Draw-down age for CPF minimum sum to be raised progressively to 65
By Valarie Tan, Channel NewsAsia | Posted: 19 August 2007 2334 hrs

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SINGAPORE : The government is taking more steps to ensure that Singaporeans have enough CPF savings for their old age.

It is raising the draw-down age for the minimum sum from 62 to 65.

This was announced by Prime Minister Lee Hsien Loong in his National Day Rally speech on Sunday.

Currently, Singaporeans who have turned 62 can start withdrawing their CPF minimum sum and enjoy a S$790 monthly payout for the next 20 years.

This will change in five years (in 2012) when the new "Draw-Down Age", or DDA, is progressively raised to 65.

The first to be affected will be those aged 56 or 57 by the end of 2007.

They will have to wait one year longer - till they are 63 - before they can tap into their CPF minimum sum.

Those 54 or 55 this year will have to wait two years longer - till they're 64 while those between 49 and 53 can only withdraw the minimum sum when they hit 65 - the new DDA.

PM Lee said: "I know this is not so popular. But we have no choice. People are living longer, we have to work longer. And we have to start drawing on the reserves later. Therefore we have to start moving now. Not move all the way now. But we have to start moving now. And we will get there in good time."

And the prime minister has promised something extra for older workers who are affected by the change.

These will come in the form of Deferment Bonuses into their CPF retirement accounts.

Details will be announced later.

But just delaying the withdrawal age is not enough to cover older Singaporeans who are living longer than expected.

So the government has decided to make annuities compulsory for Singaporeans aged 50 and below.

CPF members are currently allowed to convert their minimum sums to annuities with an insurance company and then get monthly payouts for the rest of their lives.

But the voluntary scheme has not been popular.

Mr Lee said: "It's partly because Singaporeans don't understand annuities, don't understand why they need them. It's also because frankly speaking, the returns haven't been very attractive. The costs have been high. But despite these limitations, we do need annuities as part of our old age planning."

Details on the CPF changes will be spelt out when Parliament sits next month. - CNA/ch