Opinion

What Lim Swee Say Was Really Trying To Say Regarding CPF

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Mark Cheng

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It’s tough to be a politician nowadays. Say something well meaning and it gets torn apart in seconds. On the bright side, it does lend itself to some shining examples of creativity, like how 55 years old is the new 21 (ok couldn’t help myself there). Well, Lim Swee Say’s latest statement on the use of CPF has drawn its share of detractors, but is it really all that bad? We take a look here:

Whilst speaking to reporters on the sidelines of the closing of the Singapore Model Parliament on 22 June, Mr Lim, who is also the Labour Chief, made the point that Singaporeans are living longer, and should consider refraining from making  cash withdrawals from their Central Provident Fund (CPF) when they turn 55 in order to better prepare for their retirement.

Sounds all good and logical? What sparked a little controversy were his later comments to ChannelNewsAsia (which has since been corrected) calling on Singaporeans to prepare for retirement by “using less CPF money when young”, and then saying that by “young”, he meant people who were 55 years old.

Yes, we are equally confused. But let’s stop and think about a couple of his major points regarding CPF first before jumping the gun.

 

1. CPF is Your Money. No One Can Take That Away From You

Yeah, ok fair point. But at the same time, I can’t take my own money away from myself (if that even makes any sense). Look Mr Lim, we all know that CPF belongs to us. We’ve been saying that for years.

The real issue here is getting that money, which is one of the 3 major complaints Singaporeans have with CPF.

What he was probably trying to say:

When it comes to having a pool of funds for retirement, you won’t have to worry that the money is going to magically vanish because it inherently belongs to you.

Once again, that’s not the point bro.

 

2. Your CPF Money is 100% Safe and Earns Risk Free Interest

This is an issue that has been swirling around for awhile now (remember a certain Roy Ngerng, anybody?). We highlighted our views in a previous article addressing some of Roy’s points on the CPF interest rate.

One of the things that people often forget when complaining about the pitiful interest rate, that doesn’t even rise above inflation, is that it’s not as if you can’t do anything at all with your CPF funds. The CPF Investment Scheme exists for you to put your own money to work, and is a good way to diversify your portfolio without affecting your current available cash.

What he was probably trying to say:

Your CPF money is a reliable source (we’re not saying it should be the only one) of money when it comes to retirement.

 

3. Your CPF Savings Are Mainly For Your Retirement

In a transcript of his interview, Mr Lim said:

“Besides housing, healthcare and education for your children, a very important part of CPF is to cater for retirement. So, for every dollar, if you can defer the use of the dollar, it is better to defer the use of the dollar when you are still young.”

We completely agree with this, and where possible, your CPF funds should be touched as little as possible before you retire. The only weird bit was when he went on to clarify that by “young”, he meant people who are 55 years old.

Er, last I checked, “young” people are the sort who can go to Zouk every week and then wake up the next day at 9am. Ok maybe not, but you get my point. I don’t see anything wrong with telling the real young people (let’s not get into a debate about this) that as far as possible, financial planning shouldn’t encompass using your CPF as one main money channel to fund your housing, education or healthcare.

This of course places a huge importance on early planning and financial education such that people start growing their money from an early age, instead of assuming they’ll just cover their expenses with CPF.

What he was probably trying to say:

Stop spending all your money now, leaving yourself with next to nothing left in your later years.

 

Final Note

The main gut feel we had when reading his interview with CNA was that this was a rather simplistic approach with regards to CPF. Well meaning at its core, but missing a lot of external factors that do contribute to this ongoing debate about CPF.

Want me to work longer? Sure. But are my wages going to increase enough to combat inflation given that CPF isn’t?

Want me to spend less CPF early in life? Sure. But are housing prices going to stabilise to a  point where I’m not going to cause a huge dent in my CPF account?

Also, if you are relying solely on CPF to tide you through your retirement, well… GOOD LUCK. Want to know how else you can prepare for retirement without relying on this “100% Safe, Risk Free (but very low interest rate)” system, you should definitely follow us on Facebook.

What are your thoughts on what Lim Swee Say said? Valid points or complete hot air? Share your thoughts here.

 

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Mark Cheng

I rant and rave a lot, but when I'm not busy doing that, I'm managing the content for MoneySmart. I love Singapore, but I also believe in helping it to improve bit by bit, and that's where MoneySmart comes in. Have some thoughts? Drop me an email at mark@moneysmart.sg.