CPF proposals: Good as people seek greater say in and security for old-age savings, says PM Lee

The recommendations of an advisory panel to make the Central Provident Fund (CPF) scheme more flexible for Singaporeans, based on their retirement needs, are appropriate as people seek a greater say in and security for their savings in old age, Prime
The recommendations of an advisory panel to make the Central Provident Fund (CPF) scheme more flexible for Singaporeans, based on their retirement needs, are appropriate as people seek a greater say in and security for their savings in old age, Prime Minister Lee Hsien Loong said. -- ST PHOTO: DESMOND FOO

BERLIN - The recommendations of an advisory panel to make the Central Provident Fund (CPF) scheme more flexible for Singaporeans, based on their retirement needs, are appropriate as people seek a greater say in and security for their savings in old age, Prime Minister Lee Hsien Loong said.

The proposals announced on Wednesday are good, Mr Lee added while noting that even today, quite a number of people leave their money in their CPF accounts instead of taking out what they can at their drawdown age.

"They don't get a lot of publicity, they don't jump around at Hong Lim Green, but they quietly know this is a good deal. And what the committee is recommending, makes it an even better deal," he said.

"They don't just get 2 ½ per cent (interest) on the amount they put in, they are going to get 4 per cent on the amount they are putting in. And it will see to the needs of the middle and lower end of the population, which is a benefit for Singaporeans."

Mr Lee was speaking to Singapore journalists at the end of his four-day official visit to Germany, where he met top German leaders and businessmen.

He also observed the country's vocational training system, which Singapore wants to learn as it encourages lifelong learning.

He had highlighted the move towards an integrated system of education, training and career progression, with support from industry, throughout a worker's life at last year's National Day Rally.

He also announced at the Rally the formation of the advisory panel to study ways to make the CPF scheme more flexible.

The panel's recommendations include letting people withdraw up to 20 per cent of their retirement savings at age 65, and an option for those who want to go beyond the basic and full retirement sums to pick an enhanced retirement sum.

"These are just fulfilment and definition of what I had sketched out last year at the Rally," he said.

Mr Lee noted that how much people needed in retirement would depend on their incomes and family circumstances, and the committee had to think about finding a right amount that most people would be able to meet.

But some might need a greater payout, and would have the money for that.

"Up till now our attitude is well, beyond that, you're on your own," he said.

The basic retirement sum, he noted, would cover only up to the 25th percentile of the working population, whereas many would want more than that in their old age.

"If you're an executive, and earning a generous pay, you know how to look after yourself. But if you're an average Singaporean, you have a bit more money, to say 'go and set up your own retirement scheme', I think that's not possible," he said.

"So I think it's right that...beyond the full retirement sum, if people want to put more in, do that. (But) there has to be a limit, otherwise if you have a lot of money, you just dump it in the CPF, it becomes the government's duty," he added.

"But up to three times the basic sum, let's call it enhanced retirement sum, you can put it in, you get correspondingly higher payouts when you retire."

On his meetings with German business leaders, Mr Lee said a critical issue for them was consistency of policy, regulatory transparency, a clean system and protection of intellectual property.

"They can depend on what you say being fulfilled and honoured, not just in the short term, but over the long term," he said.

"They expressed their appreciation for this, which of course means they are reminding me to please continue to uphold this.''

Mr Lee also said the Government was helping companies in Singapore to upgrade, including those in manufacturing.

"The German companies are strong in manufacturing, and we will work with them to help the companies succeed in Singapore.''

Ultimately, for Singaporeans to have good jobs and be able to earn good incomes, the economy had to be vibrant and humming, he added.

"That's what we have been trying hard to do, and trying hard to get people to understand that this is important."