CPF system is sound, provides solid foundation for Singapore's future: DPM Tharman
Deputy Prime Minister and Finance Minister Tharman Shanmugaratnam says the CPF system is sound, and provides a solid foundation for Singapore's future.
Speaking in Parliament, he says it's not a static system.
Over the years, it has been adjusted to reduce the scope for housing withdrawals and focus increasingly on retirement and medical needs in old age.
In his reply to parliamentary questions, Mr Tharman highlighted the challenges faced by social security systems globally.
They include financial sustainability, giving individuals a fair return on their retirement savings but avoid exposing them to more risk that they can bear.
He says the CPF system has protected members from risk.
While acknowledging it's not a perfect retirement savings scheme, he says it's among the better regarded internationally.
It's sustainable and offers flexibility to members to withdraw savings.
It also gives fair and safe returns.
Mr Tharman says few systems offer the guaranteed floor rates on interest rates - 3.5% for the Ordinary Account, and currently, 5 per cent on the Special, Medisave and Retirement accounts.
The interest rates are guaranteed by the government, one of the few remaining triple-A rated governments in the world.
It also subsidises CPF members through the Budget in a targetted and sustainable manner.
He says taken as a whole, Singapore's CPF system prepares Singaporeans well for the future.
Based on current policies, a new entrant into the workforce today can expected to draw a retirement income of about two thirds of his last drawn pay if he's a median income earner.
And the lower income gets a much higher ratio of his previous pay because of Government subsidies.
"As PM has stated, we want to improve the CPF to provide greater security in retirement, especially for those with lower wages and to help retirees cope with inflation. We also want to give those who are 'asset-rich and cash-poor' more convenient options to get cash from their homes. But as we seek to improve the CPF or to add any flexibility, we must retain its basic strengths and avoid the huge problems seen elsewhere."
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