atans1

If MOM correct about CPF, why need FTs, growing population?

In CPF, Financial competency on 05/08/2014 at 4:53 am
One message we always get from the govt and the constructive, nation-building media is that an aging population and the refusal of married S’poreans to do NS when having sex means we need FTs to grow the population so that S’pore can finance the needs of an aging population.
But another message is that in our CPF system, we finance our personal retirement needs (see yesterdays ad in ST),
unlike the ang mohs who have a pay-as-you-go system. The Manpower Blog from MOM describes it thus, ... a pension system. They collect taxes or get citizens to contribute to a social security fund. This pooled monies is then paid out to citizens who reach a certain age. However, many of these systems are facing challenges, because those who are young are now paying for the old. As most countries age, there are fewer and fewer young people paying for more and more aged people …
In Singapore, we have the CPF. Rather than pool all our monies together, every individual saves for his own retirement via his personal individual CPF account.
(Emphasis is mine)
So my question is why do we need to worry about an aging population? MOM says that we oldies don’t depend on younger S’poreans to pay for our pensions? It’s our money that is funding ourselves.
So why need population 6.9m by 2030? Or is it now 10m? Juz excuse to import FTs by the A380 cattle-class?
But then MOM also says CPF monies is S’poreans money, even when govt tells us how we can spend it: sounds like
“War is peace.
Freedom is slavery.
Ignorance is strength.” .
“All animals are equal, but some animals are more equal than others.”
And then there is this rubbish
When the British introduced the CPF scheme in 1955, we could withdraw all our savings at 55. Do we remember what our retirement age was then? It was 55. What was the life expectancy in 1955? It was about 60. Hence, what you withdrew at age 55 would have to last you for just a few years.
Today, the retirement age is at 62 and we could be re-employed until 65.And life expectancy is at least 82 and rising fast. For those turning 65 years old today, 1 in 2 will live beyond 85, and 1 in 3 beyond 90. What would happen if we withdrew everything at age 55? Or even 65? Would we ourselves be able to manage our monies for two decades or more? 
Well there are many other solutions other than forcing Minimum Sum and CPF Life down our throats at age 55. Ask the SDP about one possible solution. and the ang mohs too have ideas. Related post on ang moh view supporting PAP’s stance  
  1. PAP Doublespeak at its best. But great job pointing out this inconsistency in their propaganda

  2. I’ll answer briefly the two questions you posed.

    Firstly, why we need a larger population if each individual saves for his own retirement. Strictly speaking, we don’t. What we need is a larger *working* population because only those who have active incomes pay taxes. The taxes collected is used to run the country. It is simply not tenable nor sustainable to run a country with *both* a shrinking pool of tax revenue and a growing proportion of retirees.

    For instance, even with steady population numbers, we expect the size of our law enforcement to maintain its strength (if already adequate). Our law enforcement staff is mainly supported by tax payers. Retirees generally enjoy their services but do not pay for the police. With waning tax revenues, it would be reasonable to cut funding and strength of our law enforcement agencies. And it stands to reason that crime rates would go up.

    The same reasoning can be applied to health care, defense, or education expenses. Retirees don’t pay for these (other than a token co-payment).

    Secondly, why the need for minimum sum and CPF Life. In my opinion, the Government is trying to be tactful in stating their reasons. I’d be more blunt here. Simply stated, the minimum sum is a proxy for your financial acuity throughout your working life. Financially savvy individuals would, by the time they retire, have a nest egg many times the minimum sum. Folks like you would be in that category. The Government does not have to worry for these folks.

    Conversely, if you hadn’t even been able to save the minimum sum, what basis does the Government have to believe that you will be able to manage your own money to sustain you till death and not burden the rest of the population? If someone hadn’t been financially successful during their most productive years, would you believe that he is more likely to multiply his retirement account, or if given a chance, misspend or “mis-invest” his money. What then? What if they have no children or their children couldn’t support them or are themselves retired. Are you willing to support these folks for the rest of their life?

    You yourself mentioned that life expectancy is much greater than before. That means whatever savings a retiree has would have to last for a longer time. If someone hadn’t sufficiently planned for his own retirement, what makes you think he could plan for his sustenance till death?

    The views expressed here are mine and mine alone.

    • If we really need a higher target population of 10 million to pay additional taxes to sustain an ageing population, then what happens to these new immigrants when they eventually grow old 20 to 30 years down the line What is the next target then, 20 or 30 million to sustain a much larger aged population ?

      Does Singapore have enough space to accommodate 6.9 or 10 million in the 1st place ? Or are we simply pushing the overcrowding & ageing problems to future generations for them to solve ?

      None of LKY & son’s problems any more ?

    • @ Patroitt: Agree. Additionally, CPF Board should NOT allow withdrawals for investment residential property purchase as that is outside of “home ownership” platform and investment property risks are much higher than owner-occupied property risks.

      MND/MinLaw should play their role to ensure stable property market in terms of supply of public and private land (via GLS and en bloc sales) and demand (via less investment froth) because housing affordability is key to (i) General Marriage Rate (why get married when you can shack up in a 350 sq ft shoebox condo), (ii) Total Fertility Rate (how to have 3 kids when the room can’t even site a queen-size bed without one-third of the mattress resting on a bay window), (iii) Labour Force Participation Rate (why work when your HDB whole-flat can be rented out for passive income) and (iii) Income Replacement Rate upon retirement (how to have retirement security when housing loan is still outstanding at age 55 and job security is less assured after age 50 unless one has iron rice bowl in Public Service).

      One other point though – CPF LIFE is a game-changer from CPF Min Sum in that it has collectivised the social obligation of Singaporeans (instead of Govt) paying for down-and-out Singaporeans. The default plan under CPF LIFE deducts 50% of annuity premium at age 55 and the balance one month b4 age 65 birthday. Interest earned on such deducted premium during ages 55-65 goes into pool. Hence, the CPF member who met his/her Age 55 cohort’s CPF Min Sum in full cash would be “contributing” more to the pool than another CPF member who has only $40,000 to auto-qualify for CPF LIFE. Better yet, those with less than $40,000 in CPF at age 55 could also apply to join CPF LIFE where min payment if $250/month from age 65 to death. That’s why CPF LIFE pay-outs depend on (i) mortality rate of fellow SIngaporeans and (ii) interest rate.

  3. […] – The Independent, SG: Retirement in Singapore: Golden years or down trodden years? – Reflections on Change: Understanding MediShield Reserves – Thoughts of a Cynical Investor: If MOM correct about CPF, why need FTs, growing population? […]

  4. The government has a tough job hiding the truth with people like you around…
    Abe Lincoln did say you can fool everyone but not all the time.

    And oh… Freedom is not slavery. Slavery is Freedom!

  5. The nub of the matter is, to the government “welfare” has always been, and still is, a dirty word. The people are supposed to take care of themselves, or by their family members. The only “welfare” that citizens can expect are the pork barrel kind just before elections.

  6. If you the PM, you will also do the same. Who gonna pay your $3M basic salary plus perks every year?!? The oldies har?? Or the shrinking sinkies earning only $3K and KPKB-ing every minute?!? Wake up lah. So simple also don’t understand.

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