MPs question adequacy of CPF savings for old age

MEMBERS of Parliament yesterday pressed Manpower Minister Gan Kim Yong in Parliament on the adequacy of the Central Provident Fund (CPF) for old age.

Opposition MP Chiam See Tong (Potong Pasir) asked for a review of the interest rates paid on CPF accounts, and suggested that the rates be pegged to the returns of Singapore's investment company, Temasek Holdings.

But Mr Gan said that a thorough review had been undertaken in 2007, and the findings debated in Parliament.

'We should recognise that Temasek invests in higher-risk assets and the returns are not guaranteed - even the principals are not guaranteed,' reiterated the minister yesterday.
In the recent global economic crisis, Temasek's investments were adversely affected, he pointed out, adding that 'most Singaporeans would not want their hard-earned savings exposed to such volatility and potential losses'.

He also defended the state of the CPF to Madam Ho Geok Choo (West Coast GRC), who was worried that not enough Singaporeans would amass the Minimum Sum set by the Government in their accounts by the time they turn 55.

Mr Gan said that more than 40 per cent of those who turned 55 last year had in their savings the Minimum Sum.

The proportion would be about 60 per cent if those who had their savings invested in housing were included.He added that the CPF changes recently announced in the Budget statement, which will increase employers' CPF contributions by 0.5 percentage point to 16 per cent and move the CPF salary ceiling up from $4,500 to $5,000, would help to boost Singaporeans' CPF accounts.

According to the Ministry of Manpower's calculations, the two changes together would help a 45-year-old earning $5,000 a month to increase his real CPF savings by $22,200 in 10 years.

Source: IM$avvy