This is a very local point about "Contribution Ceilings", $25,245 max a year. But isn't it also the case that any extra income that exceeds the limit ($4,500) could just as well be invested elsewhere for a potentially higher return than parking it in CPF? In other words, the ceiling need not be incompatible with retirement savings--provided the employee takes the initiative to do some planning of his/her own. (Similar things could be said about mortgage--the extra take home could be use to do home loan servicing, again, provided the person takes the initiative.) Or am I missing something?

the key is in a healthy property market. we need to change the way we manage and value properties to ensure that the people's cpf monies do not go up in smoke for being owners. that way, the home becomes the people's financial support in retirement through reverse mortgage, rental etc. if need be.
unfortunately, the potential has not been fully exploited and because the property market was ill managed during the financial crisis in the 90s, many became liable and even much poorer for having a stake in this land.

Hi Huichieh

I think I get what you are implying, and I totally agree with you that CPF alone might not be enough for retirement and the prudent should start investing (wisely) any savings as soon as possible. But with a higher ceiling, none at all ideally, it is just better in dollars and cents for the employee. So in the event a person gets a nice $10,000 a month, his total CPF could be $3,300 ($2,200 OA, $500 SA and $600 MA) a month rather than it being stuck at the current ceiling of $1,485 ($990 OA, $225 SA and $270 MA), on top of the salary in cash the employee gets that could be used for investment. Whether that would sit well with employers, probably not, but they would get around it by repegging their salary scales anyway.

The government still markets the CPF as mainly a retirement plan. Unless it changes its rhetoric about the CPF and that this system is shifting from its original retirement plan objectives to a social security plan with some retirement considerations, the government will continue to be controversially faulted for not doing the best it can for the CPF member in terms of CPF retirement savings. It is almost as if they set out to do something and then got distracted with many side projects, some good, some not so good.

Hi JJ

I also agree with you totally that as CPF is so tied up with property in the pre-retirement phases, how the individual manages his property as an asset is vital. As I am a layperson, I take it that it means not biting more than one can realistically chew. In this aspect, the government's CPF mulitple housing restrictions and the housing withdrawal limit are good ideas.

The CPF used to be a simple enough mechanism to cater to our retirement needs. Over the years, however, certain things have made it necessary to expand its use or at least tweak it. For example, the realisation that we will have 18.7% of elderly 65 years and older by 2030 (bringing absolute numbers to more than half a million elderly people by that year) made it necessary to re-look the medisave/medishield/medifund schemes, the influx of foreign workers & the artificial depression of wages (resulting in less contribution to CPF), property prices soaring (esp in the 80s, early 90s) and then falling again, economic downturn, etc.

The CPF is no longer just simply a savings plan for retirement. It has become a tool which the govt uses to 'control' our 'competitiveness' in a globalised world. This is quite clear and indeed ministers have declared it so.

What they should be looking at is a return to basics - that is, return the CPF to its original role of being a savings plan for retirement needs. Granted that some (perhaps most) singaporeans would disdain having their money locked up in the CPF. The govt could, as they now plan to do with the Workfare thingy, match savings in the CPF through either an increase in the interest rate (for savings) or match it in absolute dollars and cents.

The principle is the same - rewarding savings and to encourage savings for retirement.

With the govt matching CPF savings, the percentage of CPF contribution can be lowered, thus giving singaporeans more disposable income as well, which will especially help the lower income earners.

With the govt openly declaring that 'welfare is a dirty word', nonetheless there is still a need for some sort of social security. And since the govt is talking of 'workfare', one of the ways to help singaporeans have healthy retirement funds is to have a "tri-partite CPF" system, made up of:

1. Employee contribution
2. Employer contribution
3. Govt matching savings

After all, isn't this the same principle they use for "Workfare"? And since contributors to CPF are working singaporeans, rewarding them through a govt-matching savings scheme makes sense.

Of course, since this will allow more disposable income, the purpose of the CPF should also be curtailed - that is, it again becomes solely for retirement, which was its original aim anyway.

The problem is that the CPF is being used as and when the economy takes a dive. This should not be so.

It is better for the govt to match savings rather than give handouts - such as the Progress Package and Singapore Shares.

*PS: I am no economist or statistician. So my views may be flawed.

Regards,
Andrew
theonlinecitizen

there are 90% homeownership here. as we know, most homes are paid with cpf monies. if you are an average salary worker, there is really not much to save on your income once you have expended on necessities and what have you. unfortunately, a roof over one's head, a huge ticket item, is a necessity for most people. so our savings( in cpf monies) are locked in our home for good or for bad.
currently, the reverse mortgage offered has little takers and the reasons are pretty obvious.
homes are still potential liabilities especially in an economic downturn. financial prudence in home purchases guarantees not protection against an economic onslaught. my gut is telling me that more should be done to turn mortar into real asset.
VD,90% homeownership is no peas in the pan for a greying populace. it requires a radical approach in asset management to unleash this great potential. but since my views are intuitively conceived, you are forgiven for misreading what was said. in any case, it requires indepth study and their willingness to be transparent for more useful contribution.

Hi theonlinecitizen

Interesting ideas especially the part about revising interest rates to encourage savings in the CPF. But the blanket "govt matching savings" disturbs me. Where is the money coming from, assuming we leave out the populist argument that the money comes from the amount saved after decreasing ministers' salaries? I also don't have answers.

Hi JJ

Thanks for emphasising the avenue of reverse mortgage. It is an interesting option and I also think that it is not catching on here. Annuities seem to be slightly more popular.

I think CPF has chiefly stuck to the objective of being a retirement fund.

Of course, every plan or policy has to be flexible and employer contribution cuts to maintain competitiveness/ employment would be one instance of flexibility applied. Whether one agrees that this measure will have the desired effect warranting the cost to the individual is another thing altogether.

I don't think the CPF scheme was intended to be a comprehensive retirement plan. Rather, it was intended as PART of individual retirement plans ( economy and prudence permitting.) Thus, as noted by HuiChieh, it is up to the individual to wisely manage any surplus cash he may find himself with ( highly theoretical in these times for many Singaporeans.)_ The more we guide the individual's hand from pay packet to piggy bank, the more of a nanny state we become.

The 'Govt matched savings' idea isn't going to happen in this administration, period.

One way to tap into the 90% ( for now ) home ownership to meet retirement needs is to refurbish older HDB blocks for rental at low rates to those who have sold their HDB homes and obtained less than a certain amount from the sale. This will help the increasing elderly and lower income group to have a roof over their heads after seIling their homes for money to live on. I know, morbid images of multi-storied 'death houses' with permanent wakes at the void decks ( ouch, sorry, TVD ) are already forming. But let's be practical.

Hi,

I think the CPF contribution rates is better explained as follows:
for those below - maximum contribution is S$1485 (employee pays 20% of gross to a max of S$900; employer pays 13% of gross to a max of S$585). At 35 years, the split between OA, SA and Medisave changes, etc.

Can't find anywhere on CPF website about max yearly contribution. Pointers?

I don't know what the fuss is about CPF. The govt has instituted CPF as one form of retirement savings.

