SM Lee: Self-reliance philosophy of CPF still as pertinent as ever

Given that Singaporeans live longer and how they work have changed, the self-reliance philosophy of the Central Provident Fund (CPF) remains as pertinent as ever, Senior Minister Lee Hsien Loong said on Saturday, Jul. 5.

He was speaking at Our Tampines Hub to mark the 70th anniversary of CPF with the launch of a commemorative book, and was joined by Manpower Minister Tan See Leng.

CPF, like other policies, has to be updated

During his speech, SM Lee said the government will have to adapt and update the CPF scheme to keep it "fit-for-purpose" for new generations.

Updating it reflects the changes in life expectancies, which have lengthened further, as well as society’s needs that have also evolved.

"Because there is never a once-for-all final solution. There is always a need to keep up with the times; always room to evolve and to improve," he said.

Each generation must fund own retirement needs, but govt will step in

SM Lee said each generation must provide for its own retirement needs in Singapore.

He also gave the assurance that the government will step in, when necessary.

"And if that is still not enough, the government will be there to help you," he said.

He noted that this approach of self-reliance might not work for all, which is why there are safeguards.

He noted that lower-income workers and housewives, who are not in the workforce, might not benefit fully from self-reliance, whereas it works for most people.

In cases that people do not benefit fully, targeted state support, such as the Workfare Income Supplement scheme, Silver Support Scheme and tax incentives to encourage voluntary CPF contributions from family members, will help supplement members' savings, he said.

Packages for the Pioneer, Merdeka and Majulah generations, and periodic top-ups, also help ensure intergenerational equity in a targeted way, he added.

“But the basic principle remains: you must try your best to provide for your own future needs. If that is still not enough, the government will be there to help you,” he added.

Tough decisions have to be made for CPF to work

SM Lee also said that "some very tough choices" were made in adjusting CPF rules and schemes over the last few decades as conditions changed.

He said all changes to the CPF system must be "carefully thought through".

One example was when the government had to cut employers’ contribution rates by 15 percentage points in 1985 after the economy dived into a "severe recession".

This was after the total CPF contribution rate of 50 per cent from both employees and employers was too high to sustain.

The process of cutting CPF contribution rates was repeated during the Asian Financial Crisis in 1997, and in the early 2000s after the Sep. 11, 2001 terrorist attacks in the United States.

Those crisis years saw Singapore fall into recession.

37 per cent total contribution rate reached in 2015

It was not until 2015 that the total contribution rate of 37 per cent was reached.

At this level. it was deemed about the "right level for the long term", SM Lee said.

Only a few ways to achieve retirement adequacy

He added that he was told by the late Lord Paul Myners, a British financial expert and UK city minister, who had reviewed UK insurance companies and pension funds, that there were only a few ways to achieve adequacy in retirement.

One way was to save more during working years.

The second was to spend less every month so that retirement savings can last longer.

And the third way was to retire later by working longer.

"There is no other painless way out," SM Lee said, noting that all countries are faced with these choices.

Despite the limitations and lack of more solutions, it is still possible to make balanced, practical and politically workable arrangements in these three dimensions, SM Lee said.

Singapore has delinked the CPF withdrawal age from retirement age.

Such a policy has made it easier to raise retirement and re-employment ages and to encourage workers to work longer, he said.

Many have chosen to continue working, perhaps in a lighter job, beyond the age of 63, which is the current national retirement age, he added.

The retirement age will be raised to 64 in 2026 and to 65 by 2030.

“The ethos of fairness and personal responsibility fosters the right attitudes towards work, retirement and active ageing,” he said.

This is in "sharp contrast" to the countries that have adopted pension systems paid for by the next generation of taxpayers, SM Lee pointed out.

The topic of pension reform becomes "politically very difficult" to broach in such instances, he added.

High trust in CPF

While there is "no perfect CPF system", Singaporeans are generally in a good state now, SM Lee said.

Today, public trust in the CPF is "very high", he noted.

There are even members who reach 65 years old, which is when CPF payouts start, who do not withdraw their CPF.

"Even when members reach 65, a significant minority do not make any withdrawals."

SM Lee said: "They are confident their money is safe, and they know that they are getting more than a fair deal."

70th anniversary CPF book downloadable now

SM Lee penned the foreword of a new book, "Save & Sound: 70 Years of CPF", which can be downloaded from CPF’s website.

It charts the organisation’s journey over the past seven decades and how the CPF system has evolved over the years.

CPF introduces new one-stop platform

CPF has also introduced a new one-stop financial guidance platform, Plan Life Ahead, Now! (PLAN), which was highlighted at the launch.

The platform allows members to access a personalised dashboard of financial planners in one place.

The personalised dashboard consolidates digital CPF planners, such as the retirement payout planner, home purchase planner and the health insurance planner.

Top photos via CPF