Permitting Higher Voluntary Savings Amounts under CPF LIFE

Mr Deputy Speaker, Sir, Singaporeans already have many options to plan for higher retirement payouts. Within the Central Provident Fund (CPF) system, members who wish to have higher CPF LIFE payouts can set aside an Enhanced Retirement Sum, which is three times or triple that of the Basic Retirement Sum. The prevailing Enhanced Retirement Sum is currently set at $279,000. This Enhanced Retirement Sum is revised annually, together with the Basic and Full Retirement Sums.

Members who wish to boost their retirement income further can choose to defer the start of their payouts till age 70. A member who does not start payouts at age 65, but defers to age 70 can increase their retirement income by up to 35%. I believe there was just an article over the weekend in The Straits Times about how this lady who has, I think, something like $1.6 million in her CPF and has opted to defer the payout of her retirement income up to age 70. I think she is 67 or 68. Perhaps Ms Foo Mee Har can take heart in the fact that there are Singaporeans who have accumulated those surpluses.

Apart from the CPF system, Singaporeans can also save more during their working years, by making voluntary contributions to the Supplementary Retirement Scheme (SRS). The savings in the SRS plus any investment gains, can be used to purchase private annuity plans, which can further supplement CPF LIFE payouts.

Thank you, Deputy Speaker. I thank the Minister for his sharing of the range of savings under the CPF. In fact, I am a big fan of the CPF scheme. Actually, my question is very specifically targeted at CPF LIFE.

My supplementary question for the Minister is: as more Singaporeans are realising the attractiveness of this specific scheme, CPF LIFE, which gives you a lifetime income, especially in the current challenging investment environment, and we are seeing more seniors falling victim to investment scams in their pursuit of higher returns on their hard-earned savings in order to sustain their post-pandemic lifestyle. I would like to ask the Minister to clarify the rationale behind capping the voluntary savings under CPF LIFE because, even under the Enhanced Retirement Sum scheme, Singaporeans can only expect a basic level of income – I would say basic, even if it is enhanced – of about over $2,000 at 65 years old for the cohort turning 55 now. And I think the House would agree that, at the current cost of living, $2,000 is quite basic and this is at an enhanced level.

Why not offer Singaporeans the option to save more under CPF LIFE in order to receive up to, say, the current CPF monthly contributions, capped at, say, $6,000 a month or, minimally, at around the prevailing median income of around $4,500 now?

I thank Ms Foo Mee Har for her very solid trust in the CPF system. We are also heartened that more members are topping up their CPF accounts and for their trust in the CPF system as well as the acknowledgement of the benefits that CPF and CPF LIFE can offer.

CPF interest rates are pegged to risk-free market instruments of comparable duration. There is also a minimum interest rate on CPF savings to protect members when market interest rates fall to lower levels, such as in recent years. The Government reviews these rates regularly.

Hence, today, the floor CPF interest rates of 4% per annum on Retirement Account balances are higher than what equivalent risk-free market instruments can provide.

With the extra interest, members aged above 55 can even earn up to 6% interest per annum. CPF members do not bear any investment risks to enjoy these favourable interest rates. It is guaranteed by the Government and any investment risk is absorbed by the Government's balance sheet.

Without a limit that is set as a cap, higher-income members could channel large savings into their Retirement Account and CPF LIFE. They can disproportionately benefit from the favourable interest rates and payouts, compared to other members.

Hence, a limit on how much members can top up to their Retirement Account is necessary and this is the prevailing Enhanced Retirement Sum. But we will continue to revise the Enhanced Retirement Sum annually to ensure it remains relevant to the retirement needs of the majority of members.

Collectively, the CPF Board and the Ministry of Manpower are reviewing over the longer run and we take cognisance of the Member's exhortation and suggestion in terms of finding other types of instruments to allow our CPF members to be able to place their savings with. We are reviewing some of these plans. I believe that, in time to come, we should be able to share when the plan is ready.