And it's everyone's business to figure out how best to save for their retirement. Why is it the govt's responsibility to help us with our retirement? If you're asking for welfare, then say it outright.

The real problem is that the govt has allowed companies to reduce its employees salaries thru the CPF contribution mechanism. By reducing companies' contribution rates and placing caps, employees now have pay cuts outside contractual terms. That's the real issue.

Retirement savings is our problem, not the government's. Welfrae system, that's another issue.

Ben,

So you're a straight talker. OK, let's cut the 'bullshit' and get right to the points.

CPF was our government's solution to having to provide for retirement for the rest of the population while the government servants had pension scheme, in the days CPF was created. So your view is that retirement is not a government's responisbility, and solely that of the individual? I do not agree. The Singapore government increasingly 'outsource' basic services to commercial entities and that's not right, eg basic health care to insurance, public transport to commercial listed entities whose sole objective is to make $$$. But I digress.

The government started CPF as a forced savings, so we the ordinary folks don't burden the state when we are old and retired. In typical Singapore government style of 'we can't trust the people to manage their own money, let's makes sure they cannot withdraw it all at one go'. Initially, at least the objective was very clear.

Then it was slowly allowed for other use, the chief one being housing. Property, however, is not very liquid and the market swing can mean big losses for some. Some of these were not well thought through by the government before, hence some of the challenges today. Got property but no cash to spend when we are old.

I do not agree that the CPF was not intended as THE retirement plan but complimentary. There was nothing else! It was tauted as the 'portable' retirement plan that don't tie you to a single employer, at one time.

The fact of the matter is that the government has conveniently use the CPF as the instrument to adjust wages quickly and effectively when they feel the need to, in the name of competitiveness. But the effect of this use on retirement was never well considered. Along with the fact that many workers commit their CPF to a property made it worse because some ended up with unpaid mortgages when they lose their jobs. Coupled with the market timing errors, some have lost big time and have unpaid loans or worse, forecd sale of their properties.

The use of CPF as a labour pricing instrument has all but make it rather ineffective for retirement purposes. Lower CPF contributions mean less money for retirement and we have not even factor in time value of money!

Now, let's talk about minimum sum. First, we are forced to save for retirement, then they say you cannot use it for retirement but we don't know when you'll die and we don't want you to use up all your savings before you die. When it is convenient, they say, you should be mature and manage your own retirement or finances. You seems to subscribe to individuals being responsible for their own retirement. Can I take it that you oppose minimum sum?

Hi thanks all for your views.

I think we all agree that the CPF is some sort of forced retirement planning where the prudent saver and/or wise investor can benefit from it. There is no dispute that the CPF is meant for retirement mainly.

What we might not agree on is the extent the CPF should be calibrated to economic cycles, and what more the government can do, within reason, to make the CPF work better as a retirment fund. The position I am suggesting is that the more it is some sort of tool to keep employers happy, the less it behaves as a retirement fund.

From what is thrown about, I am beginning to like the ideas surrounding what the government can offer to those in retirement if they have messed up their CPF e.g. reverse mortgage (JJ), small rental HDB flats (Wong Hoong Hooi). It is like a second chance which is just enough for them to get by so that nobody is left behind, but a second chance that is unattractive enough so that a moral hazard situation is minimised.

This angle is also very interesting and worth pursuing in pressuring the government:

"By reducing companies' contribution rates and placing caps, employees now have pay cuts outside contractual terms. That's the real issue." (Ben)
(Ben - a recent snippet on contribution ceilings is here)

And thanks to 40+ Singaporean for bringing this point on withdrwals and the minimum sum:

"First, we are forced to save for retirement, then they say you cannot use it for retirement but we don't know when you'll die and we don't want you to use up all your savings before you die. When it is convenient, they say, you should be mature and manage your own retirement or finances."

40+ Singaporean,

You have made some interesting points. Permit the KTM to share his perspective on the problem you seem to be highlighting.

First, the KTM agrees with you that "the CPF was intended as THE retirement plan but complimentary, since there was nothing else". :-) But we have to understand the backdrop of this policy which was put into effect back when policemen wore shorts. Back then, CPF alone was probably enough.

Fast forward to 2007. What has changed today? Fundamentally, the "problem" is that people are living much longer and in order for people to save enough money for retirement, they must be saving almost half of what they earn!

Clearly, it is not feasible for CPF rates to be increased to 50%, and so there is no way that the CPF alone would be enough for retirement if people want to maintain their pre-retirement lifestyles.

Second, it was not reasonable for the Government to lock away the CPF money and not let people use it to buy property since it's a substantial amount of money. Allowing the people to use the CPF to buy property actually made CPF somewhat liquid.

The fact that people committed to mortgages larger than what they could afford is not a problem with the CPF. Even if they weren't allowed to use the CPF to buy property, they would still have had to buy a place to stay and gotten into trouble when they lost their jobs.

Similarly, the claim that the CPF caused people to lose money on property purchases is ludicrous. When people buy or sell property, some will make and some will lose, independent of whether the money came from CPF or is in cash. There are also people who made money because they were allowed to buy property with their CPF.

Finally, the claim that it is a problem for people to be asset-rich and cash-poor is overrated. Unless the claim is that the property cannot be sold for cash, people can liquidate their properties either with a reverse mortgage if they want to stay put or by selling their property and renting a place.

What happens when the money runs out? Good question, but this question has nothing to do with the property and everything to do with people not saving enough for retirement.

People have to get used to the reality that gone are the days when people can expect to die and leave behind property for their children. And the reason for that is simply that people are living much longer and they are effectively "consuming" the property that they could in the past have left for their children. For those who die at 65, their children are still likely to inherit property as before.

The KTM believes that your view that the CPF was set up so that "the ordinary folks don't burden the state when we are old and retired" is right on the money. In this light, the imposition of the minimum sum absolutely in line with this line of thinking.

Perhaps the KTM can explain what he understands about the minimum sum (though he is not sure he understands all the complicated details). The basic idea is that when one reaches 55, he/she can draw out only the money in excess of the minimum sum. Then, the minimum sum is allowed to collect interest at 4% per year until the person reaches 62. Thereafter, CPF will pay out to the person an amount equal to the minimum sum with accrued interest divided by 12 divided by 20 every month.

The idea here is that the Government is worried that if the total amount is released to the people, they will squander the money away. Hence the Government will instead release the money to the people steadily for twenty years up until age 82 (which statistically is when most people will die).

Basically, if people live past age 82 and run out of money, suay suay they will become the State's problem. If people die before age 82, then they will not be a burden to the State (or be a lesser burden to the State even if they don't have the CPF minimum sum to begin with). Overall, the KTM thinks that the minimum sum scheme makes perfect sense if you have a Government bordering on paranoia that old people will be a burden.

What is the KTM's view on the minimum sum? He's quite undecided at this point. On one hand, the KTM of course prefers to manage his own money; on the other hand, he has to balance this option with the possibility that there will be those who will squander their money and be a burden to the State (and thereby indirectly become a problem to the tax payers, including the KTM).

