NTUC calls on government to pursue investments with risk-free interest rates

THE National Trades Union Congress (NTUC) has called on the government to continue to pursue new investment opportunities that will further boost returns of workers' total savings with risk-free interest rates.

This was one of several recommendations NTUC submitted to the Central Provident Fund (CPF) Advisory Panel.

The panel was formed in September last year to study the possible enhancements to the CPF system so that there is greater flexibility for CPF members as they plan for retirement.

To help workers build up their CPF savings and Minimum Sum, NTUC also urged the government to further narrow the gap towards full alignment in total contribution rates for all workers aged 55 and below.

In tandem, it also called on the government to level up total contribution rates for workers who are more than 55 years old.

Currently, the CPF Ordinary wage ceiling is S$5,000. NTUC proposed the ceiling amount be raised between S$500 and S$1,000, with progressive adjustments to correspond with the 80th income percentile.

To help low-wage workers, it also asked for the average gross monthly wage for workers receiving maximum Workfare Income Supplement (WIS) payouts to be raised to S$1,200 from S$1,000.

For the self-employed, NTUC said the government could provide WIS top-ups to their Special Accounts if they are already contributing.

"Besides supplements from WIS, the government can also provide incentives to encourage service buyers and principals to contribute to the CPF savings of self-employed and freelancers, which will help build up their savings for retirement," said NTUC.

NTUC also suggested that the additional tax relief be computed based on number of family members receiving the Minimum Sum top-ups; and the income ceiling of receiving spouse or siblings be raised from the current S$4,000 to S$12,000 per year.

As for Minimum Sum and Lump Sum withdrawal, NTUC said a 10-year Minimum Sum Schedule with corresponding CPF Life monthly payout would provide members with greater certainty.

A mid-term review of the schedule would ensure relevancy and any adjustments or changes should be explained to members in advance.

To cater to members with varying Retirement Account balances, NTUC suggested a percentage withdrawal of the balance even for those who do not meet the Minimum Sum.

It added that the government should provide a one-time "non-withdrawal" incentive that is substantial enough to incentivise CPF members to keep the total amount in their Retirement Accounts.

In terms of the CPF Life monthly payouts, NTUC suggested giving members the option of receiving an escalating payout stream and providing incentives to those who opt for lower initial monthly payouts or those who defer their draw-down age.

There should also be flexibility in letting CPF members voluntarily top up their Minimum Sum, subject to a cap.

The proposals were gathered from 250 union leaders over two months in end-2014.

In a briefing on Wednesday morning, Cham Hui Fong, NTUC's Assistant Secretary-General, said its members hope the CPF scheme is sustainable, with good interest rates and certainties such as contribution rates and interest rates that apply.

At the national level, Ms Cham said there is also a need to pay attention to the labour force participation rate and employment rate to ensure the scheme meets the needs of CPF members.