Debated in Parliament on 7 May 2024.
Mr Neil Parekh Nimil Rajnikant asked the Minister for Manpower (a) what are common misconceptions that still prevail about the closure of the CPF Special Account for members aged 55 years and above from early 2025; (b) what steps will be taken to clear these doubts; and (c) what role can the trade associations, chambers of commerce and tripartite partners play to address the concerns of the workforce and employers on this matter.
Three common misconceptions around the closure of the Special Account (SA) are: whether this move is meant to save on interest payments; whether interest accrues to Central Provident Fund (CPF) LIFE members who choose to transfer their monies from the SA to the Retirement Account (RA) after the closure of the SA; and whether the Government is trying to lock up member's savings. The Ministry of Manpower (MOM) and the CPF Board have extensively addressed these common misconceptions during MOM’s Committee of Supply debate and via public communications channels earlier this year, as well as through engagements with partner organisations. Nonetheless, the following key clarifications from our earlier explanations are worth reiterating:
First, the SA closure aligns with the principle that only long-term savings should earn higher long-term interest rate. In fact, more than 99% of CPF members aged 55 and above today can choose to fully transfer all their SA savings to their RA when the Enhanced Retirement Sum is raised to four times the Basic Retirement Sum from 2025, to continue earning the higher long-term interest rate and receive higher retirement payouts.
Second, interest continues to accrue on the CPF LIFE premium and is factored into members' CPF LIFE monthly payouts for life. Upon a member's passing, any unused premium together with any remaining CPF savings, is refunded to the member's beneficiaries.
Third, SA savings which are withdrawable will be transferred to their Ordinary Account (OA) and remain withdrawable. Meanwhile, SA savings that are transferred to RA will be used to increase their monthly retirement payouts, which members can start drawing down from age 65. For those who have yet to do so by age 70, the payouts will be automatically paid to them. This is in line with CPF's core objective of providing them with lifelong retirement income.
Trade associations, chambers of commerce and tripartite stakeholders can be strong partners and advocates in supporting workers to plan for their retirement and can direct their members to resources available online1 to address these misconceptions. They can also work with employers to leverage available schemes to support senior workers who have less retirement savings. For example, companies can choose to leverage on the Matched Retirement Savings Scheme, where the Government provides a dollar-for-dollar matching grant for cash top-ups (including those from employers) made to the RA of eligible members.
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