TR EMERITUS

The discontinuation of the Special Account( SA) for individuals aged 55 and above, is set to take effect next year. Historically, CPF members employed a “shielding” strategy to maximize their savings’ interest income. By transferring funds to their SA, members benefited from a higher annual interest rate of 4.08%, compared to the Ordinary Account's (OA) 2.5%. However, the upcoming changes will render this strategy ineffective for those above 55, as their ability to keep funds in the higher interest-earning SA will be eliminated. However, it may be good to understand the likely possible implications of the change. The cessation of the SA for individuals over 55 could inadvertently result in some CPF members, accruing interest at the OA’s lower rate of 2.5%, if they do not opt to transfer their OA funds to their RA after the SA closure. Firstly, we may need to note that most members may have met their BRS through their RA, leaving little to no balance in their SA. This scenario primarily affects those whose retirement planning strategies did not involve actively managing the transfers between their accounts to optimize interest earnings. It can be well expected that some senior CPF members passively manage their CPF accounts. Consequently, the shift of SA funds to the OA could result in lower interest income for a portion of CPF members, should they decide against transferring their OA funds to their RA following the SA’s closure. As for those who manage their CPF account, such as those who practice the “shielding” strategy and have met the BRS, they may in a sense, be denied of a long-term, high-interest, low-risk investment option and may opt to withdraw the sum to be invested elsewhere (instead of 2.5% in OA), to avoid transferring their money to the RA. It is not “the same” to say that after your SA is closed and transferred to your OA you can always transfer it to your RA, to still get the higher 4.08% interest of your closed SA. Because under the SA, you can withdraw all your funds at any time, if you have met your BRS. In contrast, under the RA, funds can only be withdrawn as a monthly annuity through CPF Life or the old CPF Minimum Sum Scheme. One should note the "withdrawal anytime after age 65, for those born after 1 Jan 1958" - Additional 20% of your retirement savings, less the $5,000 withdrawable from 55" - "Based on your Retirement Account balance at age 65 and any CPF Life premium balances at 65. Any amount not withdrawn or used to increase your monthly payouts will be transferred to your OA for your future withdrawals in the same month you start your monthly payouts" - "excluding any cash top-ups or CPF transfers as well as government grants such as CPF LIFE Bonus or Deferment Bonus as they are designed to boost your retirement payouts". Additionally, if you select the CPF Life Standard Default Plan, all accumulated interest from age 65 will be absorbed into the CPF Life pool upon death. Consequently, most CPF members who wish to leave their accumulated interest to their nominees might opt for the Basic plan, which offers a lower monthly payout, instead of the default Standard plan. For instance, the accumulated interest lost upon death at age 80, with a Full Retirement Sum (FRS) of S$192,000 (in 2022), could be about S$160,000 (accumulated interest from 65 to 80). For those deferring their payouts to age 70 under the Standard Plan, the relative loss of accumulated interest upon death may be even higher. And also, for those who opt for the ERS which has just been increased to up to 4 times of the BRS in the Budget– similarly, the accumulated interest lost may be even higher. Another possible implication of the change may be that there are 249, 000 CPF members who have invested $5.8 billion( invested sum– not the current value) from their SA, as of 4Q2023. So, for those who liquidate after age 55, does it mean that the proceeds may be returned to the OA( 2.5%), instead of the SA( 4.08%) previously, for those who have met their BRS? The removal of the SA after 55 may lead to less interest to those who choose not to have their money transferred to RA from their OA, after their SA closure. For those who choose to transfer to RA- they may arguably, lose the flexibility of withdrawal under the SA after 55, if they have met the BRS. For those who are working after 55- their CPF contribution portion which goes into SA previously, will now go to OA, at 2.5%, instead of SA's 4.08%, for those who have met their BRS. For example, with the 1.5% increase in the CPF contribution rate for age 55 to 65- the current 31% contribution rate for age 55 to 60 becomes 32.5%. Currently for age 55 to 60- 8.5% goes to SA. How much of the 1.5% increase announced in the Budget will go into the OA, for those who have met their BRS, since the SA will be closed?   Leong Sze Hian    Read More →

I have often said one of the major failings of Singapore is that our people have bought into this propaganda that we are light years ahead of the rest of our Asian neighbours. Having worked and lived in Indonesia for many years, I can tell you this is rubbish propaganda. What I see in fact is how Singapore has declined significantly in the last 2 decades relative to our SEA neighbours who have made great strides in catching up with us and in many areas even surpassing us. In the meantime, the PAP government has been resting on its laurels whilst being paid humongous salaries which are totally out of sync with reality. And their IBs have been chanting the asinine mantra of what one Singapore dollar is compared to the Malaysian ringgit. Guess what, Malaysia and Thailand have been voted the best Asian countries to retire in. Singapore doesn’t feature in the list at all and has no hope of making it as we are the world’s most expensive city. It is not an ideal retirement place. Look at this survey which ranks the Hanoi airport ahead of Changi for business travellers. I bet you are shocked. But don’t be.Just realise how much we have declined in the last 2 decades under the PAP.   Lim Tean    Read More →

A couple bows before their parents and offers them tea, as is traditional in Chinese weddings. I refer to The Straits Times’ Editorial “Marriage, children and practical concerns” (Feb 5). Since the history of human civilisation, the formation of individual family and the issue of procreation have become two of the most significant missions of personal life objectives. Foremost, let us briefly sum up the fundamental purposes of marriage: companionship, procreation, enjoyment, sexual intimacy, protection and completeness which in an extent affect an individual’s lifestyle, thinking, mindset and perceived as a fulfilled life. Since ancient times, the Eastern and Western cultures have always attached great importance to marriage and family formation. However, in the past two decades, people's scrutiny and emphasis on marriage have changed greatly. Many people think that marriage is just convening a marriage contract, and it restricts each other's freedom, time and personal development space in many aspects. Therefore, they strive to seek breakthroughs in ideas, thinking, styles and moral’s restraint. For example, some people choose to remain single. They think that as long as they can achieve financial independence, they will have personal time and space to fulfill their hobbies, interests and another career after retirement. They feel that how free they are, without restraint. Thus, there are more and more young people who have this idea. Undeniably, Singapore is situated at the intersection and deeply influenced by the Eastern and Western cultures, so it is inevitably affected by this trend. There’s also a small number of people who engage in LGBT (Abbreviation for Lesbian, Gay, Bisexual, and Transgender) activities and same sex marriage. This group of people believe that there is nothing wrong with breaking through the traditional ideological framework of sex and love, and this trend seems to have become popular and prevalent in many big cities. This is inevitably an incredible and unacceptable challenge to most people who adhere to traditional family and moral concepts. Anyway, in our highly competitive and stressful cosmopolitan society, our young people have to ensure that their rice bowl of individual career is constantly stable or secured after their university graduation prior to thinking of whether to have a family. In addition to this, they also have to carefully weigh in all the predictable and unexpected pros and cons. These include the individual family’s financial ability or situation, the couple’s physical and mental health as well as their emotional preparedness or readiness for raising their expectant children, the motivated incentives provided by the government for the advocacy, encouraging and promoting the campaign of procreation. Last but not least, our newly-wed couples have also seriously reckoned with whether the pro-family work culture being actively supported and engaged by most of our employers in Singapore? As this is also one of the practical concerns for considering procreation.   Teo Kueh Liang (Mr)    Read More →