Perception and Reality – Understanding CPF

Each time when I was asked about matters concerning CPF, I could only remember few details and at times only vaguely. I had to always go to CPF web-pages to source for answers. Questions such as “How is the Retirement Account set-up?”; “When is the drawdown age?”; “How much money can one withdraw from CPF after 55 years old?”; etc.

Let me say that even with my educational level and a finance person, I cannot keep up with the changes in CPF over the years. It is difficult for some CPF members to understand why there is a need to increase the Minimum Sum amount each year to keep up with inflation. They cannot understand why CPF money cannot be withdrawn freely especially when they need money desperately.

With limited understanding and when given inaccurate information by others, people then get worked up over how the government is managing the CPF money. There was once a time, when members can withdraw all CPF money at age 55 years old. Then over the years changes were made to CPF schemes: the drawdown age then came about. It is now 65 years old for those born in 1954 or later, when you can receive monthly payout from CPF Life. This can really be complicated. Some people felt that this is shifting “goal post” when come to finally withdrawing CPF money. The fear is whether there would be further overhaul to CPF schemes down the road (CPF Life notwithstanding).

The latest fora and discussions of CPF schemes and returns on CPF funds proved the point that CPF is complicated and emotive.

These are some of my suggestions to address concerns with CPF.

1. Adopt a moratorium of further tweaking of CPF at some point and allow existing schemes to settle over a period of time. If August this year is the time for major shifts in CPF Schemes, bear this idea of moratorium in mind. Let members have certainty of schemes.

2. Create simple guides to CPF in four languages, touching on basic principles of CPF; explaining how to use CPF monies; explaining what happens when one reaches 55 years old; how CPF Life works; and addressing various concerns on CPF by the public such as the need for factoring inflation to increase Minimum Sum. Keep this guide simple with graphical representations for some difficult concepts. This guide beats searching information on the CPF web-pages. One household needs a copy and not every member with CPF money (to be eco-friendly). If there are changes to CPF (when there is no moratorium as suggested), create another new guide to replace the earlier one. Hopefully, government and civil servants can think through deeply before making changes to CPF in the future. Each time when there are changes, people are unhappy.

3. Even with this CPF Guide, some people need explanations from CPF Board to clarify their understandings. Some face-to-face explanations become necessary. Consider how best this can be addressed. There is no lack of ideas for this to be carried out. It all depends on time, effort and at what costs.

One may perceive that public can understand the need for retirement planning through CPF, in reality people may not have a full grasp of the many changes to CPF. One may perceive that the government is doing all it can to help people live out their retirement years, in reality people may not appreciate the changes in the CPF to help in retirement. This perception and reality must be bridged and narrowed such that CPF no longer become an emotive issue to tackle with.

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