Saving ahead for life's inevitable decline

Liberalisation of the Central Provident Fund system has taken a step forward with the announcement that, from next January, people no longer will need to have a minimum sum in their Medisave account before they can withdraw their CPF savings at 55. The change will affect many because almost half of those who turn 55 currently do not have the required sum in their Medisave. However, the maximum sum for Medisave will not be scrapped. Instead, it will be increased every year to keep pace with the higher draw on Medisave by the elderly. But it will be fixed for each cohort when it turns 65, unlike now, when any increase in the maximum sum applies to all, regardless of age.

This readjustment of the Medisave formula signals a measure of flexibility as the lifting of the requirement of a minimum sum will remove a hitherto statutory load on members. However, like any compulsory scheme, certain outer boundaries must remain in place for Medisave if it is to be viable. The increase of the maximum sum underlines the need to uphold Medisave as a national savings scheme which obliges people to put aside a part of their income to meet healthcare needs, particularly after retirement. The scheme would fail if this purpose is not properly operationalised. Within these parameters, the latest changes reinforce the element of flexibility in fixing the technical aspects of the Medisave scheme.

As with the CPF generally, its Medisave component is a reminder of the duty of citizens to take personal responsibility for their needs. This will continue to be the case even when MediShield Life, the national health insurance scheme, begins to function. While the compulsory and universal nature of MediShield Life will "socialise" the scope of healthcare, the scheme can function well only if its individual stakeholders contribute their fair share to it, by keeping up the payment of premiums and co-sharing a modest part of the costs. Remaining in good health and not treating the scheme as a cheap or free buffet will also be crucial for its long-term viability.

Medisave will continue to play an essential role in financing the overall provision of healthcare in Singapore. Although compulsory, Singaporeans' contributions to Medisave remain their own money, to be drawn on in a contingency - especially in the final years of their life when their medical needs tend to rise in the face of life's inevitable decline. This would be a constructive way to look at the CPF.

The rules are there to prompt individuals to make the necessary provisions for themselves. As with retirement, the scheme relating to healthcare is transparent and all relevant information is readily available. Still, public education efforts must not flag.