There is an moral hazard in a world without the minimum sum. Basically, the "optimal" strategy is to have a jolly good time with the CPF money and then live on the State. The result is an increased tax burden all round.

Regardless, the KTM agrees with Ben that the fair thing is for people to take care of their own retirement.

Hi Void Deck,

You asked where the money is going to come from. That is a big question indeed and no, I am not going to suggest cutting ministers' pay. Haha..

It is a big question which would require a multi-faceted relook at a whole slew of issues - since CPF is tied to everything from medical costs to property, from education to investment schemes.

So, where do we start?

I am not sure, to be honest. But I do know that cutting CPF further is not a solution (esp when cost of living keeps rising), even though it may help us stay competitive. (How would the lower income pay for their housing if we further cut the CPF?)

I also know that by the year 2030, 20% of singaporeans will be 65 years old and above. That will be some 600,000 singaporeans (taking population as 3.2 million.) And at the rate we're going, most of them will not have enough to draw on when they retire.

What I suggest is a re-look at govt spending. I do not believe that all those billion-dollar upgrading plans are all necessary. Neither do I believe that we should be building so many shopping centres either, for example. (We wrote an article on govt spending here.)

Going back to basics one must then start with basics. That is, we need to see where all the money generated through all these years of 'miraculous economic progress' has gone to.

We're not talking peanuts, for sure.

Regards,
Andrew
theonlinecitizen

I also know that by the year 2030, 20% of singaporeans will be 65 years old and above. That will be some 600,000 singaporeans (taking population as 3.2 million.) And at the rate we're going, most of them will not have enough to draw on when they retire.

I'm curious as to what is your implied metric of "enough"?

For instance, as far as I can tell from people I know, there must have been lots of people who retired over the past decades without having 'enough' to draw upon in CPF if by 'enough' is meant something like: 'enough to (a) sustain the same standard of living enjoined during working years AND (b) without financial dependence upon children'. But it doesn't seem reasonable to expect CPF to be able to guarantee anything like that.

Andrew,

I do not believe that all those billion-dollar upgrading plans are all necessary. Neither do I believe that we should be building so many shopping centres either, for example.

While it is true that some of the Government buildings (i.e. the Seven Wonders) are unnecessarily opulent, it is my understanding that the billion-dollar upgrading plans are "somewhat necessary" to keep the local construction industry afloat. Shopping centres are built by private developers and so they are not funded by tax payers' monies and shouldn't be a concern.

we need to see where all the money generated through all these years of 'miraculous economic progress' has gone to.

The KTM is not sure he understands what you mean by this statement. The monies have either been spent or are now sitting in the secretive national reserves.

Hi Hui Chieh,

"Enough" as in the normal definition - that is, a reasonable amount which will allow them to live with dignity. I have personally seen elderly folks - some in their 80s - who are truly struggling. In one case, this elderly man is 86 years old. He lives in a one-room rented flat (which his eldest daughter pays for). This same daughter, who is 55 and has a family of her own, also gives him $100 per month. His other two daughters are unable to help him financially.

His application to public assistance was turned down because he was told that since he has 3 daughters, he does not qualify for assistance. It is no wonder then that he once approached a doctor and asked the doc to 'inject me' (his words) so that he can die. He lives by cooking his small donated bag of rice every month - without any dishes such as vegetables and meat as he is too weak to even walk downstairs to get them (if he has the money in the first place.)

So, what do I mean by 'enough'? Well, this particular old man asks for $200 from the govt.

I think at some point, as human beings, we should not be too calculative. I know this sound 'nice' and compassionate but also naive and even stupid. But I believe that there is more to life than counting dollars and cents all the time.

When I say 'enough', I mean enough to allow our older folks to live in dignity. How much actually, in absolute dollars is that? Well, that really depends on how big your heart is, doesn't it?

If you want a difinite figure, I have no means to give it to you as I am not privy to all the numbers, statistics and calculations which the govt would have. (Discussions about this is really moot to me for this reason).

But perhaps if we really want to get down to it, we should ask ourselves what is the bare minimum that anyone would need, to live a life of dignity in our old age.

And that again comes back to how big our hearts are.

Regards,
Andrew
theonlinecitizen.

Dear KTM,

You made a good point about the shopping centres. Thank you for pointing it out. I take back my point about them.

The second point about money either having been spent or in the reserves is true. The point, however, is whether the money is well-spent or necessarily-spent.

As in the article on theonlinecitizen, we have to relook, scrutinise and account for how the money is being spent. There are examples of lavish and unnecessary spending by the govt.

We can go on and tweak the CPF each time the economy dives but it will not solve the problem as eventually there will only be so much you can do with the CPF. The problem thus may not be in the CPF per se. It may be in the way we are spending what we currently have. If you do not plug the leak in your backroom, so to speak, no matter how much money comes in through the front door will be drained.

That is why I asked for a re-look into all those spending on upgrading and such. If you say upgrading is to prop up the construction industry, then it is an artificial means unsustainable in the long term. There is only so much upgrading you can do before people start asking if we are wasting money. Then we'll come back to square one and the same question.

Having said that, I would suggest (if we really want to tweak the CPF) to have the govt pledge matching amounts to the savings rate of the CPF. They already are going to do that in the Workfare scheme, I believe, in principle. When was the last time the CPF interest rate was increased? Not that I can remember.

Ministers' bonus are tied to GDP growth.

Why can't our interest rate on CPF savings be tied to the same?

Wouldn't this be a better way to distribute wealth than a one-time "Progress Package" or a one-off offset package?

Regards,
Andrew
theonlinecitizen.

Just for info:

The CPF website says this:

Working Singaporeans and their employers make monthly contributions to the CPF and these contributions go into three accounts:

Ordinary Account - the savings can be used to buy a home, pay for CPF insurance, investment and education.

Special Account - for old age, contingency purposes and investment in retirement-related financial products.

Medisave Account - the savings can be used for hospitalisation expenses and approved medical insurance.

Your CPF savings earns interest. Savings in the Ordinary Account earn a minimum interest rate of 2.5% per annum, while savings in the Special and Medisave Accounts earn additional interest of 1.5 percentage points above the prevailing Ordinary Account interest rate.

Andrew

1. The story about the old man is sad, but what has it got to do with CPF policy? I'm more than willing to grant the (preliminary) point that it would be a good thing that there be more safety nets able to catch people such as you described. But it is entirely murky to me that these nets will have much to do with CPF. You are basically saying that surely the state ought to support the poor old man to the order of $200/mth. I'm not sure I disagree (or agree--more data needed). But I was asking what is the metric of 'enough' in the context of the CPF as retirement savings.

When I say 'enough', I mean enough to allow our older folks to live in dignity. How much actually, in absolute dollars is that? Well, that really depends on how big your heart is, doesn't it? ... But perhaps if we really want to get down to it, we should ask ourselves what is the bare minimum that anyone would need, to live a life of dignity in our old age. And that again comes back to how big our hearts are.

