When can you see a retirement and what will you get?

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From 1955 till 1983 no minimum sum of any kind was required, and you could take out your savings at age 55 to prepare for your future retirement as you saw fit.

Since the minimum sum was introduced in 1987 at a combined $36,500 (MS $30,000, Medical $6,500) it has been raised in a series of ramps to reach $233,000 (MS $176,000, Medical $57,000) today.

In the same timeframe the withdrawal age changed from 55 to 65 with some talk of raising it to 67 in the near future although many in Parliament this week have been saying 70.

A quick inflation calculator shows $36,500 in 1987 would be around $80,000 today given the inflation rates Singapore has had so the minimum sum combi has outpaced it by 200% why such a large increase? Was there an error in the early days of CPF that needed to be corrected by such a massive rise?

Although there was a minimum sum since 1987, CPF life was only introduced in 2009 before which you bought your own annuity plan. At that time $67,000 would give you approx. $600 per month income. Today although the income has gone up to $1,300 per month you now need to pay $176,000 to get it which is 20% more expensive for what it gives. Why are we paying so much more for less?

Now we know with all the money pulled of in to HDB purchases and the very low interest rates paid on our mandatory savings scheme mean more than 50% of the people cannot reach this minimum sum and get much lower than the mandatory CPF Life scheme offers. In fact we recently heard a typical pay-out was in the $300 to $400 range so why do we persist with this failing model?

Finally, with the minimum sum set to continue increasing at $5,000 a year and what is now called the Basic Healthcare sum by who knows what quantum and both for who knows how long the chances of a decent retirement are a constantly moving target getting father and farther away for more and more people. Why is it rising so fast at these seemingly arbitrary rates with no end in sight?

Either the PAP have no idea how much we need beyond it is “more” so they just keeping raising it to be Kiasu or they know exactly what it is (as we also need to cover for the failed CPF multi use and low interest rate policy) and the number is so high they can only jump us there over a lot of years and never reveal the true number.

Either way we have uncertainty, but people shouldn’t have such a volatile minimum sum where they have no time to react to such large increases and don’t know one year to the next if they will have a retirement or not.

At so many levels how we run our CPF system needs overhauling and having a clear goal post and fixed targets are just some of them.

 

Brad Bowyer

 

 

 

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8 Responses to “When can you see a retirement and what will you get?”

  • cheat in PE:

    Why is it rising so fast at these seemingly arbitrary rates with no end in sight?

    The answer and the truth will be known when we are able to pry open the books of Temasek and GIC. They have to cover up those gigantic holes there.

    Which is why they have to cheat in the Presidential Elections to prevent a non-PAP sympathetic President to force them to open up the books for scrutiny.

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  • Bapak:

    All the ghosts and skeletons in CPF will one day walk out to hound PAP. If you can find them!

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  • TL Tan:

    The writer is too simplistic in his views. The main reason why we have to contribute more to the CPF MS, while the monthly income from it does not increase proportionately, is because of the structural decline in long-term bond yields. Furthermore, even if most Singaporeans can’t meet the MS with cash, don’t forget we can use our property to pledge up to 50% of the MS, effectively meaning we only need to meet 50% of the MS with cash from our OA and SA. Finally, with longer life expectancy and more incidences of rich-world diseases such as diabetes, it is absolutely necessary for the CPF amounts to continue increasing.

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  • LIONS:

    brad,thats well written.

    good points.

    so,isnt it quite obvious the PAP gahmen are trying to $uck a big part of our cpf (besides HDB) VIA MEDICAL CHARGES as most sgs go to govt hospitals.

    this is WHY THE LAME GOVT HAS BEEN ALLOWING MEDICAL FEES TO ESCALATE UNCEASINGLY.

    At the end all,the PAPies need not find the money they $quandered to return to us.

    in fact,MOST SGS WOULD BE FORCED TO ‘TOP UP’ their CPF becos of shortfalls after paying HIGH MEDICAL BILLS especially for those who are jobless n require surgery or are retired?

    this govt only wants more $$$ for themselves and to feed some of their doggies.

    as for the rest,it is plain wayang of HAPPY AGEING ,ACTIVE AGEING(guess they mean to tell you to collect more cardboard litters and work till you drop dead) as you continue to PAY AND PAY till you cant pay anymore???!!!!!!!!!!!

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  • Mike:

    We are all on the long march to get our own CPF monies back.
    And most Singaporean are either too young to understand, too numb to do anything, too given up to hide in denaial, or too benefited to bother.

    This is what we are, a hopeless people in a hopeless nation waiting for things to happen as though we are bystanders.

    Ultimately we as peasants have high price to pay and the quitters are ahead of times. This may sounds depressing and not loyal… put it this way, how may of us will instantly belief what doctor said if we have cancer? The only different is how long we will take to face the fact and how only it will take for us to do something about it or arrange our after life….

    Ask your friends this question if they refuse to acknowledge this crisis in our country that we are rich and yet we are also broke.

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  • True facts:

    They said u can still work until 100 years old.

    Lol.

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  • Somewhere over the rainbow(s)?:

    “One of the most tragic things I know about human nature is that all of us tend to put off living. We are all dreaming of some magical rose garden over the horizon instead of enjoying the roses that are blooming outside our windows today.”
    - Dale Carnegie

    Well, about “the” most tragic thing about citizenship in Singapore is the ever receding horizon of life’s long labour.

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  • oxygen:

    @ TL Tan

    YOUR ADVANCED FINANCE AND ECONOMICS nearly, nearly only, impressed me.

    TL Tan: The writer is too simplistic in his views. The main reason why we have to contribute more to the CPF MS, while the monthly income from it does not increase proportionately, is because of the structural decline in long-term bond yields. Furthermore, even if most Singaporeans can’t meet the MS with cash, don’t forget we can use our property to pledge up to 50% of the MS, effectively meaning we only need to meet 50% of the MS with cash from our OA and SA. Finally, with longer life expectancy and more incidences of rich-world diseases such as diabetes, it is absolutely necessary for the CPF amounts to continue increasing.

    trai

    Let me cut the sarcasm straight. You used your CPF to fund your property purchase to whatever proportion, then revert to use your property to pledge 50% of your minimum sum?

    WHAT IF YOUR PROPERTY VALUE FELL BY 30% OR MORE? Then sell your backside next?

    Structural decline in long-term bond yield? Did the yield on CPF follow the same trajectory starting from 10 yr US Treasury yield of 14% in early 1980s? Facile farts from you again of details.

    CPF is retirement fund FOR FUTURE CONSUMPTION has been used for multiple purposes FOR CURRENT CONSUMPTION and CPF returns have been artificially compressed.

    HOW CAN THAT EVER BE ADEQUATE FOR FUTURE RETIREMENT.You are a stupid puppy smelling your own anus!

    The goals of CPF scheme is MUTUALLY EXCLUSIVE – YOU BLIND SOTONG PRETENDING ECONOMIC AND FINANCE GENIUS.

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