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Lump sum CPF withdrawal suggestion by NTUC is myopic.

Wednesday, January 21, 2015

I am very disturbed by NTUC's suggestion to let CPF members "withdraw a lump sum - of at least 20 per cent of the balances - from their retirement accounts, even if they do not meet the Minimum Sum." Reference: Today Online.

In an open letter to PM Lee on 11 June 2014, I made 3 points. One of these was to allow members with genuine needs to "micro-tap" their CPF savings (presumably from age 55 to 64). A lump sum withdrawal of at least 20% is not micro at all and I am very worried that the suggestion says "at least 20%" which means that the percentage could be higher.

Although certainly not always the case, I am sure that many CPF members who are not able to meet the minimum sum at age 55 are not financially savvy. I am not sure that letting them withdraw a bigger lump sum (even with financial counselling) is the way to do it. Once the money is gone, it is gone.

A much smaller sum that is left in the CPF-RA as a result would mean a much smaller monthly income from CPF Life from age 65. How does this help the affected members' retirement adequacy?

So, I am against this suggestion by NTUC although I would like to see more compassion and understanding in the system.

What would I suggest then?

Like I suggested before, a micro tapping of CPF-RA savings from age 55 could be considered. The actual mechanics would, of course, need more thought.

Perhaps, a withdrawal rate of 2% per annum from age 55 to 64 could be allowed. If a member did not take advantage of this allowance in the first 5 years, he would be allowed to micro-tap up to 12% of his CPF-RA savings in the 6th year if there is a need to. Of course, in the first 5 years, the money that was not withdrawn would have earned some interest (compounding at 4% a year).

This would give money in the CPF-RA a better chance (i.e. more time) to accumulate so that there would be more money to be given out on a monthly basis from CPF Life from age 65.

Although we want to be understanding and compassionate, we should not give in so much as to compromise on a CPF member's retirement funding adequacy.

Related post:
An(other) open letter to the Prime Minister.


Ana said...

I'm not sure if the government is threatened by the 'if you don't do this I don't vote for you' threat. In 2011, I was supporting NSP and WP. After observing what they have done and said these 3 years.... I am starting to feel that stirring up people's emotions is not the way to a better society.

I was reading an article re retirement planning ( will send the link on a separate posting), but the author said a retiree has to have various forms of retirement sources, ie social security (it's a US context>, endowment, annuity, equities, etc. in the same manner, a retiree in Singapore needs various sources, and cpf is one of them. Unfortunately, the financial literary of Singaporeans are generally quite low - well, compared to an average Hong Konger at least. So, too many are getting led by emotional rants by the likes of Roy, Dr Chee, etc. I hope in the next 50 years, retirees will not suffer because of the political threat...

E H said...

This suggestion is one of 15 by Ntuc to the advisory panel. Obviously, not all would be accepted. Some will be. Cross your balls.

Siew Mun said...

I guess someone has an hidden agenda to get CPF members to folk out 20% of the monies to buy insurance, ILPs and etc. ;-)

iwimsasl said...

NTUC can have its suggestions, so do I.

I would suggest the govt to un-tie the CPF draw down age to the re-employment age. Instead it is fairer to tie it to our retirement age - 62 years old currently. It's a matter of < or > sum to be paid out.

Of course, members can choose to draw down their cpf at a later age for greater monthly pay out but the key here is to let us have a choice right?

Sillyinvestor said...


I have a different take on this.

I am not talking about the small group hard core people who are just cynical about anything.

Allowing people to withdraw, help build trust. They are elderly who can withdraw but didn't. They know they can do it.

Of course, with this option, everyone will take first, as "a lark in hand is better than two in the bush"

but after taking it, hopefully they see the system with less suspicious.

Of course, what price trust?

Circle said...

"I am sure that many CPF members who are not able to meet the minimum sum at age 55 are not financially savvy."

I think you are making a very general assumption with this statement.
I am in the opinion that the Singapore Government is too protective over its citizens to the point that they do not take the initiative to improve themselves or take responsibility for their actions.

I watched a documentary on some North Korean defectors who are now living in South Korea. After years living in North Korea with the government structuring their lives from birth, these defectors suddenly have the freedom to do what they want and most of them feel lost because they do not know how to structure their lives for themselves.

