SINGAPORE - The Minister for Manpower Tan Chuan-Jin on Sunday published a blog post on Sunday about the CPF and the Minimum Sum.
The minister explains why the CPF and the Minimum Sum are necessary, and clarifies some misconceptions about the Minimum Sum.
Minister Tan also said that the Government will continue to strengthen our CPF system to provide Singaporeans with more assurance for our retirement, healthcare and housing needs.
Here is the blog post, titled "The Truth About Our CPF and the Minimum Sum":
PART I - Our CPF System
"CPF is my money. Why can't I use it as I please?"
"The CPF is a scam. It is how the Government cheats you of your money."
"Government is raising the Minimum Sum to keep you from taking your money."
We have been hearing some of this online. In many dialogues and conversations, I have asked if people actually read about what CPF is really about. Most admit that they don't. But there are also those, especially the ones keen on financial planning, who put out thoughtful pieces to help Singaporeans understand how it helps.
Let me state that the CPF is put in place to help Singaporeans have peace of mind when it comes to their retirement years. With increasing longevity, it has become even more important to help Singaporeans sustain their retirement adequacy for longer. There are 3 main points I would make.
1) CPF helps us to retire.
2) CPF is your money. You are already using it! Everyone has received their CPF monies plus top-ups and interest.
3) The Minimum Sum is increasing because we are living longer so we need to spread out our payouts.
CPF Helps Us to Retire
We will all retire one day so we need to prepare for it. The CPF is how Singapore does it.
Many countries do the same through a pension system. They collect taxes or get citizens to contribute to a social security fund. This pooled monies is then paid out to citizens who reach a certain age. However, many of these systems are facing challenges, because those who are young are now paying for the old. As most countries age, there are less and less young people paying for more and more aged people. The status quo cannot hold. Either taxes will have to rise, or old people will get a lower and lower pay-out. The pension payout age is also being increased.
In Singapore, we have the CPF. Rather than pool all our monies together, every individual saves for his own retirement via his personal individual CPF account. We contribute monthly into the account. Our employers contribute too. The Government also contributes into the accounts for those who need more, through Workfare and other schemes such as Pioneer Generation Package. We then make sure this CPF account grows at a reasonable interest rate without risk. In fact, your CPF monies are backed by the full faith and credit of the Singapore Government - only one of a few countries in the world with a triple A credit rating from all of the world's major credit rating agencies.