A member of Parliament wants Central Provident Fund (CPF) members to be given an option to pay more into their retirement accounts, so they can receive bigger payouts from their CPF Life annuity scheme.
Ms Foo Mee Har (West Coast GRC) was speaking up for CPF members who are concerned that the CPF Life payouts of around $1,200 a month will not be enough as retirement income.
The current cap on how much people can put into CPF Life is equivalent to their Minimum Sum. Ms Foo suggested that the cap be removed.
"Given that the Government has acknowledged the current Minimum Sum only provides monthly payouts to cover basic living expenses, I would like to ask the minister, why is there a need to set a cap on the sum of money that CPF members wish to set aside in CPF Life?"
Manpower Minister Tan Chuan-Jin, in his reply, said that while the CPF Life scheme is designed to help Singaporeans meet their basic needs in retirement, its priority is to provide for those at lower income levels.
In doing so, it allows the Government "to target our resources on those Singaporeans who need it most", he added.
Mr Tan also pointed out that middle- and higher-income Singaporeans, who have retirement savings in excess of the Minimum Sum, have other investment options outside the CPF system to meet their retirement needs.
Persisting, Ms Foo expressed the hope that the Government would look into her suggestion.
Mr Tan, noting that the four-year-old CPF Life scheme is relatively new, said the Government will "continue to look at it and see how best to improve it".
Earlier, he told the House that CPF members can put aside more than the specified Minimum Sum for their cohort - up to the current cohort's limit.
The Minimum Sum is lower for older cohorts. For instance, it was $148,000 for those who turned 55 from July 1 last year until June 30 this year. This is lower than the $155,000 for people who turn 55 from July 1 this year until June 30 next year.
But these older workers can put in up to the $155,000 Minimum Sum of the current cohort. This bigger amount would give them monthly payouts of $1,200 under the CPF Life scheme.
Ms Foo also asked for an explanation of how the CPF Life scheme can guarantee a payout for life, even after the initial quantum had been exhausted.
Mr Tan said this was because CPF Life involves risk pooling.
The Minimum Sum is used to buy a CPF Life annuity.
The premium from the annuity is not pooled. But the interest earned on the annuity is shared among surviving members, allowing payouts to continue.
This article was first published on August 06, 2014.
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