more".

"In the last few months since we started the tripartite workgroup on older workers, I have met many union leaders.

"At the NTUC's suggestion, we did this in clusters – aerospace, logistics, healthcare, financial services and even the public sector – a very diverse group of workers. We talked about many things.

"The CPF pay-out eligibility age did not come up very much at all. What has been said very clearly is that the workers want the opportunity to work longer.

"This is also consistent with the focus group discussions that we held with members of the public. They want to keep working and save more. I hear these workers and I understand them. I want to be able to help make it happen.

Mrs Teo also highlighted that the Ministry of Manpower's "main priority" currently "is to build a tripartite consensus on the way forward" on "the retirement age which is currently 62, the re-employment age up to 67 today"

"In this process, we take reference from what we have always done in the past, which is the workers express their views, the employers express their views, and we try to find a common ground for the best way forward. That is how we did it with the re-employment age of up to 65 and then subsequently to 67.

"If we can have a good new tripartite consensus on the retirement age and the re-employment age, it will point the way forward for all of us that is helpful. I ask for some time to get this done," concluded Mrs Teo.

Government recommendation to raise CPF withdrawal age "unreasonable": NTUC, 35 years ago

The controversy surrounding the raise of the minimum CPF withdrawal age can be traced as far back as 35 years ago when the National Trades Union Congress (NTUC) reportedly branded a Government recommendation regarding the matter as "unreasonable".

The Business Times reported in an article titled "Raising CPF withdrawal age unreasonable, says NTUC" dated 28 Mar 1984 that while the then-Health Minister Howe Yoon Choong reportedly "urged Singaporeans to concentrate on the wider issues" highlighted in the report made by the Committee on the Problems of the Aged, Singaporeans mainly focused on the "proposed change" to raise the age of CPF withdrawal in stages from 55 to 60, as solving "problems of an aging population" require a sense of urgency.

NTUC added that "consideration should be given to raising the withdrawal age from 55 only when the retirement age had been universally raised by employers", according to BT.

"The suggested annuity scheme mentioned in the report was a new concept that needed to be explained to many workers who did not understand it in principle", said NTUC.

However, BT reported "some industrialists" as saying, in support of the recommendation, that the change in the CPF withdrawal age "would delay any pressure put on the CPF by mounting repayments".

"An executive in the oil industry" told BT that "there was a large number of workers aged between 40 and 45 who had contributed since the scheme's inception in 1955, and that CPF would face a heavy outward flow of cash as they begin to retire in 10 years".

Such an argument, however, might not be very popular with workers, BT suggested, as they "might feel disgruntled at the prospect of having to wait longer than expected for the return of their savings".

"Some said that the idea would increase fears amongst Singaporeans that they might not live to collect their money," added BT.