This election season is going to be a unique and not to mention a strange one. It’s going to be one that occurs amid a year of national celebration at getting to the magic 50 as well as a year of sorrow at the loss of one of our most iconic citizens in the form of the late great Lee Kuan Yew whose legacy will no doubt be contested for years to come. There are a number of issues that are most likely going to dominate headlines going into this election season. Namely they are the (1) CPF, (2) income inequality, (3)healthcare, (4) childcare and (5)immigration. Today I’m just going to dive into a quick summary of issue number 1, CPF.
On CPF: The most likely position to be taken by the more extreme opposition parties would be for the government to allow (or return to the original policy) of letting people withdraw their retirement savings at the age of 50. PAP will likely state the position that they are doing this to help the people prepare for a longer retirement and that by keeping the money in CPF the burden then falls on the government to ensure that there is a steady income for folks as they get older.
My Position: I don’t think the government should have unilaterally changed their policy and then expect people to be perfectly fine with it. They should have given people the choice of taking the money or choosing an annuity payment scheme while advising those that did take out the lump sum that they were essentially cutting themselves off from collective risk taking. Admittedly, it is likely that a lot of people would have made bad choices and taken the money rather than the guaranteed income but at the end of the day the choice should ultimately have been theirs. The corrective action to that was what the government implemented recently which allows people to still take out a portion of the money though still not a everything , while still giving them a guaranteed income.
Where the REAL debate should be: The real debate should centre on retirement adequacy. Are people adequately preparing for their own retirement and whether the government should be more involved in the process to reduce the probability of large amounts of old, asset rich and cash poor people. Existing policies that have sought to alleviate these issues have not been widely accepted or at least used by the targeted population.
Should there be more set aside by the government in the interest rates that govern the CPF model? Yes.
Should there be more done to make sure that nest eggs are inflation protected? Yes.
Should there be a deeper discussion on the cost of providing everybody with a decent retirement, and the cost of providing even homemakers with a decent income in the event that they end up alone. There should be a discussion as to how much of our future budgets should be set aside to cater to these additional cost as we face down the barrel of an aging society with little end in sight.
It would be nice if the discussions moved in that direction. But as of now, it’s just a giant pissing contest. There is even more to be discussed on the use of CPF in Healthcare and Housing, but that might just muddy the already muddy waters, and since it has been largely ignored by all parties I’ve chosen not to dive into it.
CPF – For an FAQ on all aspects of CPF.