Changes to the CPF - CPF Focus Group Discussion

Few months ago during the national day rally speech by the Prime Minister, it was announced that there may be possible changes to the CPF scheme to allow for more flexibility. A CPF advisory panel was appointed by the Ministry of Manpower in September 2014 to study possible enhancements to some key aspects of the CPF system, to make it more flexible to meet the needs of more Singaporeans and provide additional options in retirement.

I was at the first CPF focus group discussion last Saturday. I got to meet and interact with a few other people and know what were the concerns they had with regards to the CPF system. CPF was not a topic of interest to me until somewhere this year when I started to hear a lot of negative things about it. I had no idea what is the Minimum Sum or what it means. What I only know was that a portion of my salary is deducted every month into the CPF.

Because of the negativity spreading around, I decided to look deeper into what was going on. Writing a financial blog at that time also spur me to produce an article on the CPF system which I wrote here: All about CPF minimum sum and CPF life. My conclusion is, CPF is a social safety net that is for our basic retirement needs. Without it, our society may be in chaos with people having no money for even the basic necessities such as food during retirement.

But, as with every system, there will always be more improvements to be made. Many feedbacks were given and I personally heard from readers who emailed me as well as friends, family and colleagues who discussed about the CPF. As a young person living in Singapore, I see some of my older colleagues regret that they did not plan for retirement earlier in their lives. They had to continue working even when they don't like it. They do not have a choice to do what they like in life rather than just working in something they don't like.

During the focus group discussion, we formed into groups of 6. My group had only 5 person with 2 of the advisory panel members sitting in to listen. We could interact and discuss relatively well with the small group.

The 3 questions that we discussed were:

1. “How much of your retirement expenses should be covered by payouts from your CPF savings? And how much will you need to cover your basic expenses?”
2. “How much should be allowed to be withdrawn at a lump sum at 65, bearing in mind that withdrawing this amount will lead to lower CPF payouts?”
3. “If there was a CPF LIFE plan that had lower payouts at the start, but increased every year to help with increases in the cost of living, would you opt for it?”

I shall not elaborate further on what the general answers were during the discussion as you can probably read from news report by the media. They did quite a good job capturing what was being discussed during the focus group discussion.

For myself, here are my personal views to the 3 questions:

1. “How much of your retirement expenses should be covered by payouts from your CPF savings? And how much will you need to cover your basic expenses?”

I would like CPF to cover all of my basic necessities such as food, utilities bills, transport etc. In today's dollar value, a figure of $1000/mth would be quite comfortable. This is just for basic expenses


2. “How much should be allowed to be withdrawn at a lump sum at 65, bearing in mind that withdrawing this amount will lead to lower CPF payouts?”

Withdrawing a lump sum at age 65 is not needed if we have adequate money for retirement. I would choose not to withdraw any lump sum unless I really have no savings left. The money in the CPF still earns a 4% risk free interest in the retirement account. Moreover, having $155,000 inside the CPF at age 55 would give us an estimated $1200/mth for the rest of our lives starting from age 65. At 4% interest rates, the $155,000 in your RA account would grow to an estimate of $229,437 when you reach age 65 (assuming there are no further contributions). If we calculate, this would mean a 6.27% annual draw down rate (($14,400 divided by $229,437)*100%). This is not a bad draw down rate at all considering you get payouts for the rest of your life under the CPF life scheme.


3. “If there was a CPF LIFE plan that had lower payouts at the start, but increased every year to help with increases in the cost of living, would you opt for it?”

This question is tricky. I think starting to draw down at age 65 is already late and if we still get lower payouts at the start, then the amount becomes very little. With a fixed payout, there would be a worry of not having enough in later parts of our lives but I guess who still cares about increase cost of living when they are in their 70s?


I don't really like the idea of only drawing down our CPF at age 65. Since there're considerations to make the CPF more flexible, perhaps there could be an option to draw down earlier but of course with lesser payouts. An example would be to draw down maybe $900-$1000/mth at age 60 instead of $1200/mth at age 65. This is just my suggestion.

I did ask around and I always hear that draw down age at 65 is too late. Perhaps age 60 would be a good age to starting drawing down their CPF. A concern was that those who are above 60 risk losing their jobs more than anyone else.

There will be more focus group discussions organised for the next few months. If you are interested to participate for the subsequent focus group discussions, please refer to this website for more information: www.cpfpanel.sg. You can sign up for the discussions through the website directly. Information on the next available sessions are also listed on the website itself.

You can also send in your views and feedback on the CPF by emailing to cpf_panel@mom.gov.sg

I did talk to some of the advisory panel members and they were sincere in listening to feedbacks so they can make better informed decisions. We can all do our small little part to give our ideas and suggestions.

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