SINGAPORE - More members in each cohort reaching the age of 55 have been able to meet their Central Provident Fund (CPF) Minimum Sum over the years, despite this threshold having increased over the years, said Manpower Minister Tan Chuan-Jin on Tuesday.
This is due to improvements to the CPF system, and also because wages have been growing and more are participating in the labour force, he added.
His statement on CPF was given in Parliament response to 10 MPs' questions on the compulsory savings scheme from 10 MPs.
The Government is "even more optimistic" that younger workers can attain the Minimum Sum, he said. He cited a 2012 study by two local economists which estimated that about 70 per cent to 80 per cent of new entrants to the workforce would be able to meet the Minimum Sum for their cohort fully in cash.
Three key improvements to the CPF system have helped.
First, the CPF has paid an additional 1 per cent interest on the first $60,000 of combined balances since 2008.
This means that about two-thirds of members earn 5 per cent interest on all their balances in their Special, Medisave and Retirement Accounts, and over half of all members earn 3.5 per cent on all their Ordinary Account savings.
"This is superior to what is earned on bank deposits and comparable financial instruments," Mr Tan noted.
Second, lower income workers also have their CPF savings boosted by the Workfare Income Supplement scheme.
Third, CPF contribution rates for older workers have been raised to help them save more, said Mr Tan.
But a key group of concern are the senior citizens who are in retirement and have insufficient funds, he added.
Mr Tan said that many of these seniors have low CPF balances because of lower wages in the past and the more liberal withdrawal rules which were calibrated for shorter life spans, which depleted their CPF savings.
But because the majority of current seniors own and have fully paid for their homes, he added, they can be used to supplement their retirement funds, and there are schemes to help them do so.
"Those who take advantage of these schemes typically get enough in proceeds from the sale to top up their CPF accounts up to the Minimum Sum, with cash to spare," he said.
Among CPF members who turned 55 years old over the past five years and had used CPF monies to purchase HDB flats, an average of 55 per cent of their Ordinary Account savings had been withdrawn to finance their flats at age 55, he noted.
However, as the CPF is founded on the principle of self-reliance and work, those who do not work and contribute regularly to the CPF are therefore less likely to attain the Minimum Sum.
For inactive CPF members, many of whom have not worked regularly, he revealed that 23 per cent of Singaporeans who turned 55 in 2013 were inactive CPF members, while the remaining 77 per cent were active members or self-employed.
For this group, he said, "family support will have to come in and other social safety nets are in place to provide assistance for example through the various ComCare schemes".