…is that it was a knee-jerk reaction by the PAP, a manifestly inadequate attempt to correct a real and massive problem.
And what problem is that? Why, the problem of cannot retire, of course!
Consider this: Minister Tan says that the Minimum Sum of $155K is only enough to fund CPF Life’s payout of $1,200 monthly for about 10 years. He says $1,200 is practically the minimum one can retire on in Singapore, and that’s why the Minimum Sum (first implemented in 1987 at $30k) was raised to $120K (in 2003 dollars, now $155K in 2014 dollars) in 2013.
But the real problem with the Minimum Sum, especially the $120,000 in 2003 dollars, is that it ignores the real problem. That Singapore is way too expensive and CPF has lost its mission.
Many years ago, the PAP allowed CPF to be used for housing, then investment, then children’s education.
It seemed a good idea at the time, and it was very popular. To some, it allowed them to buy multiple properties without paying ‘cash’. To others, the low-income earners, it allowed them to buy their HDB flats and still have cash left over for renovations.
When property prices rose dramatically due to the release of CPF liquidity, PAP ministers even called it ‘asset enhancement’. PAP ministers even boasted that HDB flats were affordable because even young couples could own flats on a 30-year loan fully paid for by CPF.
No one seemed to realise then that the fact that people couldn’t afford to buy flats without draining on their retirement savings (aka CPF) signaled that something was terribly wrong with property prices in Singapore. No one seemed to realize that Singaporeans were draining their life savings away.
When they did, instead of reversing their policy, PAP decided to up the Minimum Sum to $120K (in 2003 dollars).
See the contradiction? You want people to save for retirement but you allow them to use their CPF money to buy property. We call this 自出矛盾。
The real problem is that Singapore is too darn expensive. Even the Economist can see that. The only people who can’t see that are the PAP.
Raising the Minimum Sum cannot solve this problem, especially if half the CPF members can’t meet it anyway. It’s a joke.
Locking people’s CPF savings away for 10 more years cannot solve this problem either. You force people to postpone retirement, but honestly, do you think that people can’t do their sums? Do you think that people can’t see that their meagre CPF savings won’t last them more than 3-5 years if they stopped working? Do you think aunties and uncles work at McDonald’s because you don’t allow them to withdraw all their CPF at 55? Or are they still working because they realize CPF no enough, even if you gave it to them at 55?
What worries me is that this Govt does not know how to solve the real problem of the world’s most expensive city, and the only thing they do is keep raising the Minimum Sum as if that will make our retirement happier. History has shown that one cannot solve a cost problem by simply getting people to save more.
The real problem with the Minimum Sum is not that you cannot withdraw it at 55, or that the Govt keeps raising it, or that it’s being used to cover Temasek losses (as some conspiracy theorists allege).
The real problem is that even if you could withdraw it, it’s no longer enough for your retirement. And the big problem behind that is that this Govt has run out of ideas to make it possible for the average person to retire comfortably in Singapore, other than by raising the Minimum Sum.
PAP are like a bunch of animals in denial, who refuse to believe that Singapore is the most expensive city in the world, claim HDB flats are affordable and reading their CPF statements make them happy.
That is the real problem that the Minimum Sum represents.