The action, which Deputy Prime Minister and Finance Minister Lawrence Wong announced at Budget 2024, drew solid website responses, with some questioning its schedule.
Some lamented the Retirement Account’s minimal cash and the Common Account’s lower interest rates.
Dr. Tan reiterated on Monday that higher cash savings does not result in high interest rates.
” The main idea behind closing the ( Special Account ) is to “right-site” CPF funds, so that only CPF savings invested in long-term retirement accounts receive a higher long-term interest rate,” he said.
The Manpower Ministry also noted that this issue may increase if the government did n’t act in an earlier press briefing by referring to earning high interest rates on liquid cash as a “free lunch.”
In response to MP Foo Mee Har’s ( PAP- West Coast ) suggestion to allow current members over the age of 55 to preserve their Special Accounts open, Dr. Tan claimed this may unintentionally lead to a generational divide.
He claimed that older Singaporeans may gain while younger generations would suffer.
Those with higher incomes are also the ones who will be affected by the closing of CPF Special Accounts.
Just 8, 400 people, or less than 1 % of all people 55 and older, will be able to move their full benefits to their Retirement Accounts, according to Dr. Tan.
More than 99 percent of people will still be able to receive higher long-term interest charges.
CPF’s OBJECTIVE
According to Dr. Tan, the CPF program was intended to support housing and healthcare wants while also providing income in retirement.
These are the main priorities, but the system’s evolution was necessary because Singaporeans can then afford to set aside more money in their transactions today than they did when the CPF was first instituted.
From 2020 to 2022, Dr. Tan noted that the number of people who freely top up their accounts has more than doubled.
He claimed that many people would prefer to keep more than the Full Retirement Sum. Some “hope for higher investment earnings,” while “hopefully” others will leave a legacy.
” The variety and percentage of CPF people with withdrawable Special Account accounts has also increased and will continue to do so,” he continued.
Dr. Tan also addressed a question from MP Louis Chua ( WP- Sengkang ) regarding why the interest earned on CPF Life is pooled together and not distributed to beneficiaries when a member passes away.
The secretary argued that risk-pooling is important because CPF Life offers members lifelong monthly payments even if their savings are outlived.
People of the Retirement Account must become clear about what they are receiving from their savings. He claimed that CPF Life is an investment vehicle and not a form of healthcare.
Dr. Tan added that the government is n’t locking up members’ discounts because members are required to start drawing down their Pension benefits at the age of 70.
” Some people have written to me asking for a delay in their payout launch date beyond the age of 70. However, it is incomprehensible. By the time that age, we want people to like their hard-earned money.