2. I understand what it means for you and I and other private individuals to be compassionate, to have a big heart. When faced with a struggling individual as you described, I can only pray to God that I will find the wherewithal to do my bit to help. And I trust that you will do the same. In so doing, we manifest compassion, e.g., by writing out a check in our name to transfer some of the wealth that we have to the poor individual. But what is the translation of all that to matters of policy? What are we thinking of when we turn all this into policy?

Suppose you and I have big hearts--we believe that some big 'X' is "enough to allow our older folks to live in dignity". Are we saying that I and you--qua policy proposers--are now to manifest our compassion by making other people transfer their wealth (i.e., pay taxes) to the objects of our compassion so as to guarantee their access to X? Remember: It is one thing to talk about compassion in the context of our private action, or even in the context of fundraising for a charitable cause. Talking about compassion in the context of policy is another kettle of fish altogether.

Hui Chieh,

I do not believe that policy should be devoid of compassion - or that they are mutually exclusive. Policy must be clothed in compassion even (or especially) at govt level. That's my view.

But I take your point.

What has this all got to do with the CPF?

Well, first, we have to ask ourselves why the old man is having such a hard time - even though, like you and me - he slogged all his life, contributing to CPF in his work as an ambulance driver.

What happened to his CPF savings? I'm not sure (maybe I will ask him the next time I see him). Or is the policy itself faulty? Has his money been drained by housing policy? Or health policy? Or the cost of living?

And according to govt ministers themselves, most singaporeans will face the same thing - most singaporeans will not have enough for retirement. This may suggest to us that some policies are not that sound.

But yes, we come back to your question about 'what is enough' for retirement? I suggest we take a look at what the bare minimum is for a dignified life in singapore. How do we go about that? I have no illusion that it is a big task. Again, if you are asking for an absolute number or a method to calculate it, I have no answer but I would imagine that it will have to take into consideration the person's average financial contribution (to his CPF) during his working days.

As I have said before, there are two things we need to do first:

One, a re-look at govt spending.

Find a better way to increase singaporeans' savings. I suggest tying interest on CPF savings to GDP growth - same as they have tied ministers' bonuses to GDP growth.

Regards,
Andrew
theonlinecitizen

Andrew,

The KTM agrees with you that it is important to ensure that there is minimal "wastage" in our government spending. However, the KTM believes that your logic with regards to the CPF policy is still somewhat muddled.

In your example of the old ambulance driver, the problem has nothing to do with CPF and everything to do with the fact that he didn't manage to save enough money for retirement when he was younger.

In other words, the argument that the aged who are destitude should be given more government aid has little or nothing to do with the CPF. If you point is that the Government should top up the CPF, then the current Progress Package is actually a superior deal since the people have more flexibility (those who want to put the extra cash into their CPF can choose to do so).

Why is it important to clarify this? Because if not, people will be calling for changes to the current CPF regulations for the wrong reasons. Personally, the KTM believes that the current CPF regulations are mostly okay.

Why can't our interest rate on CPF savings be tied to the same (GDP growth rate)?

Wouldn't this be a better way to distribute wealth than a one-time "Progress Package" or a one-off offset package?

This is actually a very bad idea for two reasons. One, if wealth redistribution is done by increasing the CPF interest rates, then the rich (who have more money in the CPF) would be getting much more than the poor (who may not have any CPF). The way that the Progress Package is currently dished out, while not perfect and cannot satisfy everyone, is somewhat progressive (i.e. poor get proportionally more than the rich).

Two, the CPF (OA) is actually like a bank deposit, 'cos you can use the money to pay for property. Similarly, the CPF (SA) is like a fixed deposit. In other words, they are financial instruments. The way to compute the "fair" yields for the CPF monies to peg them to that for similarly riskless instruments.

In particular, CPF will always accrue interest at a constant rate (hence "riskless"), while GDP may not grow annually. If CPF is pegged to GDP growth, then it will no longer be a riskless asset and many will perhaps be forced to take on a higher risk profile than they are comfortable with.

Note that people can choose to use their CPF (OA) to invest in a variety of financial instruments that offer higher yields (at higher risks). Given this flexibility, there is no good reason for the CPF board to try to decide for people on what to do with their money. People should decide for themselves. If they don't know better, they can engage the services of financial planners.

It is not the Government's core business to help people figure out how to increase the yields on their retirement funds, and the KTM believes that it should stay that way.

KTM,

You said: "In your example of the old ambulance driver, the problem has nothing to do with CPF and everything to do with the fact that he didn't manage to save enough money for retirement when he was younger."

Allow me to quote you (what would be my reply as well) from ian:

"The problem is, people who are doing ok or well tend to say that the poor or those complaining should do more for themselves. That is presumptuous. Who is to say that they are really not trying? And just because they have not contributed directly to the economy does not mean they have not sacrificed for it. As a people, we could have voted the PAP out because of the unpopular measures (i.e. allowing such an influx of foreign labour) yet a fair majority still voted for the PAP because I believe we still trust in their policies and for want of a better phrase, we sucked it up and sacrificed. We allowed the foreign workers to come in and depress wages. We took wage cuts. We accepted GST and fare hikes. The sacrifice made to accept these policies was the contribution.

Whether directly, or indirectly, all Singaporeans have contributed to the recovery. While I do not begrudge ministers their pay and pay rise because they consider themselves having done their job (and done it well?), maybe it is time they do not deny all Singaporeans better distribution. While it is probably not going to be easy to implement measures to redistribute wealth, and difficult to balance measures of redistribution to discouraging private and corporate investments in Singapore, it is not impossible and I’m sure the ministers’s pay will probably cover the brain juice involved in solving these issues.

But I guess we can only hope that in the end, the rich finds it beneficial to themselves to help the poor, if not, the issue of the income divide will never be solved without the need to pry the money out of their hands."

Regards,
Andrew
theonlinecitizen

Andrew:

I am still mystified as to how the story about the old man is relevant. It is not that it is simply irrelevant, but you need to tell us a lot more to make the relevance apparent.

Until we know more about the specifics of the case about the old man, we won't know that it's a problem with CPF that is at issue, or that the problem is something that can be fixed by tweaking CPF policy rather than by doing something else. For instance, did he contribute to CPF as a working adult? (Presumably he did.) How much was in his OA and SA when he retired? What happened to that money? Etc. I'm not sure I would go with KTM in saying that "it has everything to do with the fact that he didn't manage to save enough money for retirement when he was younger. But that certainly is a possibility that hasn't been ruled out yet. This is not a matter of saying that "the poor or those complaining should do more for themselves", etc., but entirely a matter of not jumping to conclusions either way until the evidence is in.

Otherwise, we are going to end up with lots of policies that make their proposers feel all good about themselves (you know, the compassion stuff) but don't solve actual problems, or worse still, generate unintended undesirable consequences. The road to hell is paved with good intentions.

KTM,

Allow me to comment on your comments on my post. I would have posted on your blog, which carries the same comments but it does not allow anonymous 'commentor', hence I post them here instead.

