Friday, August 14, 2015

History of the CPF Minimum Sum Scheme

Minister for Health Howe Yoon Chong chaired a ministerial committee to study into the Problems of the Aged. The committee submitted a report in 1984 recommending that the withdrawal age for CPF savings be raised from 55 to 60 years. This caused an uproar among the public. The proposal was shelved.

A few years later, the Acting Minister for Labor Lee Yock Suan introduced the concept of the Minimum Sum Scheme in Parliament. The amount was initially set at $30,000. It was approved by Parliament and was generally well accepted by the public. Most people reaching age 55 could have some balance that could be withdrawn after setting aside the minimum sum.

As the years go by, the CPF members faced these following daunting issues:

1) The HDB flat prices continue to increase significantly compared to prices in the early 1980s. After paying the high prices, many CPF members have little savings left at 55.

2) The minimum sum was increased every year and has now reached $160,000 in 2015.  This is clearly an excessive sum.

You can read more details of the history of this scheme in this article.

Over the last 30 years, the minimum sum scheme had clearly been badly managed by the government. This has led to a big gap in trust between the people and the government.  How can the government be so much out of touch with the ground?

1 comment:

Anonymous said...

What if the minimum sum is $60k today and people reaching 55 can withdraw ALL in excess of the MS. What do they do with money?
Keep in FD? buy a single premium endowment? invest in stocks? in ILPs? UTs? go for around the world tour? invest in one of the casinos to triple the money? Buy SSB? break it up and buy a regular dream saving endowment?
Mr. AntiCPF has 200K altogether in his OA and SA when he reaches 55. He jumps for joy and celebrates the windfall because he only has to leave $50K in MS and can withdraw 150K. He is cash rich now. However, he still has an outstanding mortgage of $80K for his 5 room flat. He is still working and his monthly house installment is $1300.He has no saving or any investment. He earns $4000 a month.His monthly expenditure is $3500.
What is your advice for him?

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