If it tried to cater to high income earners, that would cause problems for others
The CPF scheme would run into problems if it sought to provide for the full retirement needs of everyone, rich or poor, the man in charge of running it has said.As it now stands, the Central Provident Fund scheme 'fully meets the retirement needs of the people who are below middle income', the fund's chief executive, Mr Yee Ping Yi, said in an interview with The Straits Times.
That means the bottom 40 per cent of wage earners.
It also 'substantially meets' the needs of middle-income earners, which means its retirement coverage extends to about 60 per cent of wage earners.
NOT FEASIBLE
'If you want to design something to literally meet all the needs of all workers of all income groups, you'll need a much higher Minimum Sum, higher income ceiling, then probably fewer people at age 55 can withdraw anything.'
CPF Board chief executive Yee Ping Yi
'If you want to design something to literally meet all the needs of all workers of all income groups, you'll need a much higher Minimum Sum, higher income ceiling, then probably fewer people at age 55 can withdraw anything.'
CPF Board chief executive Yee Ping Yi
On CPF returns, inflation, CPF Life
Can CPF returns beat inflation to help members save for retirement?
CPF interest rates have done relatively well. From 2001 to 2010, the
nominal return on CPF cash balances for Special, Medisave and Retirement
Account balances was 4.1 per cent, while the average inflation rate was
only 1.6 per cent.
A large proportion of CPF savings of Singaporeans is also invested in housing, which is a hedge against inflation. A typical 55-year old earner would have experienced a total rate of return of 4 to 6 per cent in real terms every year on average, taking into account CPF savings spent on his house. He can also monetise his house to enhance his retirement income, such as renting out a room.
CPF Life seems to offer lower payouts than the Minimum Sum
Scheme (MSS), especially for females who are expected to live longer.
How useful is CPF Life, then?
A large proportion of CPF savings of Singaporeans is also invested in housing, which is a hedge against inflation. A typical 55-year old earner would have experienced a total rate of return of 4 to 6 per cent in real terms every year on average, taking into account CPF savings spent on his house. He can also monetise his house to enhance his retirement income, such as renting out a room.
When the MSS was introduced 25 years ago, not many people were expected to live past 85.
Today, Singapore has overtaken many developed countries in terms of longevity, including the UK, where males and females who turn 55 in 2013 are expected to live to 86 and 89 respectively, which means that about half of them live even longer. So Singaporeans turning 55 in 2013 can generally expect to outlive their Minimum Sum payouts.
It is important to compare how much the member receives over his or her lifetime when comparing payouts of the MSS, which last about 20 years, with CPF Life, where payouts are for life. As with any annuity product, members who live longer will benefit more from CPF Life, and those with shorter lives will only get a little less than under the MSS.
A female member with a balance of $90,000 who outlives two-thirds of the other females of her cohort will receive at least 30 per cent more in total under the Standard Plan, compared to what she would receive under the MSS.
A female member who just outlives one-third of her cohort would receive about 7 per cent less under the Standard Plan, compared with the MSS.
Today, Singapore has overtaken many developed countries in terms of longevity, including the UK, where males and females who turn 55 in 2013 are expected to live to 86 and 89 respectively, which means that about half of them live even longer. So Singaporeans turning 55 in 2013 can generally expect to outlive their Minimum Sum payouts.
It is important to compare how much the member receives over his or her lifetime when comparing payouts of the MSS, which last about 20 years, with CPF Life, where payouts are for life. As with any annuity product, members who live longer will benefit more from CPF Life, and those with shorter lives will only get a little less than under the MSS.
A female member with a balance of $90,000 who outlives two-thirds of the other females of her cohort will receive at least 30 per cent more in total under the Standard Plan, compared to what she would receive under the MSS.
A female member who just outlives one-third of her cohort would receive about 7 per cent less under the Standard Plan, compared with the MSS.
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