I am not saying that Singapore is North Korea. I am just citing an example on how too much government in our lives may not be a good thing for us in the long run.

Ray said...

Policy makers have an unenvious task of having to make 1 policy that can fit different kinds of needs.

Sure i believe those under MS can very well be financially unsavvy. But they can also be quite poor and struggle to make ends meet.
To them: whats the point of having some money, albeit little, in the CPF when I have to beg and borrow to make ends meet.

So allowing some flexibility is the least govt can do.

Ray said...

the problem with letting people be responsible for their own doing can be very disastrous. what if they squander all their money and then look to the govt to help them? do you then say "i told you so" and turn them away? Our govt is paternalistic but that is necessary to a certain extent.

AK71 said...

Hi Mike,

That thought was on my mind too. Trust is like a bridge. Once destroyed, it has to be re-built. It takes time.

However, what is the price that people have to pay in the process? This is a pertinent question because, ultimately, CPF members would be compromising on their retirement adequacy if they should be allowed a lump sum withdrawal of at least 20%.

A bird in hand is better than two in the bushes. I am sure that there are many who think like this at one time or another (including me). Well, in this instance, I like to think of the bird as the proverbial goose that lays the golden eggs. We don't want to impair its ability to lay those eggs. ;p

AK71 said...

Hi Circle,

The quotation is incomplete. You missed out the very important adverbial phrase that came before that: "Although certainly not always the case..." ;)

I am sure that there are CPF members who are not able to meet the minimum sum through no fault of their own. For example, housewives.

So, I am fully aware of the exceptions to the rule.

I know you are not saying that Singapore is North Korea but using North Korea as an example is not suitable at all. We can say Singapore is protective of its nationals but I don't think we can say the same for North Korea.

North Korea basically institutionalised their people. It is very much like being in a prison. This is why prisoners who have spent many years behind bars need help to integrate with society.

On the matter of giving citizens the chance to improve themselves and to take responsibility for their actions, I am all for this. I believe that everyone should take full responsibility in planning for their retirement.

However, can you honestly say that everyone will do it? If we cannot ensure that everyone is responsible, then, having a mandated minimum safety net in place for everyone is only prudent. It is not only for the good of those less responsible but for society as a whole. :)

AK71 said...

Hi Ana,

All of us get emotional sometimes. I have also said before that when I am emotional, I usually make wrong choices. -.-"

I believe that time is the best test of peoples' abilities and will. Over time, we will be able to see if their words and actions match as well. :)

AK71 said...

Hi iwimsasl,

I would like to have choices in life to. :)

Unfortunately, we don't always make the right choices in life. I make mistakes too. Loads.

So, there are instances when having a choice might not be a good idea. In some instances, it is better not to have a choice (although I would still like to have a choice). -.-"

Betta man said...

I believe most, if not all of the suggestions made by the Labour Movement will be adopted by the government, given their close ties.

I am sure that the Labour Movement would be consulted the government before releasing these statements.

I am disappointed that the Labour Movement did not put up a lower & flexible drawdown age as one of its suggestion.

Ray said...


" it is better not to have a choice (although I would still like to have a choice)"

This is exactly how some people against CPF is feeling. They just want a choice. So surely you can understand their feeling of wanting to choose.

AK71 said...

Hi Ray,

Oh, I understand that perfectly. :)

However, to prevent my itchy fingers from doing something I would regret later on, I think not having a choice is acceptable in certain instances. Of course, this is just me. ;p

Anonymous said...

Why do you want the govt to play nanny to the people of Singapore? Is it not enough that they lock up our money for more than 30 years? What gives then the right to change the rules of the cpf act as and when they wished? Much as I appreciate your concern about financial planning, it is not right to have the govt assume a gatekeeper role just because some people are not financially savvy.

To use food as an example, do you want the govt to regulate what you can eat, simply because some people cannot control their urges and become obese from eating fatty food? The govt should therefore control how much fat we get to eat each meal and each month?

Where do we draw the line between personal responsibilty and govt intervention?

Ray said...

" What gives then the right to change the rules of the cpf act as and when they wished?"

