Central Provident Fund (CPF) members have now been offered more options for their retirement needs, Manpower Minister Lim Swee Say said yesterday.
They can choose between fixed payouts and one that starts lower but keeps rising. There is also a new investment option for those who seek higher returns on their CPF funds, but may not have the time or know-how to invest on their own.
The changes also keep the system simple enough for the public to make a suitable choice, he told reporters a day after the Government accepted ideas from an advisory panel to improve the CPF scheme.
"In the past, we may have offered you laksa and chicken rice, and now we offer you nasi lemak. If you ask me, is laksa better than chicken rice or nasi lemak, it all depends on what you are looking for," he said.
"All these options are good, but you have to find the one that is most suitable."
One new option is a CPF Life plan that gives escalating payouts to keep pace with inflation. Monthly payouts will go up by 2 per cent every year, but payments start at about 20 per cent lower than those of the current default plan.
"We will probably be able to put the escalating payouts in place in the next couple of years," said Mr Lim. It will take "a bit longer", he added, to implement the new, low- cost investment scheme that the panel also introduced.
The Lifetime Retirement Investment Scheme (LRIS) opens up a new option for investors, he said.
Speaking to reporters at the launch of a central kitchen for eight Indian restaurant operators, Mr Lim said the LRIS might have "tremendous impact in the future" as it plugs a gap in existing investment options.
On the one hand, he said, members are guaranteed risk-free interest for their Ordinary and Special accounts. On the other, they have the CPF Investment Scheme (CPFIS), a higher-risk option that requires more financial knowledge to manage and is also costlier.
"There is a growing number of CPF members who feel they can strive for higher returns than the risk-free ones, but don't have the time, expertise or know-how to manage their private investments.
"This is a simple scheme for individual investors which is less costly and less time-consuming," he said.
He said that it is an "immediate priority" to spend time ensuring the smooth implementation of the panel's recommendations.
More will also be done to explain the changes to the public so they can make suitable choices.
Industry experts like Mr Marcus Kok, principal pension consultant for PwC Singapore, welcomed the LRIS as a boon for younger members, who can take on more risk.
But, he said: "If you are five years away from retirement age, it might be better to just let the money sit in your retirement account."
Aon Hewitt Wealth Management executive director Shikha Gaur said members should "understand what these options mean for them and how they supplement a retirement plan that has been well thought through".