CPF Advisory Panel still didn’t get it! 10 points’ recommendation can summarize to only 5 points!

The first set of the recommendations by CPF Advisory Panel just came out!

I found the newspapers’ reports to be utterly confusing and although there are up to 10 points’ recommendations, some are rehash of old policies, rewording, introduction of a new term (e.g. “Basic Retirement Sum”), and hence the 10 points can be further summarized to just 5 points as follow:

1) CPF Advisory Panel recommended that from 2017 to 2020, each cohort of members turning 55 in a calendar year should have its Basic Retirement Sum increased by 3 per cent from the cohort in the previous year. 

Note: Note the term “Basic Retirement Sum” used.  This “Basic Retirement Sum” is basically half that of “CPF Minimum Sum” and is only applicable for people who pledge their properties.  Those people who do not pledge their properties will need to maintain the “CPF Minimum Sum”, which is currently $161,000. 

Given that the CPF Minimum Sum will be increased again from 2017 to 2020 by 3% per year, as such, by 2020, CPF Minimum Sum will be about $181,207 !!!!!

2)      CPF rules could be relaxed to allow members to transfer their CPF savings above the required Basic Retirement Sum to their spouses’ Special or Retirement Accounts. Currently, members can only top up their family members’ accounts using funds in excess of the Minimum Sum.

3)      Give members the option to defer their payout start age, up to 70, for permanently higher monthly payouts.

4)      Give the option to members with higher CPF balances to commit more of their savings into the CPF LIFE scheme, so they receive higher monthly payouts.

Note: The maximum that any member can contribute is called the “Enhanced Retirement Sum”, which is capped at 3 times the Basic Retirement Sum.

For example, those turning 55 in 2016 will have the option of topping it up to the maximum of S$241,500, or three times that of S$80,500.

5)      Give members the option to withdraw up to 20 per cent of their Retirement Account at the Payout Eligibility Age.

Note: Payout Eligibility Age is currently 65 years old.  Why they can’t just say 65 years old to avoid introducing more jargon? (unless there is plan to increase this age?)

Why I say the CPF Advisory Panel didn’t get it pertains to point 5 above.  Their recommendation is to only allow CPF members to draw 20% of their Retirement Account at the age of 65 years old.  The problem I see is that most members want to be able to withdraw at 55 years old or between 55-64 years old because CPF Retirement Account is locked at 55-65 years old!  Before 65 years old, CPF members will not get any CPF Life payout and given that from 55 years old onwards they can’t touch their CPF money, they may want to withdraw some money for some purposes, e.g. pay mortgage loans, pay for children’s education etc!