When the CPF was first introduced it was a simple savings scheme for retirement. You put some money aside and when you retired you take everything out at 55. Simple and neat. Under that system and at one time at 25% + 25%, if I am not wrong, the savings grew rapidly, helped by 6% or 7% interest rate. Everything was fine, really. There were great trust and faith in that system.
When the savings got too big, people started to get clever ideas, just like the foreigners queuing outside our PM and DPM Finance’s offices asking for financial help. The foreigners know that we have a lot of money to give if they know how and what to say. We have been very generous when they rubbed us the right way.
Now where am I? Oh, the people have a lot of money in their CPF accounts. There is no need to sell HDB flats so cheaply right? The people were rich and could afford to pay more for their flats. Along the way some got carried away and HDB flats were priced to suit the savings of the people. Very affordable indeed! The more the people saved, the higher the HDB prices. The people could afford to pay until nothing left in this affordability game.
This should be a good thing if the people had paid all their savings for the flats, no need to pay them interest or return to them. And even better still, if they sell their flats, they have to pay back to CPF with interest some more, lagi shiok. Then some people had smarter ideas. So much money laid idle in the CPF. Should invest them wisely and get higher returns and profit the balance. Who can disagree with this kind of logic and game plan. Hire the best brains money can buy, sure make money one, if not in the short run, sure make in the long run. Historical data showed that over 20 or 30 years, the returned could be 20 or 30%. Bao chiat one. How to lose money, or how can lose money?
The CPF savers should feel very secure. At least they are reporting profits of 7% or more, like 14% or 17%? Then why suddenly a new legislation was passed to reduce the interest rate to 2.5% in Ordinary Account and 4% in Special or Retirement Account, and no guarantee some more? No one smelt a rat. And another legislation was passed to provide for a liquidation of the CPF if it does not have enough money to pay the savers. Correct me if I am wrong, but I remembered it was put up by Gan Kim Yong, I think. No one smelt a rat either. A sure win investment plan, every year registering high profit, then interest rates paid to CPF holders getting lower and lower and even made provision for the CPF to go bust, then no need to pay back. What is going on? No one asked the right question or no one wanted to ask the right questions.
Then more sub accounts were invented within the CPF. Special Account and Retirement Account. Wait a minute, isn’t the whole CPF savings a savings account for retirement? Why now got Retirement Account some more? Then Minimum Sum for Retirement Account or is it Ordinary Account, I am lost on this. Then minimum sum for Medisave. First they created Medisave Account, then Medisave Account also got Minimum Sum? What’s that? And the minimum sum gets bigger and bigger every year, for the good of the savers. Must be lah. Oh, all these accounts are to ensure that the money would always be there till the savers koyak.
When the withdrawal age was pushed back from 55 to 62, no one complained or no one objected. No one smelt any rat. Now it is to 65 or maybe older. Still no one complains. If there were any complaints, it seemed that no one heard or got the message.
The gradual incremental changes of the CPF Scheme were made without much resistance except the very first attempt by then Finance Minister Howe Yoon Choong. The Union objected strongly and it was dropped for a few years. The rest is history. We now have a CPF savings scheme that is unrecognizable from its original form.
With the impending Medishield Life, the money would be stuck in the CPF for good or would be spent without the savers touching it. Oh I forgot. How come when home owners sold their flats, the interests accrued over the years must be returned to the CPF for safe keeping when they should be returned to the owners who had retired or passed 55 years of age?
Today we have a very complicated CPF Scheme that would end up with very little money left after deducting for housing and medical and a few other approved schemes compares to the earlier simple scheme when the savers would have quite a big chunk of money to withdraw at 55. Now at 55, very likely you get $5K.
Isn’t the CPF meant for retirement? Why when a person retires, he can only get $5K and the rest transferred to another Retirement Account? Why must a person still pledge his home to a Minimum Sum when he has already retired? Or why can’t he use the money transferred to his Retirement Account to pay for his housing when he now needs the money more desperately?
If these terms were made known in the beginning, no one would want to join the scheme. Of course they can make it compulsory, just like the Medishield Life. Now it is looking so beautiful and glowing. Think what they can do to the CPF Scheme and what they can also do to the Medishield Life and the Medishield Minimum Sum in your CPF savings ten or twenty years down the road. You would not recognize them.
The CPF scheme that was once the envy of other countries is turning into another big screw up. Now it has become a scheme when one can only smile at the numbers printed on it. Those who spent their whole life working and savings and thinking that when they retired they could become a king for a moment had their dreams shattered facing a stone wall. Many would get $5k if they are lucky.
Chua Chin Leng AKA RedBean
*The writer blogs at http://mysingaporenews.blogspot.com/