The NTUC proposed measures last week to tweak the Central Provident Fund system. Among them: raise the monthly salary cap on which contributions are calculated, higher contribution rates for older workers, and higher Workfare payouts for low-wage workers. NTUC assistant secretary-general Cham Hui Fong tells Toh Yong Chuan about the thinking behind the proposals.
What steps did NTUC take to produce the recommendations?
We held four focus group discussions last year.
Two groups were union leaders of a mix of ages. A third group comprised low-wage workers, older workers and women; and a fourth group was made up of professionals, managers and executives (PMEs), youth and families.
In all, 250 of them attended the discussions. I believe they are fairly representative of workers because these were the groups we engaged when we held our Singapore Conversation sessions in 2013.
We compiled their views after the sessions.
Some views did not make the cut. Can you give some examples? Why were they not good enough to make the final list of NTUC recommendations?
There were quite a number. I can give three examples.
Some younger CPF (Central Provident Fund) members believe that they will have to meet the CPF Minimum Sum requirement only later - probably 30 years down the road. They wanted to be given the opportunity to build up their CPF savings through investments and therefore, they wanted more options to invest at their own risk.
We were not very comfortable with that. We don't think that everyone can be a good investor. So we tweaked that part by saying that you have to meet a basic CPF savings level before you can invest the extra savings you have.
Then, there was another group who suggested that the drawdown from the Minimum Sum be calibrated into different amounts, with those having saved more being allowed to withdraw more.
So they wanted us to give differing rates of withdrawal, which we were again not comfortable with. We found that idea a bit complicated. Just because someone has, say, one thousand dollars less in his savings, he cannot draw a higher percentage.
So we said, let's be fair. Let's just set a percentage of what can be withdrawn and everybody can be eligible to withdraw that percentage.
There was a group of older workers who suggested that for those earning, say, below $1,000 each month, their CPF contribution rate should be a fixed dollar quantum.
Our worry here is that under such a system, there is no incentive for them to earn more by moving up, because they will not see the CPF savings grow if the contribution is at a fixed rate. It will also further complicate the whole scheme. So we said no, let's not move into that.
CPF members already complain that our CPF scheme is so complex. So we want to ensure that there's some simplicity in the scheme.
But because of that recommendation, we proposed tweaks to the Workfare Income Supplement (WIS) scheme so that these workers get higher payouts.
(The NTUC has suggested that the average gross monthly wage for workers receiving maximum WIS payouts be raised to $1,200 from $1,000.)
Employer groups reacted quite strongly to NTUC's call for higher CPF contribution rates for workers aged 50 to 55. They said it will lead to higher labour costs.
When there is any cost adjustment, upward adjustment, we have never heard any employer come back to us and say that the timing was good.
It is always a bad time to raise costs. But when we expect wages to go up, costs will inevitably go up.
You sound a little dismissive of employers' worries.
No, I am not dismissive. Employers will certainly be worried and we will hear them out.
But unless they have good, reasonable grounds to really explain why older workers are not cost-effective, they have to find ways to restructure the job.
We also want to ensure that the employment of older workers is sustainable. What we want to say is that employers have to be fair to the older employees.
How do you plan to persuade employers to come on board?
We will have to tell them the reality is that costs will keep going up. They will have to work closely with their workers, with the union, to see how we can raise the productivity and redesign jobs so that it is sustainable to hire older workers.
Two key recommendations stand out: doubling the amount of CPF savings that earns an extra 1 percentage point interest from $60,000 to $120,000; and raising the $5,000 monthly salary cap on which CPF contributions are calculated. What was behind these suggestions?
When the extra 1 percentage point interest change was announced in 2008 for the first $60,000 CPF balance, the average nett CPF balance was only about $47,000.
Today it's already up to more than $70,000. That's why the $60,000 amount has to go up.
The other idea is the $5,000 salary ceiling. That amount should be pegged to the 80th percentile of income, which is the monthly gross salary excluding employers' CPF contributions.
That 80th percentile band has already gone up beyond $5,000. In 2012, the 80th percentile was already $6,000. This is why we are saying that the $5,000 ceiling should be adjusted to what is the new 80th percentile.
This is something we hope that the Government should set a timeframe for review, maybe every three years.
One controversial idea is to allow a partial withdrawal even if the CPF member does not have the required Minimum Sum. Why?
When we had the focus group discussions, to be honest, again we had split views.
We had one group which felt that by allowing withdrawals of a limited amount, there will be the temptation to actually withdraw. And that will have implications on their payouts later on.
But another group argued that "this is my money". They are not a big group from among those who attended our discussions.
Some of those who wish to be able to have this lump sum are people who probably don't have a lot of money, a lot of disposable income. They look forward to drawing $10,000 or $15,000 to either have a holiday or to go and do something they like, or to renovate their home. So our recommendations are merely a response to their views.
But if you notice, we are not even saying that they should be allowed to withdraw the entire sum. There were mixed views, but we need to have a balance.
Has the NTUC gone populist with this move?
I wouldn't say we are being populist. But honestly. Who are we to decide for CPF members? It is their money. So we would rather leave it to individuals to decide what is best for themselves.
So we went ahead and recommended that there should be flexibility where members are allowed to draw down a partial lump sum.
If the Government can give a 20 per cent withdrawal rate, we would be quite happy.
But many workers do not have enough to even meet the CPF Minimum Sum at age 55. How can this group be helped?
Salaries, CPF contribution rates and interest rates - these are a few factors that could help to boost their CPF savings.
Salaries are tied to the job. And I think that over the last few years, and moving forward, we are going to do a lot more to see how we can boost worker salaries.
We are also pushing on the issue of CPF contribution rates. We think that we should undertake a serious review.
The third is really interest rates. We agree it is a good interest rate that the Government is giving now. But we believe it can be improved on further.
For employees, one way is for them to continue working and upgrading themselves. We will not see the pay rises immediately, but we believe that they will be able to see some positive outcomes.
How confident are you that the recommendations will be adopted?
Honestly, I wouldn't know. We are seizing this opportunity to take a look at the areas under the review. This is also an opportunity for the Government to know that these are the voices that we have been hearing from the ground.
Realistically, of course, we hope that at least half the recommendations will be accepted. Some of those may not be immediate; others will be subject to further review.
What if the panel reviewing the CPF says "no" to the NTUC's recommendations? Some of your idea are outside its review mandate.
We hope the panel would look at the recommendations positively. We also hope that the Ministry of Manpower - which actually decides on all these policy changes - can also look at them favourably.
We also have tripartite committees. There is no harm setting up new tripartite committees to really review some of the ideas, such as what the employers' CPF contribution rates should be.
Why are you fronting this major NTUC initiative?
I am representing NTUC because I am director of the industrial relations department. I've been in the labour movement for almost 24 years. It was my first job after I graduated from the National University of Singapore in 1991.
I was then a young industrial relations officer, 23 years old, and it was very tough talking to the management of Japanese companies.
In their minds, they say: "Who are you? Are you qualified to talk to us?" I told myself then that one day, I was going to be as knowledgable as them and talk to them on an equal footing. Today, I can say that I can.
What are your greatest achievements and regrets in your 24 years at the NTUC?
The greatest achievement is the relationship we have built over the years with union leaders, company management and the Government. I don't have any regrets.
Are you heading for larger roles, maybe in politics?
No. I have spent half of my life in the labour movement. I enjoy the work. Some people probably see themselves as having some kind of role in politics.
But I'm not someone who sees myself in politics. I represented NTUC as a Nominated MP in Parliament from 2007 to 2009. That was my political contribution.
This article was first published on January 31, 2015.
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