Because the govt is still going to have to be responsible to those who squander their money and in the end left with nothing. It's a burden to the society when that happens and the govt cannot do nothing should it happen. So a responsible govt will plan ahead for rainy days. I rather my govt has long term vision than to yield to myopic (as the article is rightly titled) demands of the people.

AK71 said...

Hi politicalwritings,

Please see my reply to your comment:
here. :)

Anonymous said...

Thanks for reply.

The reply rests on an assumption that the govt provides for people who can't provide for themselves.

As you know, this govt has no interest in welfare. It doesn't offer unemployment benefits. It expects people to pay for their own medical expenses, emptying even the savings of their children and their relatives if necessary.

This is why we see uncles and aunties working at McDonald's or as cleaners at food courts or even collecting cardboard and tin cans. The govt doesn't give retirees a cent.

So why do you make an assumption that it will fund the retirement of those who have withdrawn their cpf savings? And use it to justify the holding back of the cpf savings of the majority of Singaporeans?

Ray said...

AK71 said...

Hi politicalwritings,

Although not a welfare State, Singapore does provide help to the low income and the needy.

You can find out more at the Ministry of Social and Family Development's website:

As our population age and if the proportion of those who are financially impoverished should increase in size, I doubt very much that the government would do nothing to help.

I don't think that there is anything wrong with asking the immediate family members of the financially impoverished to assume responsibility first. Tax-payers' money should be used to provide financial aid only as a last resort.

Nick said...

CPF monies are meant for retirement purposes and the govt should not bow down to the pressure of the people demanding CPF to be returned to them at 55. There are many examples of people 'squandering' away their savings/donations when they receive a lump sum payout. What is to prevent this from happening when the govt allows withdrawal of upto 20% from the RA.

As it is the current min sum of $155K gets you only $1,192 - $1,318 per month from age 65 onwards.

Yet most needy families CPF RA barely meets the min sum and are living from hand to mouth. In their minds they are thinking what is use of even having a min sum when we struggle to even put food on the table each day.

I don't profess to have an answer. Perhaps the govt can consider allowing a basic monthly sustenance amount to be withdrawn from the RA to tie them over for a period capped at certain amount but definitely not a lump sum withdrawal of 20%.

AK71 said...

Hi Nick,

I agree and, hence, my suggestion to allow these individuals to "micro-tap" their CPF savings from age 55 to 64 (and not a lump sum withdrawal at age 55 that is "at least 20%" of their CPF-RA). :)

Betta man said...

Perhaps a more balanced approached is to allow people to start drawing down from CPF Life at age 55 instead of 65. Of course, the monthly payout would be reduced accordingly.

But to a family that is living from hand to mouth every month, they need the money NOW, not at 65.

AK71 said...

Hi betta man,

Of course, this is all part of the ongoing debate.

The 10 year accumulation period for the minimum sum from age 55 to 64 is to ensure a more meaningful monthly payout from CPF Life that would go some way to ensuring retirement adequacy. This is basically an annuity plan.

You are right to say that giving people a choice to start drawing from the "annuity" earlier at age 55 would mean a smaller monthly payout. This would very likely fall short of estimates on what is considered a more meaningful retirement income.

So, a solution, in my opinion, is for such CPF members to continue working, building more savings (some of which would go into their CPF account) along the way.

I know some might think that I am heartless for saying this but I am simply a pragmatist.

Siew Mun said...

I am a bona-fide tax payer I disgree to use state funds for people who squander their money away. One the other hand,I do support to use state for people who are in dire straits due to unforeseen circumstances. I considered myself as quite financially savvy, but I still would want the Government to lock my monies in CPF. Where can I get 4% return relatively risk free?

AK71 said...

"Prejudice is a burden that confuses the past, threatens the future and renders the present inaccessible."

- Maya Angelou

C said...


At first glance, I agree that for most people, 20% lump sum withdrawal from CPF at 55 year is on the high side. But just hypothetically speaking, what if a person dying from an incurable sickness wants to withdraw this money (20% out of the $500k in his CPF) to have a final European trip with his kids and leave the rest to his family ?

Lastly, I am pretty excited about NTUC's proposal on raising the quantum from $60k to $120k for the extra 1%. Also the option to allow people to top up in excess of MS. :-)


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