Love it or hate it, the CPF system is here to stay.
And according to some experts who are not residing in Singapore, it’s a good thing.
Now, before you shoot me with your SAR21, let me tell you this first:
Don’t shoot the messenger.
GunghoRanBo: Huh?
Yeah, that and maybe, you might want to listen to why they seem to think this way.
GunghoRanBo: *Shrugs* Okay…<BANG>
MY LEG.
Overseas Experts Think CPF is the Best Retirement Scheme in Asia & Provide Some Suggestions
How well do you think Singapore’s CPF is at letting Singaporeans retire comfortably?
Well, according to some experts overseas, it’s the best-est in Asia.
The Melbourne Mercer Global Pension Index 2019 (which you can tell is all about retirement because pension) ranks Singapore’s CPF as number 7 on the list.
The first to sixth positions are:
- Netherlands
- Denmark
- Australia
- Finland
- Sweden
- Norway
This means that if you were to compare our CPF system to the rest of Asia, we’re the best, followed by:
- Hong Kong (15th)
- Malaysia (17th)
- Indonesia (28th)
- South Korea (29th)
- China (30th)
- Japan (31st)
Grade ‘B’
Singapore’s CPF got a B grade in the 2019 index.
That means the CPF has “a good reliable structure that offers many benefits”.
Some benefits include:
- Allowing CPF to be used early for housing and education
- Can be used for medical needs
- CPF Life (lifetime payouts assuming there are funds in your account)
However, there are still some areas for improvements, the index stresses, which will bring the system to ‘A’.
Now, I know what you’re thinking, ooh, improvements.
Based on the sentiments on the grounds right now, if you’re part of the majority, chances are you wouldn’t be keen on the improvements suggested.
Three Specific Areas Of Improvements
The first is to set up tax-approved group corporate and private retirement plans.
The second is to allow non-residents, which makes up a “significant” portion of the workforce here in Singapore, to put their money in the CPF scheme.
The third is to push back the age where people can withdraw from their CPF accounts.
Like I said, not a popular opinion for the last one.
The reason is, experts pointed out, that people are now living longer lives.
This means funds for retirement should be held longer to get a bit more interest before being released into the retiree’s hands.
CPF Interest Rates Are Actually Good
So, why open up the CPF to foreigners? The answer is, because, the interest rate of up to 6 per cent is good.
That’s also the main reason why private plans with CPF-like benefits still hasn’t taken off in Singapore.
Because in order to hit the interest rate, the Singapore government has to “heavily subsidise” the scheme.
Withdrawing All Your Money Isn’t ‘Prudent’
Professor Joseph Cherian, practice professor of finance at the National University of Singapore Business School pointed out that Singaporeans are unhappy because they feel that the “goalposts have changed on them many times”.
That’s basically chim professor-speak for the terms & conditions are changing too much.
For example, initially, people were able to draw their CPF at a younger age, but it’s now been pushed back.
Also, they will have to leave a minimum amount inside instead of being able to draw it out.
Many complained that they have “low retirement savings”, he said.
It doesn’t help that Singaporeans are allowed to dig into their retirement savings for housing or education in the early years.
He pointed out that legitimate retirement experts know it’s not advisable to draw out all of your funds by age 55.
Instead, the goal should be to convert your accumulated savings into a lifelong payout that’s enough to support your retirement needs and experts.
Anything above that? You can keep it.