If you are reaching the age of 55 or have already passed this
juncture, you may be now wondering where all your hard-earned CPF
money has gone to over the years. Unfortunately, you are not
alone.
Many other Singaporeans are waking up to the fact that
the Central Provident Fund, which they depended on for retirement,
will fail to meet their basic daily living needs in the decades
ahead. If you are beginning to realise being employed
during your retirement is the only way to survive, you are not
alone in this, either. Our government has said so plainly –
Singaporeans cannot afford to retire.
This chilling truth was confirmed by a study (conducted by
Mercer Consulting), which covered 214 cities across five
continents, measuring the comparative cost of over 200 items in
each location, including housing, transport, food, clothing,
household goods and entertainment. It is acknowledged to be the
world’s most comprehensive survey on the cost of living. It
revealed that Singaporeans’ ability to replace their last earned
salary at the point of retirement by accessing their retirement
funds (CPF) is ‘particularly low.’ This highlights what
many Singaporeans have discovered for themselves: our present CPF
Scheme cannot provide a retirement income that can replace what we
were earning while in the workforce.
Cast your mind back, and you will probably be able to pinpoint
the exact time when our CPF Scheme lost its direction. In an
attempt to subdue increasing resentment from voters reacting to the
government’s authoritarian high-handedness and the fact that it
seizes 40% of our incomes, a major change occurred. The government
raised the amount of CPF funds that could be used to purchase first
HDB flats and then private properties from 80% to 100%. This caused
the prices of homes to skyrocket overnight. The situation was made
worse by the government’s conflict of interest as the owner of 80%
of the land (through the SLA), provider of 90% of the housing
(through HDB) and provider of housing finance (CPF). It meant they
had every reason to not to take steps to rein in the growing bubble
in property prices. This was exacerbated by their decision to
expand our population at an exponential rate starting in the 1990s
which put further pressure on the already limited supply. The rise
in HDB prices the resale index is up 342% meant that Singaporeans
committ themselves to decades of using their CPF contributions to
pay for housing which started out as budget homes meant to house a
young population in a developing young country. Furthermore most of
household wealth ended up tied up in property. This resulted in a
situation where the government has to keep prices rising if they
are to avoid the kind of housing bust we have seen in the US, but
on an altogether bigger scale. This is undoubtedly one of the
reasons why the government continues to encourage massive
immigration to Singapore because the implications of an end to
their deliberately engineered boom are too horrendous to
contemplate.
In addition the government CPF usage to allow certain shares and
equities to be bought and sold, medical bills to be paid for, and
even children’s tertiary education to be financed, all with CPF
money. No long-term planning was done for the health problems of an
aging population with the result that we face a situation where
ordinary Singaporeans will quickly exhaust their Medisave and
Medishield accounts to pay for medical treatment and may have to go
without the treatment they need, receive substandard treatmentor
face potential bankruptcy and the loss of their housing.
Underlying all this was a gradual erosion of the bond between
the government and people which had been created by the government
thanks to its “High Pay For Government Ministers and Top Civil
Servants” talent pricing scheme, and using the liberalisation of
our CPF funds as a cure-all to placate Singaporeans’ anger and
sense of outrage. In simple terms, the CPF was compromised by a
need to stay in power at any cost.
Today, Singaporeans are paying the price for that decision – two
incomes tethered to thirty-year mortgages, skyrocketing HDB prices
which are out of reach for most and retirement becoming a luxury
for the minority of generously paid Singaporeans.
What has made life worse is that amidst all that, our incomes
have mostly stagnated or have even been reduced, resulting in our
contributions to CPF lagging far behind the rising cost of living
and inflation. The end result? Out of the 700,000 Singaporeans who
were aged between 55 and 80 years old when invited to join the CPF
Life Scheme, only 30,000 signed up. I believe this is because
Singaporeans have lost faith in the government, its policies and
its direction. What’s more – a large number
of Singaporeans will be retiring from work with
insufficient savings in our CPF. A whopping 30% of us will not
have the Minimum Sum of $40,000 in our CPF when we reach the age of
55, and thus, will be automatically excluded from the CPF Life
scheme.
In response, our government tries to assure us that our assets
have appreciated in value, we are richer than we were before and we
are even better off than our neighbours. I do not believe this to
be true. I see it as a case of asset inflation, where we pay a lot
more for the biggest ticket item, leaving nothing for having or
even bringing up children, starting a business or making retirement
a possibility.
The Reform Party is convinced that nothing short of an
overhaul of the CPF Scheme and a return to providing low cost
housing to the average Singaporean by the HDB is going to solve the
problems created by the indiscretionary depletion of our CPF funds.
We propose keeping the growth in the prices of HDB flats pegged to
the growth in median incomes by increasing supply, so that if we
earn more, we can have better homes, and not vice versa. In the
longer term we want to give the private sector a much bigger role
in providing housing for the majority of the population so as to
improve affordability and quality through competition. We propose
that part of CPF be augmented converted into a Basic Pension
Scheme, in which every Singaporean who has worked in Singapore and
paid CPF for twenty years or more is entitled to a pay-out. Part of
the funding for this could come from our plan to give our citizens
a stake in Temasek and GIC. We also want a basic universal health
insurance scheme to be funded out of CPF to replace the current
inadequate Medisave and Medishield schemes. After providing for
these two requirements the Reform Party believes that savings
decisions should be an individual decision and not determined by
the government.
The Reform Party also intends to restore your ability to
withdraw the employee contributions portion of your CPF savings at
55 if you so wish while still providing incentives to persuade you
to buy an annuity.
However when making any decision we have to be sensitive
to the decisions of the incumbents which have created a situation
where most of our household wealth is tied up in property.
At the moment most of people’s CPF contributions is used to
service their housing loans. Any attempt to divert part of CPF into
paying for basic pensions may result in people being unable to
service their loans and a precipitate fall in property prices. This
could create a serious recession along the lines of what has
occurred in the US. However the Reform Party believes that such a
scenario grows more likely with every year that this government
continues to stoke an unsustainable property boom. Our steps to
reduce the rate of increase of prices and peg it back to the same
as or less than the growth in median incomes are designed to
achieve a reallocation of resources without causing any adverse
consequences for the domestic.
If you have been feeling that your worst fears are coming true
lately, you are not alone. We at The Reform Party feel the same
way. So do many Singaporeans. The time to rescue ourselves from a
bleak future is now. Vote us into Parliament, so that we can
achieve a better Singapore for you confidently. Support us and
ensure that we Singaporeans are heard, loud and clear. We want our
CPF back to what it was meant to be: saving, day by day, so that
when the time comes, we can stop working, look back and not have to
feel as if our life’s work has all been for nothing. The time has
come for us to stand up for a better Singapore.
.
By Alec Tok
* The writer is a member of the Reform Party who will be
standing for the upcoming Singapore general election
Taken from the brave, Temasek Review"
http://www.temasekreview.com/2010/11/26/whither-our-cpf/
