The Central Provident Fund board was set up in late 2014 with a single goal in mind: to make the CPF system as strong, fair and efficient as possible. The Fund itself is hugely important to Singaporean society, as it provides for retirement, housing, healthcare and employment benefits in the state. If poorly managed, the CPF could slow down or even halt the state's increasingly powerful economy.
Well, the first batch of recommendations from the Panel has now been handed in to the government and, certainly, there are some interesting issues raised and ideas offered. In particular, this list of recommendations focuses upon future adjustments to the Minimum Sum and the issue of lump sum withdrawals.
What the CPF Advisory Panel is hoping to respond to with this review is to strike a balance between providing a life-long, reliable safety net for the country's citizens, while also allowing them the economic freedom and flexibility upon which the state's economic boom has been founded.
For example, on the issue of retirement, the Panel proposes adjusting the Minimum Sum in order to allow people a more flexible monthly pay out during their retirement. A key suggestion is that those CPF members who turn 55 in the year 2016 put a large enough proportion of their CPF savings in order to make up a basic pay out of about $700 per month when they retire in 2026.
If that is you, then you'll need to put a Basic Retirement Sum of $80,500 as premiums in 2016, as worked out by external actuaries hired by the CPF. If, however, you turn 55 in 2020, then you have a 70% chance of having enough saved up in your fund to meet this Basic Retirement Sum.
To offer a more flexible service, the Panel recommends that CPF members can withdraw cash from their savings above the Basic Retirement Sum. However, these withdrawals will only be available subject to a charge or a pledge on the value of property held by the member. So, should you make a withdrawal and sell your property, then the pledged amount will be returned to your CPF, thus garnishing your basic pay out. If you do not own your own home, then it is highly recommended that your Full Retirement Sum is twice the Basic Retirement Sum, which would be something like $161,000 if you are retiring in 2016.
The Panel also wants to make topping up pay outs to ensure larger monthly amount in future easier for members. An Enhanced Retirement Sum would be established that will allow members to add savings or cash to their premiums. It is likely that this ERS would be three time the BRS. If, for example, you wished to top up in 2016, this would be capped at $241,500.
Another key recommendation involves the concept of deferral, which would allow members to put off their retirement provisions until the age of 70. As well as allowing them more time to save more money for retirement, this will also help those who wish to work past retirement age, a phenomenon that is becoming more and more popular in Singapore.