Changes to the Central Provident Fund (CPF) scheme that will allow members to withdraw a lump sum upon reaching an eligible age strike a balance between being flexible and safeguarding retirement adequacy, said Manpower Minister Lim Swee Say yesterday.
He was responding to concerns raised by eight MPs during the debate on the Central Provident Fund (Amendment No. 2) Bill, which was passed yesterday. Other changes include having the Retirement Sum scheme payouts start automatically and making it easier to top up relatives' CPF accounts.
Acknowledging MPs' differing views on the lump sum provision, which had been recommended by an advisory panel, Mr Lim said the panel's views were also divided, with some advocating flexibility and others wanting tighter rules.
Ms Lee Bee Wah (Nee Soon GRC) called for more leeway for those who might want to buy property, while Mr Png Eng Huat (Hougang) suggested allowing the lump sum withdrawal from age 55.
But Nominated MPs Thomas Chua and Randolph Tan cautioned that too much flexibility might risk members' savings.
LUMP SUM WITHDRAWALS
Central Provident Fund (CPF) members who turned 55 in 2013 and later can make a lump sum withdrawal of 20 per cent from their Retirement Account when they reach the payout eligibility age.
AUTOMATIC PAYOUTS FOR RETIREMENT SUM SCHEME
Previously, members on the Retirement Sum scheme had to apply to start their payouts. Starting from 2018, payouts will begin automatically once the member turns 70.
REFLECTING MEDISAVE CHANGES
On Jan 1 this year, the Basic Healthcare Sum was introduced. It is the maximum that can be set aside in the Medisave Account.
The CPF Act has been changed to fix the Basic Healthcare Sum for each cohort when they turn 65 years old, and to remove obsolete provisions relating to the Medisave Minimum Sum.
SIMPLER TOP-UPS FOR FAMILY
CPF members who have set aside their full Retirement Sum will be able to top up the Medisave Accounts of certain family members, aged 55 and above, directly from their own Ordinary and Special Accounts.
Previously, they would have had to withdraw excess monies in cash first.
Mr Lim replied that the changes in the Bill strike "the most appropriate" balance. They allow members who turned 55 in 2013 or later to make a lump sum withdrawal upon reaching the payout eligibility age. This recognises that some people may need to withdraw money earlier, he said. But the amount they can take out is capped at 20 per cent of their retirement savings, and the eligibility age is set at 65 instead of earlier, "because by then the person would be in a better position... to look ahead and make the assessment", Mr Lim added.
Another change will have the Retirement Sum scheme payouts start automatically when members turn 70. Previously, they would have to apply for the payouts to start.
This change kicks in in 2018 and is expected to help a third of the Retirement Sum scheme members turning 70 that year. The total number of members was not given.
Another change makes it easier for CPF members who have set aside their full Retirement Sum to top up the Medisave Accounts of certain family members.
NMP K. Thanaletchimi and Mr Louis Ng (Nee Soon GRC) wanted to know which relatives this would apply to. Mr Lim clarified that in-laws are also included, as the aim is to encourage the younger generation to top up the accounts of older family members.
MPs, including Mr Saktiandi Supaat (Bishan-Toa Payoh GRC) and Mr Chong Kee Hiong (Bishan-Toa Payoh GRC), also hoped more could be done to educate the public about the CPF.
Mr Lim agreed, saying that the CPF Board is starting an exercise to explain the system simply. A trial run was done last month, with more sessions to be conducted in Tamil, Malay and Mandarin.