Source: Google map screengrab.

MOM: CPF payouts determined by actual household expenditure patterns

The Manpower Ministry (MOM) defended itself in mainstream media this week (‘Different method used to calculate CPF payout sums: MOM‘, 8 Jul) saying that it uses a different method to calculate the CPF payouts under the national CPF Life Scheme.

MOM’s comments came in light of a recent study conducted by a team of researchers from the Lee Kuan Yew School of Public Policy (LKYPP) at NUS two months ago. The team led by Assistant Professor Ng Kok Hoe found that an elderly Singaporean above 65 years old would need $1,379 a month in order to meet his or her basic needs.

In particular, the team found that the household budgets necessary to meet basic needs were $1,379 per month for single elderly households, $2,351 per month for elderly couples, and $1,721 per month for a person aged 55 to 64 years old. Note that the amounts assume the elderly senior is in good health.

The sums were derived from focus group discussions involving more than 100 participants from diverse backgrounds, and using a consensus-based methodology known as Minimum Income Standards (MIS). Participants generated lists of items and services that were deemed a basic need through a common consensus. Each item or service was only included if participants agreed that it was a basic need, and could explain why it should be included.

These included personal care items as well as leisure and cultural activities, as participants agreed that basic needs go beyond subsistence. Household budgets were then determined from these lists.

Prof Ng said, “Such income standards can help by translating societal values and real experiences into unambiguous and substantive benchmarks that policy can aim for.”

MOM behaves defensively

Instead of welcoming the study done by the LKYPP’s team in order to help chart future policy changes, MOM defended itself explaining that it uses a “different” method in arriving the CPF payout sums – monthly income for those above 65 to survive in Singapore.

Mr Shaun Goh, Director for Retirement Systems at MOM, commented that the study was “useful for personal goal-setting and retirement planning”. However, the methodology used by LKYPP is fundamentally different from the Government’s method of arriving at payout sums under the CPF Life Scheme, he said.

Goh did not say if MOM agrees with the proposed $1,379 as a baseline figure for old age requirement. He said CPF retirement sums and corresponding payouts have been established by examining actual expenditure patterns reflected in the Household Expenditure Survey (HES), which is conducted once every five years.

This was done at the advice of experts from the CPF Advisory Panel, Goh noted. “Individuals’ needs vary, and members should plan for their retirement based on their estimated monthly income required,” he added.

Those who expect to spend more in retirement may also set aside more savings in their CPF, and Singaporeans can supplement their CPF payouts with other income sources such as private savings, and family, community and government support, he said.

Of course, Goh forgot to mention that another income source is for elderly Singaporeans with insufficient CPF payouts to continue to work till they drop dead. Already, Senior Minister of State for Health Amy Khor wants more elderly Singaporeans to continue working in the name of “offsetting” the low birth rates in Singapore.

“This brings opportunities for greater labour force participation at older ages, and is important for a country like Singapore where birth rates are relatively low,” she said at an international conference recently.

CPF BRS’ monthly payout less than $800

Currently, the monthly payout under the Basic Retirement Sum (BRS) corresponds to the average expenditure of retiree households per household member for the 21st to 40th percentile.

For BRS, CPF members would need to pledge their property to CPF Board. For those turning 55 this year, the BRS is $88,000 and the monthly payout from 65 is a mere $700+.

Many elderly can’t even meet the BRS. For example, Lim Koh Leong, 60, whose plight was highlighted on social media recently only has $70,000 in his CPF. He wanted to take $15,000 out to fund his daughter’s education but was rejected by CPF Board. In the end, he sought help from his family members.

So, in Mr Lim’s case, in 5 years’ time when he hit 65, his monthly payout would likely to be less than $700, since he couldn’t even meet the BRS.

Obviously, those who can’t work or are drawing only few hundred dollars of measly CPF payout every month would be forced to lower their monthly expenses considerably.

For example, it was reported in the media last year that housewife Chuang Pek Yah, 62, who lives in a condo in Bukit Timah, resorted to dimming the ceiling lamp to save utility expenses. She was even considering doing laundry every other day instead of daily. Similarly, 46-year-old taxi driver Kent Chia was “extra mindful” of his household expenditure and his family tried hard to “save where [they] can”.

Perhaps Director Goh expects elderly Singaporeans to use public toilets in coffee shops and hawker centers to save on water, soap and toilet paper for their call of nature. For food, perhaps he expects our seniors to eat grass everyday, helping NPark to save on manpower to cut grass at the same time.