A soccer team, with the Central Provident Fund's (CPF) guaranteed interest rates as "defenders" guarding against risk. This is one of the more colourful images that emerged when The Sunday Times met members of the CPF Advisory Panel to discuss its latest recommendations.
The panel this month announced two key recommendations: a new Lifetime Retirement Investment Scheme giving Singaporeans more options to grow their savings; and an escalating payout option for CPF Life, to help those worried about coping with inflation in their later years. Currently, payouts are fixed monthly amounts.
Giving individuals more flexibility to handle their retirement savings according to their needs certainly seems the name of the game with the changes, which have been accepted by the Government and come a year after the panel made its first set of recommendations.
The 13-person panel was appointed in September 2014. Among its first tranche of changes was the option to withdraw up to 20 per cent of savings at age 65 in a lump sum. This appeased many who had clamoured for the freedom to do what they want with their money in their golden years.
While the changes have been the subject of much discussion, critics may be surprised to learn of the sheer detail that has gone into them.
For one thing, it was a logistical challenge. The panel met more than 20 times over two years, with many meetings crossing the five-hour mark. Each panellist also attended 12 to 15 focus group discussions, to get a sense of the needs and aspirations of the Singaporeans they were working for. That's not counting all the side meetings and endless e-mail exchanges. Insight finds out what led to the changes to this crucial system that will affect all Singaporeans at some point in their lives.
How the team of 13 made its decisions
Not many would think of their retirement savings as a football game. Yet this was the analogy used by some tasked with recommending changes to the entrenched Central Provident Fund (CPF) scheme.
"Think of the investment tools that generate high returns as strikers. You can't have 11 strikers in a team, right? That would be ridiculous," CPF panel adviser Christopher Tan tells The Sunday Times at a recent roundtable, in response to those who clamour to take out their savings and put them in riskier options.
Instead, CPF savings in the Retirement and Special Account, which currently earn guaranteed interest rates of 4 per cent per year, should be regarded as "defenders".
'Singaporeans don't realise what a good deal the CPF is'
The Central Provident Fund (CPF) system has its share of detractors among Singaporeans but, overseas, it attracts a lot of positive attention.
This puzzling fact could be because Singaporeans do not realise they really have a good deal, says finance professor Benedict Koh, a member of the advisory panel that studied ways to improve the scheme. He tells Insight in a recent panel discussion: "I present papers at international conferences. You won't believe what people say: 'Can I invest in your account?'. 'Can foreigners buy it?'."
Many people here are not aware that a 4 to 5 per cent interest rate guaranteed by a government with a triple-A credit rating - the highest rating - is simply unique, says Prof Koh, who is associate dean of the Singapore Management University Lee Kong Chian School of Business.