" Fast forward to 2007. What has changed today? Fundamentally, the "problem" is that people are living much longer and in order for people to save enough money for retirement, they must be saving almost half of what they earn! "

I do not agree that fundamentally the issue is that people are living much longer. The fundamental issue is that CPF is inadequate as a retirement fund and medical expenses in individuals' retirement years, based on today's cost and projected costs in the case of those retiring in the next 10 to 15 years. (These are my assertions without hard supporting data. I will happily retract my statement, if someone with data can provide them and prove me wrong). Hence, the real questions are

1. Has cost increased so much that projected cash required in CPF or retirement back in the days when mata wear shorts is so grossly wrong?

2. Was the CPF scheme fundamentally flawed to begin with? (as in forced savings by taking a certain percentage of salary can never be adequate unless it is such a big chunk that it is impractical, which is your point that 50% of salary is needed to be adequate.)

3. Has the CPF board lost its bearings in the years since CPF inception, to the degree someone woke up one day and said 'OMG, CPF savings is never going to be sufficient for retirement!'

"Second, it was not reasonable for the Government to lock away the CPF money and not let people use it to buy property since it's a substantial amount of money. Allowing the people to use the CPF to buy property actually made CPF somewhat liquid."

I don't see why it is unreasonable. I use my CPF to buy property and I am not against it per se. My point was that permitting such a use, coupled with the volatility of property market has resulted in substantial losses in some cases because of timing and other factors. The effects are so vast for some that it is threatening the fundamental purpose of CPF as a retirement scheme.

" The fact that people committed to mortgages larger than what they could afford is not a problem with the CPF. Even if they weren't allowed to use the CPF to buy property, they would still have had to buy a place to stay and gotten into trouble when they lost their jobs."

People committing to mortgages larger than they could afford is a problem with the CPF administration. Again, it is not taking into account the fact that CPF is primarily for retirement. Singaporeans expect to own their own properties rather than rent. You appear to have the same mindset. Why? The reason is our government advocating and encouraging citizens to own their own properties. I still remember some years back when the government is so proud of the fact that a very high percentage of citizens own their own homes (actually the truth is that 90% of these so called owners are still a long way from owning their properties but they are paying mortgages for the next 20 years before they call it their own). The result is that the rental market is very small and the people's mindset is that they MUST own their own properties, regardless of affordability.

"Similarly, the claim that the CPF caused people to lose money on property purchases is ludicrous. When people buy or sell property, some will make and some will lose, independent of whether the money came from CPF or is in cash. There are also people who made money because they were allowed to buy property with their CPF."

I don't think I claim the CPF caused people to lose money on property. My point was that allowing CPF to be used for property as opposed to keeping it as a retirement fund had resulted in people losing large sum of money because they committed to property purchase with CPF money at the wrong time and some over-extended themselves, while others have lost jobs BUT have ASSUMED that they will continue to be employed, earning similar salary, resulting in them having to sell the properties at a big loss. In this, you have misunderstood me initially.

" Finally, the claim that it is a problem for people to be asset-rich and cash-poor is overrated. Unless the claim is that the property cannot be sold for cash, people can liquidate their properties either with a reverse mortgage if they want to stay put or by selling their property and renting a place. "

Mr KTM, here again, I'm afraid you have missed the point. It is not 'overrated', to borrow your word. It is true. You only have to look at people in other major cities in the region to know that it is true. Singaporeans working in Singapore have much lower spending power than those in HK or Tokyo because most of our income is committed to servicing mortgages. Reverse mortgage is a relatively new thing here. Until recently, you cannot get a reverse mortgage with most of the banks here. That left people only with the option of selling their properties. But there is a small rental market where one can rent a home after selling your only property, as I have pointed out earlier.

I wrote what I wrote earlier to point out to Ben some of the underlying historical and implications of our CPF scheme. A fundamental mindset change is needed on the part of the government, in terms of what the state need to provide in way of retirement, the citizens' role in retirement planning and basic welfare and healthcare services that the state must provide retired citizens. I don't see that happening yet.

Instead I see a retirement scheme conceived long ago, which is not adequate anymore, being used as instruments to pushed high home ownership and to tweak wages (in name of competitiveness). Many Singaporeans have cause to be worried.

" There is an moral hazard in a world without the minimum sum. Basically, the "optimal" strategy is to have a jolly good time with the CPF money and then live on the State. The result is an increased tax burden all round.

Regardless, the KTM agrees with Ben that the fair thing is for people to take care of their own retirement. "

Firstly, I think your "optimal" strategy is already being adopted by many today. They splurge their CPF money the minute they lay hands on it. Again, I have no statistics but have heard many such stories. The minimum sum is, at best, only doing the bare minimum but it is not such a good implementation. There are better ways of doing it, in some form of annuity scheme, rather than force individuals to keep their money meant for retirement beyond their dying days (to put it bluntly).

I would agree that basically people should take care of their retirement BUT our government has taken it upon itself to set up a retirement scheme for our citizens. Hence the onus is on the government to make the scheme a good one, at least a reasonable one that will achieve its aim of providing for retirement for citizens.

40+ Singaporean,

I would agree that basically people should take care of their retirement BUT our government has taken it upon itself to set up a retirement scheme for our citizens. Hence the onus is on the government to make the scheme a good one, at least a reasonable one that will achieve its aim of providing for retirement for citizens.

This statement is the crux of the issue. You have got to take a stand. It's either your responsibility to take care of your own retirement, or it is the Government's responsibility.

If you believe it's your responsibility then it's perfectly okay for the CPF to take care of your retirement partially and you go and deal with the remainder. Of course, perhaps the Government might have claimed more than they should have in the past when mata wore shorts -- but it changes nothing if the problem is yours. If you are claiming that people were misled to think that CPF was sufficient and therefore didn't save enough even though they could have (and are therefore in trouble today), that's a separate issue altogether (is this your claim?).

If you believe that it's the Government's reponsibility, then it's clearly a problem now since we know "CPF no enough (for most folks for retirement)" and the Government will die die make good. Note however that what this also means is that we are talking about taxing the young (or our children and children's children to pay for our retirement). This is actually not quite fair since when we were young, we never had to do the same. The problem is exacerbated by the declining birth rates.

Fundamentally, if you agree with the KTM's argument that "in order for people to save enough money for retirement, they must be saving almost half of what they earn", there is probably NO solution to the problem to begin with. Given the high costs of living, it is just not possible for most people to save 50% of what they earn -- and there is NO way to tweak the CPF scheme to make up for the shortfall. Reality is that people just have to (i) keep on working after they reach their retirement age, (ii) ask for money from their kids, or (iii) make the Government cough out the money (which it will take from their kids anyway).

You seem to claim that the CPF has problems, but it's not clear to the KTM what those problems are. You say "the minimum sum is, at best, only doing the bare minimum but it is not such a good implementation. There are better ways of doing it, in some form of annuity scheme, rather than force individuals to keep their money meant for retirement beyond their dying days (to put it bluntly)". You may wish to know that in addition to the method described by the KTM above where the minimum sum is drawn out over 20 years, people can opt to buy an annuity instead, which will pay them until they die. Unfortunately, given the rather long expected lifespans of Singaporeans, the yield for the available annuity is very low and the scheme is extremely unpopular. Perhaps you can tell the KTM more about your other "better ways" (note that you have highlighted that there are those who will splurge the moment they get their hands on their CPF money....)?

