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IPS forum on CPF: Future needs and wants of seniors.

Wednesday, July 23, 2014

The next speaker was Associate Professor Tan Ern Ser from the Department of Sociology in NUS. His presentation looked at three categories of seniors aged 55-65, 65-74 and those 75 and older.

In general, younger seniors as well as male seniors do better in having CPF savings. More older seniors receive retirement funding from their children compared to the younger seniors. 

This, to me, shows that the CPF has become a more important part of retirement funding for Singaporeans and will continue to be so for younger generations, basic safety net though it may be.

Prof Tan also revealed that despite some worries, most of our seniors have seemingly been prudent with the CPF money they withdrew. See table below:

Usage of withdrawn CPF money.

Frankly, if I were to withdraw my CPF money just to plonk almost half of it in a savings account, I would rather leave it in the CPF to earn 4% per annum in interest. 

Of course, this could change in future. Who knows? By the time I reach 55 years of age, fixed deposits in the banks here could attract interest payments of more than 5% per annum.

What I also found interesting is in the next slide:

Prof Tan asked whether good relationships with children lead to financial adequacy for the seniors or does financial adequacy of the seniors affect their relationships with their children? 

Well, I think that if the reliance on children should be an important part of some people's retirement planning, then, this could be an interesting question to ponder.

OK, who threw a shoe at me? Who? Who?

See slides: here.

Related posts:
1. AK attended a forum on CPF.
2. What is our attitude towards having children?


veronika said...

Congratulations on being invited, it is an honour from the powers that are!
( it also means your blog is being read by them )

It is certainly good for the Gov to try and explain their point of view on CPF. They hold all the keys and switches.
Unfortunately, they are doing a poor job of convincing people that their concerns and their methods is the best way forward.

"shifting goal posts" is true and they have not answered it fully. Here is why:

Previously, upon your 55th birthday, the minimum sum would be released over a 20 year period. That means it will run out when you are 75 years old.

Now, the statistics imply that you will live longer than 75 years, so they take the minimum sum and plonk it into CPF LIFE.
Lets not forget that before CPF LIFE, they had already shifted the goal post to draw down from 55 yrs to 65 yrs.

By extension, from 65 yrs if we add 20 years we will be 85 years old. We would have accumulated another 10 years of CPF ( 55 to 65 ) and without CPF LIFE, we would draw down our minimum sum over 20 years.
How many will survive past 85?

They are not being candid, but they should be. What they are doing is creating a system where we combine and pool our CPF to sustain each other.. they just hold the keys and switches. What then is the role of Gov? It seems they do not want to have the responsibility of funding old age care, or as little as possible.

Might I not have an option?

- to choose between LIFE & old scheme?
- to choose between private annuities?

The interest rates now is artificially low and that makes CPF accounts very appealing, but despite that, people must have a choice.

The Gov has always supported a "free market" & competition.. why is there no market for products that help build retirement funds or products that help sustain retirement financing?

The current policy of "NO OPTION" is bad and it indicates either a lazy way of handling CPF or as the buzz among the people is being passed around: that they are hiding, distorting truths.

Thanks AK, for all your sharing.. appreciate your work.

AK71 said...

Hi Veronika,

A very good piece of writing from you, as usual. Thank you. :)

At the forum, Minister Tan Chuan-Jin said that the goal posts have not shifted but the game has changed as longevity risk has increased. ;p

I don't really have an opinion on this but I do agree that giving people options as per your suggestion would go some way to relieving suspicions and unhappiness in some quarters. However, the kiasu spirit in me tells me better not. -.-"

There is always a fear that people might withdraw all their money at retirement and squander it. One of the speakers talked about the need for compulsion when it comes to savings and delaying gratification. I will be publishing a blog post on this later this evening.

You are right to say that the CPF Life is about risk pooling. This has deviated somewhat from the original intention of the CPF which was more each person for himself. I will be blogging about this too as it was something two speakers in the afternoon session spoke about.

Finally, I am happy if readers find my sharing helpful. I joked with a friend that my blog is like national service but I am happy to do it unlike the one in my late teens. So, you are welcome. :)

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