The Central Provident Fund (CPF) has been in the spotlight in Singapore for as long as people have been contributing their share.
On Feb. 18, 2019, Singapore's Minister of Manpower Josephine Teo came forth to address the latest misconceptions about CPF payouts in Parliament.
On Jan. 19, the CPF Board had put out a statement debunking a viral Facebook post that alleged the CPF payout age had been discreetly raised from 65 to 70.
At the heart of this issue, alongside past debates regarding the CPF, lie Singaporeans' fundamental concerns about their ability to access their savings, which they perceive to be "locked up", when they retire.
And these concerns date back decades — to the 1980s, when our ministers debated the matter of the CPF withdrawal age.
Former Minister of Health once proposed raising CPF withdrawal age from 55 to 60
In 1984, then Minister for Health Howe Yoon Chong had recommended that the CPF withdrawal age be raised from 55 to 60 to reduce the likelihood of inadequate savings for old age.
Howe's recommendation was part of a report issued by a 12-member committee, known as the Committee on the Problems of the Aged, which examined the issues of Singapore's greying population.
At that time, the CPF contribution rate was much higher: 50 percent of wages, in fact, which consisted of 25 percent from the employer and 25 percent from the employee.
The current rate of CPF contribution stands at a total of 37 percent of wages, with 20 percent coming from the employee, and 17 percent coming from the employer.
The recommendation by Howe sparked wide backlash.
NTUC called the recommendation "unreasonable"
Despite Howe's urging of Singaporeans to focus on the bigger issues raised in the report, debate largely centred on it's recommendation to raise the CPF withdrawal age.
The Straits Times (ST) reported that NTUC came out against the recommendation, calling it "unreasonable".
NTUC added that raising the withdrawal age should only be considered when the retirement age had been universally raised by officers.
Some workers were also reported by ST as stating that the recommendation would increase fears among Singaporeans that they would not live long enough to collect their money.
These concerns eventually came to a head in Parliament on June 29, 1984, when then-MP for Kebun-Baru, Lim Boon Heng (currently chairman of Temasek Holdings), and Toh Chin Chye (a backbencher by that time) criticised the recommendation in response to Howe's position.
Summary of all three parties' position
Here's a breakdown of what all three parties said in Parliament:
Howe Yoon Chong
Acknowledging the backlash against his proposal, Howe decided to address the public criticism by elaborating on his position:
- That the public criticism missed the proper purpose of the CPF -- to primarily provide for old age, not enjoyment.
- That the Committee's main concern was whether the CPF would be sufficient enough for the financial security, care and health of the elderly.
- What's more, should the CPF be their only major source of savings, the issue of healthcare costs would be exacerbated.
- As such, in increasing the withdrawal age, the Committee's aim was to encourage every able-bodied person to keep working for as long as possible, so as to increase their financial independence and keep them mentally and physically active.
Lim Boon Heng
In response, Lim stated:
- That it is unreasonable to raise the withdrawal age of the CPF before a general acceptance of the raising the retirement age as it raises the question of how a worker is supposed to survive while jobless from age 55 to 60.
- That Singaporeans expect to withdraw their CPF at the age of 55 and may have already made plans for the money, such as investing it in banks, using it to plan a pilgrimage to Mecca, or the holiday of a lifetime.
- Lim further noted that the Committee seemed to have the implicit assumption that Singaporeans were unwise, likely to waste their money and therefore ought to be protected against their own weaknesses.
- More importantly, it is the wish of Singaporeans to maximise returns on their CPF savings, which makes it so difficult for them to accept the potential scenario of a later scenario.
- This means that the minister's explanation is therefore about the government helping to manage the worker's savings rather than keeping his savings.
- This in turn raises the question of how far should the government go in protecting citizens against their own mismanagement.
Toh Chin Chye
Toh subsequently built up on the position put forth by Lim, adding that:
- The problem of touching the CPF should be related to the CPF's use, management and contribution.
- At a contribution rate of 50 percent of wages, the CPF is a "vexatious burden" for both employee and employer, as it means increased costs for the employer and less take-home pay for the employee.
- That what was really irksome was "that the government is using people's savings and telling them how to spend their savings."
- A "fundamental principle" of the CPF was also being breached -- namely that "The CPF is really a fixed deposit or a loan to government, which can be redeemed at a fixed date when the contributor is 55 years old."
- Toh further drew a parallel with the withdrawal of a bank deposit, noting that a bank would lose credibility with its customers, if a person, upon attempting to withdraw his money on the due date, was told to come back a year later.
- As such, the central issue to the recommendation's problem was essentially about the credibility of the CPF's management, and a gradual encroachment into its original purpose of providing for retirement.
Recommendation eventually shelved
ST reported that the recommendation was eventually shelved in the wake of the widespread anger and the toll it took on the PAP's performance during the 1984 General Election.
Channel NewsAsia (CNA) reported that the 50 percent contribution rate was also brought down in 1985 in the midst of a severe recession, to 35 percent, with the late Lee Kuan Yew stating that the cut be made on the employer's contributions, to make Singapore competitive.
So what's the current withdrawal age?
Currently, the CPF withdrawal age remains at 55.
This withdrawal can only be done after setting aside a stipulated sum of money in your Retirement Account. This stipulated sum is called the Retirement Sum.
As its name suggests, this is to ensure that one will have enough for retirement and the sum required increases every year.
As for the CPF payout age of 65, this refers to the money paid from your Retirement Account, assuming you were born in the year 1954 and after, until it runs out (if you’re on the Retirement Sum Scheme) or until you pass on (if you’re on the CPF Life scheme)
More information about how CPF currently works:
How the current CPF debate looks like:
Top image collage from National Archives of Singapore and CPF Facebook