Govt: No need for automatic CPF payouts at 65 cause we send reminder letters every year after 65

The Manpower Ministry replied in ST Forum today telling Singaporeans essentially the PAP government’s usual stand of not having automatic CPF payouts at age 65 (‘CPF payout: Decision can be made any time from age 65‘, 6 Mar).

It was responding to ST Forum letters from members of public urging the government to make payouts automatic at 65 or even earlier, as well as to pay out the entire retirement sum by 70.

Dr Ho Ting Fei asked, “Why not make payouts automatically start at 65, or even earlier, especially since Mrs (Josephine) Teo said there was no advantage for the CPF Board or the Government to want members to defer payouts beyond 65?”

“Let those who need the money receive it, and the rest can opt for the deferred payout and enjoy the attractive interest rate,” Dr Ho argued.

He also proposed that all payouts should be completed by 70. Citing SingStat, he had observed that survival rates for Singaporeans drop steeply after 70. He said, “The payout at age 70 should include the entire Retirement Sum. The CPF Board should not hold on to the sums of every person who turns 70 and dispense it in monthly portions over the next 23 years until the person turns 93.”

“According to SingStat, only about 30 per cent of Singapore residents are expected to be alive at 90. What merit is there, then, in not paying out the entire Retirement Sum at 70?” he asked.

He urged the PAP government to be more “compassionate and practical” in considering the payout age based on Singaporeans’ life expectancy, as well as the “needs and entitlements of individuals”.

Another writer Lawrence Loh Kiah Muan agreed with Dr Ho. Mr Loh commented that CPF rules and policies should be simple and logical, instead of being complicated, confusing and potentially contentious.

“If savings can be withdrawn from the Ordinary Account at the age of 55, then the same spirit should apply for the Retirement Sum, in that members should be able to withdraw it at the retirement age of 62,” he said. “What is the rationale for starting payouts at the ages of 65 to 70, when the minimum retirement age is 62?”

Mr Loh also agreed with Dr Ho that the government cannot assume everyone will live beyond 90. He also wanted all the CPF monies be withdrawn at age 70. “Those who prefer to keep their savings in their CPF due to the interest rate can do so by opting in,” he said. “Ultimately, CPF savings belong to the members, and they should have more say in how they can be used.”

Govt continues its stand of non-automatic CPF payout at 65 and avoids talking about paying out everything by 70

Replying, Divisional Director Sim Feng-Ji of the Manpower Ministry disagreed with the views from Dr Ho and Mr Loh.

“Mr Loh asked why payouts start from the age of 65 when the statutory minimum retirement age is 62. Age 62 is not the age workers must stop work, but the age when they are re-employed. Under the law, employers have to offer workers re-employment up to 67. In practice, well over 90 per cent of eligible workers are re-employed at 62,” explained Director Sim.

“As a result, the employment rate of seniors has risen steadily. Today, about four in 10 seniors aged 65-69 are still working,” Director Sim proudly proclaimed.

He said that despite Ms Teo’s recent announcement of raising both retirement and re-employment age, CPF members “will still be able to start receiving their payouts any time from 65”.

With regard to starting payouts automatically at 65, Director Sim argued that it has been a longstanding practice for CPF members to decide when they wish their payouts to begin. “They can do so any time from 65,” he reiterated.

By deferring payouts, Director Sim reminded all that CPF members will get more payouts later. He said, “We do not assume every member wants to start receiving his payouts at 65. There are in fact benefits to starting later. Members will earn more interest. For every year of deferral, members get up to 7 per cent more in payouts. That is up to 35 per cent more for five years of deferral.”

That is, of course, if the CPF members are still alive at 70 to enjoy the extra 35 per cent.

“Starting payouts automatically at 65 means automatically denying members these benefits,” Director Sim asserted.

He also came up with the argument that CPF Board would send reminder letters to a CPF member every year after 65 should he choose not to start his payouts. “It is therefore possible that many CPF members who do not start payouts at 65 have made a conscious choice,” he argued.

But in his reply, Director Sim completely side-stepped the question of CPF Board paying out the entire retirement sum at 70.