My point was that allowing CPF to be used for property as opposed to keeping it as a retirement fund had resulted in people losing large sum of money because they committed to property purchase with CPF money at the wrong time and some over-extended themselves, while others have lost jobs BUT have ASSUMED that they will continue to be employed, earning similar salary, resulting in them having to sell the properties at a big loss.

The KTM for one, would object to the Government locking away his money and not letting him touch it (at all). In trying to protect people from their stupidity, you will thereby also deny people who want access to their money the access they want (or perhaps need). The current situation represents a sort of compromise between the two camps. And seriously, even the fellas who have no idea what they are doing also want the access. Your suggestion to not let people use their CPF monies at buy property is not a political platable option.

People committing to mortgages larger than they could afford is a problem with the CPF administration. Again, it is not taking into account the fact that CPF is primarily for retirement. Singaporeans expect to own their own properties rather than rent. You appear to have the same mindset. Why? The reason is our government advocating and encouraging citizens to own their own properties. I still remember some years back when the government is so proud of the fact that a very high percentage of citizens own their own homes (actually the truth is that 90% of these so called owners are still a long way from owning their properties but they are paying mortgages for the next 20 years before they call it their own). The result is that the rental market is very small and the people's mindset is that they MUST own their own properties, regardless of affordability.

Then people better wake up their idea loh. :-) If they want to be like lemmings and buy property because the Government says it's good to own property, then it's the Government's fault loh.

The rental market is small for a very simple reason -- people can only own one HDB flat each and the number of people who upgrade from HDB to private is relatively small. As for the rest? They need a place to stay what, so how to rent to people? Maybe the solution is for HDB to allow people to own more than one HDB flat at the same time?? :-P

At the end of the day, if people don't save enough money for retirement while they are working, it's going to be a problem REGARDLESS of how we tweak the CPF.

The KTM is not trying to defend the current CPF policy. He's simply trying to understand and clarify people's unhappiness with the CPF. Till now, there does seem to be any compelling reasons why there's a problem with CPF, other than this sense that we need to "protect the people from themselves(!)" (which is an argument that the KTM doesn't buy).

Mr KTM,

Till now, there does seem to be any compelling reasons why there's a problem with CPF, other than this sense that we need to "protect the people from themselves(!)" (which is an argument that the KTM doesn't buy).

If I have given you the impression I am of the opinion that we (or rather, more accurately, the government) need to protect the people from themselves, let me clarify that I'm not. On the contrary, this may have been overdone already by the government of the day, who frequently thinks that it knows better! In fact, I agree that it is impossible to protect people from themselves.

I was merely trying to point out that there are fundamental flaws with the CPF scheme as it stands and it can be tweak and improved. Do I have all the solutions? NO, I don't. But before we jump to the solution, do we agree there are problems? If we don't, then it is pointless even trying to discuss solutions. I'll leave the solutions to our well paid civil servants to work on. If only they pull their heads out of the sand briefly even to see and agree there are issues.

In my younger days, I use to think that our CPF scheme is sound and better compared to the retirement schemes and social welfare systems practice in Europe and US. I would even defend it when it was 'attacked' by visitors who come from these countries. I am not so sure anymore. Perhaps I am now older and wiser. I know neither is perfect. I know one can argue and point out examples which support one's views, either way.

The basic question is and should be 'Is there room for improvement to our retirement scheme, CPF?'. Following that, 'What are the problems with CPF, as it stands?' Before attempting to answer 'How can we make it better?'.

The rental market is small for a very simple reason -- people can only own one HDB flat each and the number of people who upgrade from HDB to private is relatively small. As for the rest? They need a place to stay what, so how to rent to people? Maybe the solution is for HDB to allow people to own more than one HDB flat at the same time?? :-P

You are right. Government housing policy results in very small rental market.

...an opt to buy an annuity instead, which will pay them until they die. Unfortunately, given the rather long expected lifespans of Singaporeans, the yield for the available annuity is very low and the scheme is extremely unpopular.

While I have stated earlier, we should not jump to solution, I will put in a comment here. I'll take your word that current annuity schemes are not attractive. (I know they exist but you appear to know more about them in details than I do.) This is one area, the government can potentially tweak the system. CPF funds is not insignificant. If the CPF do not have the expertise but there are commercial business with the right expertise, then work with them to come up with schemes, annuity or otherwise, which will be sufficiently attractive and serves its purpose. If, for instance, the government force a certain percentage of CPF for each account holder into some form of annuity scheme, people may have better protection and with the larger volume, we get a better deal. Just like medical insurance, it is essential. It is foolhardy to think that whatever we have in medisave will see us through our healthcare cost in our old age.

This statement is the crux of the issue. You have got to take a stand. It's either your responsibility to take care of your own retirement, or it is the Government's responsibility.

Now to address THE most 'important' point, lest I be viewed as not being capable of taking a stand! :(

It's the government's responsibility to draft the law relating to retirement. It's the government's responsibility to determine the fundamental scheme to adopt - i.e. put the onus on the employers? take on the onus itself? or put the onus on the individuals (ie no forced savings, no employers funded retirement scheme). Once this is done, individuals have to bear their share of responsibilities within the chosen framework. And it is details relating to this framework, that I take issue with.

CPF, in my opinion, is a combination of all three possibilities. Our government has come up with a scheme that says, employers and employees contribute about the same amount (lesser for employer, more for employee currently but it started with both providing equal shares - I'm old enough to know and not too old to forget :) ) There is another component, which most of us do not associate with our retirement and it is not part of the CPF scheme but it is there - cultural and social responsibilities in the form of filial piety, common in Asian culture. We even have a law which allows parents to claim maintenance from their children!

Where does this leave our government? Purely as a fund administrator and policy decision makers, that what CPF Board's roles are. Relevant question here is whether the government should play a bigger role as a contributor to the retirement fund and welfare provider? The two becomes closely related for old folks. The current government's stand is clearly one of 'Don't look towards the government for such contributions, you'll get nothing.' Singapore has one of the strongest reserves in the world. The reserves are invested and there are returns. Until recently, capital gains are not touchable. I didn't know this before. Question is why can't a portion of this income from the reserves, capital gains or otherwise, be used for the benefits of citizens. Keeping for the future generations? Hey, but we already do not tax them to provide for older folks but the fruits of the labour of current generation should be kept solely for the future? for a rainy day? whose rainy day?

They have coined a new word 'Workfare' and is trying to obliterate the word 'Welfare' from Singaporeans' vocabulary. Since by definition, retirees do not work, they are left with almost nothing, No Welfare, No Workfare. You better have enough in the CPF and/or have children who will take care of you. And if you don't have enough money for the government to ship you off to Batam, where it is cheaper to maintain you till you die, the government do not know what to do with you. This, I think, is the situation today. Can improve?

40+ Singaporean,

We are starting to digress, so perhaps permit the KTM to try to paraphrase you and summarize the discussion.

