CPF Minimum Sum, CPF Life, Medisheld Life share one bad feature. What is it? What is a better approach?
ANSWER:
It is bad to force the members to keep their money in the CPF against their will, or to force them to take up the CPF Life or Medishield Life against their will. The members feel that they are given a poor return.
It is better for the CPF to allow the members to withdraw all of their savings at 55 but give them the option to keep the money in the CPF beyond 55 if they wish to. The CPF can make it attractive for members to keep their money longer, on their own, by offering an interest rate that is better than what they can earn outside on their own.
This is the approach taken by the Malaysia EPF (which is the equivalent of our CPF). The members do not feel that the EPF is giving them a poor deal and is holding back their money to "milk" them.
Tan Kin Lian
*The writer is the former NTUC Income CEO and Presidential Candidate. Article first appeared on https://www.facebook.com/kinlian/posts/804949986244322