Sunday, February 03, 2013

Withdrawal of CPF savings at 55

Many people are angry at the Government for holding back their CPF at age 55. They argued, "This is our money. Give it back to us at 55, as you had promised. We know how to handle with our money. It is our business, even if we lose it"

I do not support this argument. At the same time, I do not agree with the way that the Government is handling this matter. There should be a sensible compromise.

Here are my reasons:

1. The government is not holding back all of the CPF. They are only holding back the minimum sum. This is the amount that is deemed necessary to support the cost of living for the next 20 to 25 years.

2. Any CPF savings above the minimum sum is paid out at 55. Many people may not have any savings left to take out, as they had spent too much of their savings on buying or upgrading their HDB flats. But there are others, who have been more prudent, that do have some money to take out at 55.

3.  If all the money is taken out at 55, there is a real risk that many people will lose their savings due to bad investments or were cheated by crooks or "lovers". We cannot ignore this risk or allow these naive people to be exposed to it.

4. I repeat - the Government only keeps back the minimum sum (i.e. any excess can be taken out) and gives an attractive interest rate for this minimum sum in the retirement account or in CPF Life. On balance, I think that this is a wise and fair move.

Having said this, I do not agree with the way that the Government is handling this matter. These are the changes that they should consider:

a) Allow the member to make partial or full withdrawal of the CPF minimum sum under certain specified circumstances, provided that they have received counselling  by a specially trained financial adviser.

b) For example, if there are debts to be paid due to illness, unemployment or other acceptable grounds (including bad mistakes made in the past), or even to take an extended holiday, the requests should be considered.

c) For people who are capable of handling their own investments, and can show evidence to that effect, they can request for full withdrawals.

d) Those who wish to migrate from Singapore should be allowed (and I think that this is already the case).

e) If the minimum sum is insufficient, the member should be allowed to ask for the required monthly withdrawal amount, even if the money runs out earlier than 20 years.

My advice to consumers is to keep as much money in the CPF as is allowed, as it is a good, risk free and hassle free investment.

Be assured that the Government has more than enough money to pay you the monthly installments. Do not believe in the rumors that the Government does not have the money. The Government is, in fact, too rich from the high taxes and levies that they have been collecting!


Sobri said...

May I also suggest that after the minimum sum is exceeded, CPF should allow the member to withdraw the 4 - 5% interest on the excess amount every year. This would give members a good reason to put in more, something like an FD in their SA.

Kooli said...

If a member is 55, he/she can withdraw his/her hard earned money to pay essential service.

Both retiree and their family will be happier.

Pls create happy policy at no cost.

zhummmeng said...

Why people have not enough money to meet their minimum sum let alone to withdraw some money on reaching 55?
1. no planning (no commission no planning)
2. they let insurance conmen invest and 'manage' their CPF.

Xianlong said...

More & more are unable to meet minimum sum due to exorbitant housing sucking away their CPF.

When unable to meet minimum sum which keeps rising, the locked up $$$ is as good as gone...

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