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Singapore’s Central Provident Fund (CPF) scheme is a “key pillar in the social security system,” according to Singapore’s Manpower Minister Tan Chuan-Jin.
Speaking in Parliament on Tuesday, Tan sought to “dispel misconceptions and myths that have surfaced in the recent public discussion” with regards to CPF and the need to increase the Minimum Sum amount for Singaporeans turning 55 this year.
Tan admitted he was aware locals were concerned and “unhappy” about this mandatory increase in retirement savings, but cited higher life expectancy and living costs as important reasons for this increase.
“When the CPF was first introduced almost 60 years ago, members could withdraw their money at age 55 in a lump sum,” he said.
“The situation is very different today where one could expect to live a further 30 years or more. Allowing a full withdrawal from CPF at age 55 today will put us at real risk of outliving our savings in old age.
“This is why we introduced the Minimum Sum scheme.”
He explained the increases to the Minimum Sum for each successive cohort over the last decade were part of a gradual adjustment which started in 2004, and was aimed towards what a lower-middle income household would need in retirement.
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The Minimum Sum for those turning 55 between July 1 this year and June 30 next year had been raised to $155,000 earlier this year.
“We estimate that is how much a lower-middle income household would spend on daily living when they enter retirement 10 years from now. $1,200 per month in 10 years’ time is not an excessive amount – it is equivalent to only about what $1,000 would buy today.”
Also speaking in Parliament on Tuesday, Minister of Finance Tharman Shanmugaratnam reiterated the CPF system was aimed “at meeting basic retirement needs.”
Shanmugaratnam, who is also Singapore’s Deputy Prime Minister stated CPF members’ investments are guaranteed, regardless of the returns on investments made by GIC, the Government’s investment arm.
“CPF members bear no investment risk at all in their CPF balances. Their monies are safe, and the returns they have been promised are guaranteed,” he explained.
He concluded his speech by adding the “CPF system is sound, and provides a solid foundation for Singapore’s future.”
“It is not a static system. Over the years, we have adjusted the system, such as to reduce the scope for housing withdrawals and focus increasingly on retirement and medical needs in old age.”