1. Retirement is a problem

The problem is "money no enough". More specifically, there is a growing realization that "CPF money no enough".

At the end of the day, if people dun save enough for retirement, then definitely there is not enough money when they supposedly have to retire. Doesn't matter whether they are saving money in terms of CPF, as asset in their HDB flat, in stocks and shares or simply as cash in their bank accounts.

If people got not enough money when they grow old, money will not fall on trees. Therefore, money must come from their kids -- either willingly or through Government taxation. You seem to think that the civil servants can do miracles with the CPF monies that are currently no enough and come up with some fabulous scheme that magically makes the insufficient CPF monies "enough". There is this thing known as a market and it dictates the risk-return tradeoffs that we can get for the money.

2. Who should be responsible for our retirement.

It seemed for a moment that you agreed with the KTM and Ben that it's the individual's problem, but then you went on to say that "it's the government's responsibility to determine the fundamental scheme to adopt ... it is details relating to this framework, that (you) take issue with".

First of all, you have to understand that in this day and age, retirement is never the employer's problem. :-) While they may contribute to the CPF, it's really transparent to them whether the money goes to the worker or gets locked up at the CPF Board. Their view of the CPF is just a fixed business (labour) cost. The responsibility either lies with the individual and/or the State. As you rightly highlighted, it is quite clear in the present regime that the State's view is that people should take care of themselves. Since you've admitted that you agree with this stand, so we can leave it there.

3. Your highly-paid civil servants are not miracle workers. They cannot solve problems that have no solutions... but they are unlikely to admit to you that there are problems that they can't solve either. :-)

I was merely trying to point out that there are fundamental flaws with the CPF scheme as it stands and it can be tweak and improved. Do I have all the solutions? NO, I don't. But before we jump to the solution, do we agree there are problems? If we don't, then it is pointless even trying to discuss solutions. I'll leave the solutions to our well paid civil servants to work on. If only they pull their heads out of the sand briefly even to see and agree there are issues.

The KTM fails to understand why you think that the civil servants are smarter than you and that if you can't come up with a good solution, they can! :-) What faith! :-P

This is the mentality that is quite scary in the KTM's opinion: Singaporeans seem to think that the Government is omnipotent and can solve all their problems, forgetting that we are only a piece of "pi sai" in the context of the world. Being small has its advantages in the sense of being nimble and amenable to rapid change. It however also means that we are totally defenseless against the onslaught of globalization.

It seems to the KTM that you've not pointed out any fundamental flaws with the CPF. It's just that the CPF probably isn't enough for retirement for many. If you are of the view that the CPF must be enough and if it's not enough, it's a flaw then there's nothing much to argue.

The fix is actually simple -- just make people contribute more money loh; until there's enough. But the realities of life are not so simple. Given the rising costs of living, most people are simply unable to afford to squirrel away half their earnings, period. And please keep in mind that there are rules of economics that say it's impossible to grow money on trees.

What the KTM is really saying is the following: there really isn't much you can do with the CPF to solve the problem at hand (which is "money no enough" at retirement).

There are only three obvious solutions (and any other solution is likely a variant of these): (i) people keep working after retirement; (ii) people get money from their kids; or (iii) people get money from their kids indirectly by having Government cough out money first and then tax the people.

In my younger days, I use to think that our CPF scheme is sound and better compared to the retirement schemes and social welfare systems practice in Europe and US.

The KTM believes that you are still correct. While things aren't looking quite so rosy here, the picture is much worse for the countries you mentioned. The point is not to ask yourself what's going on today, but what's the long term picture. Dun kuncheong spider. The US Social Security System will start to get drawn down in 2010 when the Baby Boom generation hits retirement age. Then we can keep our eyes peeled and see what miracles the entreprising Americans can pull off to deal with their problems. :-) Maybe they can start another war? Perhaps with Iran or North Korea? Unfortunately, war is not a very platable option for us. :-P

Finally, you also raised this point about the reserves. Yes, there's always the possibility of raiding the reserves to pay for stuff. Logic is actually faultless: this generation was the one who accumulated the reserves, shouldn't we be entitled to enjoy the fruits of our labour before we DIE? :-)

This is the deal: the rainy day is coming. The day will come when the world starts to run out of oil, and then we, with the rest of the world will be in very deep economic trouble. This is not a boogeyman. This is real. It would be good for us, if none of us who are reading this blog will live to see that day, but that day will come. :-( If we want to spend more of the reserves today and leave our children and our children's children with less $$$ to deal with the day of reckoning when it comes, so be it. (Footnote: It turns out that the KTM had once written about the outsourcing of old folks and the oil peak problem).

The KTM is not disagreeing with you that "retirement is a problem". He is merely trying to make sure that the terms of reference are clear and there's sufficiently clarity in the problem so that this discussion can be a fruitful one. At the end of the day, even if nobody can come up with a "solution", if people go away with a clearer understanding of what's going on, there is value in this discussion.

Respectfully, it seems to be the KTM that you are really arguing that the State should provide more welfare. And if that's indeed the case, harping on the CPF will serve only to muddle the underlying issues. Do take a step back and think about what you are unhappy with and perhaps try re-express them in a more direct way. You may wish to think about the following points:
1. What is the unhappiness
2. Why did the "problem" come about
3. How "big" is the problem (i.e. how many people does it affect?)
4. What are the possible solutions
(a) how much do these solutions cost; and
(b) how are we (the State) going to pay for it

Mr KTM,

Before I respond again to your latest comments, a digression, for a lighter moment. Are you ready a chay kway teow cook? It is one of my favourite hawker food by the way. If you are, and you are as good as you are with blogging, I like to try it someday!

I doubt that is your profession, though. I won't be surprised if you are actually a civil servant. Whether you are or not, it does not matter. I will still hold this exchange with you. Now back to your points and my responses.

1. Retirement is a problem

I agree. But I would put it this way instead. Retirement is a challenge for many Singaporeans because retirement funds in the form of CPF is insufficient.

If people got not enough money when they grow old, money will not fall on trees. Therefore, money must come from their kids -- either willingly or through Government taxation.

Mostly true but it can also be funded by taxation of the retirees during their productive years.

You seem to think that the civil servants can do miracles with the CPF monies .... that magically makes the insufficient CPF monies "enough".

I know civil servants cannot do miracles but can they do better? I believe so. I did not for one second think they can magically duplicate $$$ and double our money in the CPF kitty. That's not what I suggested. Please re-read my post again, if you are in doubt.

There is this thing known as a market and it dictates the risk-return tradeoffs that we can get for the money.

I appreciate the little lesson you are trying to impart here but let me assure you that I am very much aware of markets and return's association with risks. Many of the civil servants you are defending needs this lesson more than I do, I am pretty sure. I have been in commercial organisations for more than 25 years, MNCs, GLCs, local SME and even a couple of years in a government related public service organisation. I was a little perturbed by your language but decided to let it passed. I didn't want this discussion to be distracted by some minor matter.

