You are here

MPs offer ideas to improve CPF

[SINGAPORE] Members of Parliament came up with ideas to tweak the Central Provident Fund (CPF) system such that it could provide enough for Singaporeans during their retirement.

Chua Chu Kang GRC MP Zaqy Mohamad suggested that the CPF could consider a government-backed investment plan that tracks inflation, above the existing Ordinary Account and Special Account interest rates.

Mr Zaqy, who kicked off the debate on the President's Address yesterday, noted that the existing CPF-approved investment funds were currently left to the market, which often has financial risks beyond what the ordinary CPF member can understand.

"A government-led plan may come somewhere in between, in that it is a trusted plan, with standard terms and the objective of tracking inflation to protect one's savings for the long term," said the backbencher.

Having such a plan would help improve returns on CPF savings, he said. This, he added, could reduce citizens' unhappiness with the "changing goal posts" of the CPF Minimum Sum amount.

Your feedback is important to us

Tell us what you think. Email us at

Earlier this month, it was announced that the Minimum Sum would be raised to $155,000 for those turning 55 between July 1 this year and June 30 next year. This is $7,000 higher than last year's Minimum Sum of $148,000.

Mr Zaqy noted that only half of all Singaporeans can meet the Minimum Sum requirement.

"Much of the frustration I encounter with the Minimum Sum or the Retirement Account after a certain age is due to the inflexibility when one falls into the difficulty of using funds to pay for their mortgages or changed property as a result," he said.

Nominated MP Tan Su Shan said that it was probable that Singaporeans had to factor in a higher rate of inflation when calculating their retirement adequacy.

This, given the fact that CPF members enjoy a risk-free interest rate of 2.5 per cent per annum on their Ordinary Account savings, but bearing in mind that inflation in Singapore has averaged 4.1 per cent over the last three years since the economic restructuring journey began.

"This is double the historic average inflation rate of about 2 per cent and will erode our CPF savings," she said, adding that it would be "useful" for the government to provide a medium-term projection of the country's inflation rate.

Ms Tan, a banker, noted that since the Monetary Authority of Singapore had chosen to maintain a strong and stable Singapore dollar, it was likely that most inflation costs could come from domestic pressures.

"Being able to project the growth rate of our cost of living expenses will help us make the right choices, outside of parking our surplus funds in cash deposits," she said.

In his speech at the re-opening of Parliament on May 16, President Tony Tan Keng Yam had said that the government would improve the existing CPF savings and CPF Life annuity schemes to ensure that older Singaporeans would have enough to last them through their golden years as life expectancy goes up.

The authorities will also develop more options for Singaporeans to unlock the value of their homes in their retirement, said Dr Tan.

Ang Mo Kio GRC MP Inderjit Singh called for caution against overly emphasising the role of the home in providing for retirement adequacy.

"To achieve this goal of a home being a source of retirement funding, asset appreciation would be beneficial. However, the appreciation of housing prices can cause serious anxiety among the young who are looking to settle down and start a family," he wrote in a speech posted on his Facebook page yesterday.

"Even though my home price has increased constantly over the years, I am not any richer till I dispose of my property. But in that instance, I would have to purchase a replacement home, which would of course be more expensive. Constantly increasing property prices, in my opinion, are not a good thing for our country," he said.

BT is now on Telegram!

For daily updates on weekdays and specially selected content for the weekend. Subscribe to