Seniors can band together to maximise savings

Managing editor Han Fook Kwang pointed out that Singaporeans cannot depend on their Central Provident Fund (CPF) savings for their retirement ("Life starts at 60, how long will funds last?"; June 30).

Measures implemented by the Government show that our leaders are well aware of this. The most obvious step was to raise the retirement age from 55 to 60, then 62, with further increases likely.

Then there is the Supplementary Retirement Scheme, which helps people build up their retirement funds.

But inflation is a form of "silent" tax. If we take the low bank savings interest rate of 1 per cent and an inflation rate of 5 per cent, and apply the rule of 72 (a way to determine how long an investment will take to double, given a fixed annual rate of interest), then we will find that our nest egg would be halved in 18years. So even if one has sufficient CPF savings today, they may shrink considerably when one reaches retirement age.

Mr Han suggested that CPF contribution rates be raised. However, this is of no help to the seniors who have already retired.

Therefore, if the CPF can be tweaked at all, the yield paid to members should be increased - if not for all, then at least for the retirees.

I suggest that seniors band together to increase the yield on their nest eggs while reducing their expenses. For example, medical insurance for a group would usually cost less than that for an individual.

Such self-help, non-profit groups would be happy to accept a guaranteed 5 per cent return on their investment without incurring the high costs levied by financial institutions.

Geoffrey Kung Kuo-Woo


Reverse Co-operative