Friday, April 03, 2009

Relief loan is similar to early withdrawal from CPF


I have proposed that retrenched workers should be allowed to take a relief loan, offered by a Government agency,  at an interest rate of 2.5% per annum. This should also be available to workers who suffered a drop of earnings due to a reduction in working hours.

This relief loan is similar to an unemployment benefit, but has to be repaid in the future. Interest on the loan can be accumulated with the principal. The borrower has the incentive to repay the loan earlier, to avoid incurring interest charges.

My proposal is similar to early withdrawal from the CPF. The loan incurs interest charge of 2.5%, which is similar to the interest earned on CPF savings.  There is no additional cost to the borrower under my proposed relief loan scheme.

My proposal is intended to protect the integrity of the CPF as a saving plan for retirement.  There is a reminder on the borrower to repay the relief loan. However, if the loan is not repaid, it will be repaid from the CPF savings at the time of its withdrawal.

My proposal will also offer relief to the retrenched worker in the case where there is no CPF savings to withdraw from, e.g. where the savings have been fully used to buy a property.

Tan Kin Lian
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2 comments:

  1. Ma ReeApril 03, 2009 12:02 PM

    Generally, I think it is a sound idea. There should be a cap on the loan amount (for example: max 6 months of last drawn salary). Also once the person get a job, CPF should have the power to deduct both the monthly CPF contribution and the loan installments from the salary. my 2 cents.

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  2. DavidApril 03, 2009 12:14 PM

    Why should the gahmen be bothered with such a loan scheme? They will tell you that existing help schemes are already there eg charities and the MP meet-the-people session. If you need help just go see the MP, queue a few hours if required, apply and get some cash or grocery vouchers to last for a few months. If used up see MP again until you can find a job that will provide income.

    In this way people will also be motivated to get any job that will provide income. After all, who wants to queue for hours to see MP and seek cash and food aid repeatedly?

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