Allow me to clarify my issue with the civil servants and the government in this matter (I see both as one and the same). CPF, as a retirement scheme, has lost its bearings. If we are both right in that CPF will not provide sufficiently for average Singaporean's retirement, then as a retirement scheme, I can only conclude that it has failed or is failing. If so, what is the government or CPF Board doing about it? You, like Ben, appears to just accept it and says, 'Let's take it upon ourselves. It's our responsibilities, after all.' Where's the accountability? Is there no scope or opportunities for improvements? You may say that I chide the civil servants for not doing enough in this area and I will agree. Is it not true? Are you suggesting that individuals should just save for their retirement and if they cannot save enough for retirement, too bad?

I take a broader view of this matter, beyond CPF and extended it to include welfare for older citizens who can or are no longer working, no longer economically productive.

The KTM fails to understand why you think that the civil servants are smarter than you and that if you can't come up with a good solution, they can! :-) What faith! :-P

Many of the civil servants who are scholars are smarter than me (I mean this sincerely). That, I am pretty sure. They were selected based on their academic performance, at least up to A-levels. I have also worked with quite a number of such scholars. Many are smart, alright. I am not saying they also do a good job or are very good at what they are suppose to do or even that they performed in their jobs. Some are promoted beyond their capabilities. It is our government's views that those who are academically capable can do anything and that a fast path is the way to develop such 'talents'. I do not agree. This is only true for some. In the government's eyes, they can come up with better solutions than me. My expertise is not in retirement funds management nor public service nor have I ever worked in CPF. The CPF staff and related government organisations' jobs deal with the business of providing a viable retirement scheme and administering it. It is reasonable for me to think they can come up with a better solution than me, don't you agree?

Finally, you also raised this point about the reserves. Yes, there's always the possibility of raiding the reserves to pay for stuff. Logic is actually faultless: this generation was the one who accumulated the reserves, shouldn't we be entitled to enjoy the fruits of our labour before we DIE? :-)

Raiding the reserves? Strong words. Why use the term 'raiding'? What I suggested in analogous to how I would manage my savings? It is the same as asking if I will leave all my savings to my children in the future or use some for my own needs in retirement. What do you think my answer will be? I take my parental responsibilities seriously but will also look after my self with my own savings. Fair, won't you say?

So, you are of the opinion that our reserves should not be touch, except for the rainy day, which in your view is when oil runs out. I respectfully disagree but will have to leave this for another time. For now, I hope I have been clear about my views.

40+ Singaporean,

Thanks for your clarifications.

Mostly true but it can also be funded by taxation of the retirees during their productive years.

Well, it didn't happen. And the problem at hand is not with the retirees 20 years from now, but the people who have already retired or are retiring within the next 5 years. The CPF itself was forward tax of sorts -- but not quite since people can actually use it to buy property. And the current realities are such that it's not quite feasible to force people to save enough. We just have to come to terms with this new reality and deal accordingly.

I appreciate the little lesson you are trying to impart here but let me assure you that I am very much aware of markets and return's association with risks... I was a little perturbed by your language but decided to let it passed.

Respectfully, the KTM wasn't trying to be rude. My sincere apologies if any offence was taken. The reference statement was in response to your earliest note against the minimum sum and suggestion that the 20-year payout was a bad idea. The point is that people has a choice of either a 20-year payout or an annuity for life. Annuity is based on market rates and the returns are unacceptably low, so people wouldn't choose that option. People are already complaining about the minimum sum, so increasing it further will be a political liability.

Are you suggesting that individuals should just save for their retirement and if they cannot save enough for retirement, too bad?

Not "too bad", but it's a problem that they should go and figure out how to deal. If you subscribe to individual accountability then this is exactly what it means.

The CPF staff and related government organisations' jobs deal with the business of providing a viable retirement scheme and administering it. It is reasonable for me to think they can come up with a better solution than me, don't you agree?

This is probably where you and the KTM differ. The KTM believes that the civil servants are already doing the best that they can. You dun believe? We can wait and see if anything drastic happens to the CPF. :-P This is one instance where the KTM sincerely hopes that he's wrong.

The KTM is actually surprised that people (you are not alone) have so much faith in the Government and/or civil servants given the amount of complaints and supposed grievances. :-P

Die die the problem of retirement will be dealt with - because it's a problem. What the KTM believes however that there's only one reasonable approach under the present climate and that's for the Government to cough out more money for welfare. Workfare, whatever fare you want to call it, it will come in some form. And no matter what creative names the Government comes up with, it will be handouts. We're not going to have old folks starving and dying on the streets of Singapore (worst case, ship to Batam. :-P) -- that much the KTM is confident . :-)

Raiding the reserves? Strong words. Why use the term 'raiding'? What I suggested in analogous to how I would manage my savings? It is the same as asking if I will leave all my savings to my children in the future or use some for my own needs in retirement. What do you think my answer will be? I take my parental responsibilities seriously but will also look after my self with my own savings. Fair, won't you say?

Of course it's fair. People have different views about how they should deal with their estate. :-) The KTM for one is not going to leave a single cent to his kids .... so to some extent, his perspectives on the reserves and his perspectives as a parent don't seem to agree -- but people are idiosyncratic what, so what's new? :-)

Once again, thanks for patiently sharing your views. If the KTM seemed rude at any point, please accept his sincere apologies. It's mostly a matter of his writing style. :-P

It suddenly dawned on me that 40+ Singaporean understands CPF to be some sort of co-funded (citizen and Govt) welfare program that provides some sort of remuneration to the individual when his income stops. Along with it comes a philosophy that the Govt is responsible for citizens' well-being when they are no longer economically self-sufficient. New Zealand and Scandinavian countries are prime examples.

If there are other Singaporeans who share the same thinking, then SgAngle has fulfilled its mission by drawing out confusion and developing clarity!

Firstly, in governance, there are two polaric values: self-sufficiency and welfarism. And there are varying degrees of welfarism.

Secondly, our PAP govt carries philosophies of self-sufficiency, family support, and community support, before the State steps in. Despite the workfare trumpeting, let's credit the Govt for providing welfare - ERS, NSS, Baby Bonus, Progress Package, etc. Whether you think it is sufficient/bribery/eye-candy is a separate issue.

Thirdly, our PAP govt knows that leaving people to their own devices will be a time-bomb, and thus, instituted CPF as a form of forced savings so that people will have some savings when they retire. 40+ Singaporean misses this completely, hence his long rants ;-). Whether the forced savings will be sufficient, is a separate issue. If our Govt does not do this, it faces the possibility of an ageing population in financial distress, and will thus be forced to provide welfare or risk losing power.

Finally, while we may wish to lobby our Govt for more welfare, a better approach is self-sufficiency. This means we must be responsible for our own retirement and live within our means.

Don't mistake CPF to be a welfare program. If you feel there is insufficient welfare in Singapore, it's not because CPF is faulty.

Mr KTM,

Blogging must be your full time job! I didn't expect a response so early in the morning. I do appreciate your responses, writing style, language, arguments and all.

Clearly, we do not agree on what we and the government should do, given the situation. You have resigned to the fact that the government i