SINGAPORE: While the Central Provident Fund (CPF) Board has "stepped up" its outreach efforts, there is "much room for improvement" in how it relays information on key issues such as starting payouts for those who are retiring, said Manpower Minister Josephine Teo in Parliament on Monday (Feb 18).
Mrs Teo was responding to Members of Parliament (MPs) Foo Mee Har, Cheryl Chan and Liang Eng Hwa on whether CPF information can be better related to the public.
"The answer is yes.
"For example, we will review the letters sent to (CPF) members who are approaching their Payout Eligibility Age (PEA), so as to avoid misunderstandings which confused members unnecessarily," Mrs Teo said.
This comes after social media posts sparked discussions on whether the payout age for the Retirement Sum Scheme (RSS) had "quietly shifted" from 65 years old to 70 years old. The RSS is the main retirement payout scheme for members born before 1958 and are now aged 61 and above.
"It is still 65 today. We have not shifted the PEA from 65 to 70, as was alleged by a spurious online post. Members can start their retirement payouts any time from 65," Mrs Teo said.
Mrs Teo added that the exact payout and letters sent to members may vary, depending on each member's particular circumstances, such as whether they are on the RSS or the later CPF LIFE Scheme.
"Hence CPF members should not rely on letters sent to others. They should instead contact CPF Board if they are in doubt about any letter sent to them," she added.
READ: Two MPs table parliamentary questions on mechanism for CPF payouts; others see no major issues
Other than the letters, Mrs Teo explained that the CPF Board has started, from this year, face-to-face meetings for all members reaching the PEA of 65 years old. These meetings are at any of the five CPF service centres across Singapore.
During the meetings, a CPF officer is able to provide personalised guidance as part of their CPF Retirement Planning Service.
In addition, the Government will work with other agencies, such as the Social Service Offices (SSOs), to reach out to CPF members, Mrs Teo said.
"For example, where appropriate, staff at the SSOs will ask members who approach the SSOs for financial help whether they have activated their CPF payouts, and assist them to do so if they wish. We also will collaborate with the Silver Generation Office to communicate this issue to elderly members," Mrs Teo said.
NO CHANGE TO PAYOUT STARTING MECHANISM FOR RSS
On questions whether the payout starting mechanism has changed, Mrs Teo reiterated that it has always been this way and members will have to instruct CPF Board on when to start their retirement payouts after reaching their PEA.
"Members are in the best position to decide (when to start their retirement payouts) based on their individual circumstances. It is also the same approach as in many other countries," she said.
"There is no advantage for CPF Board or Government to want members to defer their payouts beyond 65. Those who defer their payouts, in fact, enjoy the higher interest paid on their CPF monies," she added.
About six months before turning 65 years old, members who are under the Retirement Sum Scheme (RSS) will receive a letter informing them that they can start their payouts anytime from 65 years old, she explained.
Accompanying the letter is a form that the member can use to fill in information about their bank account details and send it back to the CPF to start their payouts, she added.
"Members who do not instruct CPF Board to start their payouts are reminded through their Yearly Statement of Account", Mrs Teo said.
For those who do not initiate their payouts, it will start automatically at age 70. This was part of the changes to the CPF Act in 2016 and came into effect in 2018.
"In the past, some RSS members had their savings intact in their CPF accounts until they passed away. They never touched it at all. This is unsatisfactory. We therefore introduced a Latest Payout Start Age of 70 for members turning 70 from 2018," Mrs Teo said.
"Even if such members have not applied to start payouts, CPF Board will start the payouts for them. But I must again emphasise if a member wants to start his payout before 70, he can do so any time from his PEA. He does not need to wait till 70.
"In other words, the Latest Payout Start Age is not the same thing as the PEA. It is a way to ensure members get to enjoy the benefit of their CPF savings by 70 at the latest," Mrs Teo said.
SLIGHTLY DIFFERENT FOR CPF LIFE MEMBERS
However, those who are on the CPF LIFE scheme, which replaces the RSS, may differ slightly in their payout starting mechanism.
Those who joined CPF LIFE before July 2015 will receive their payouts automatically at 65 unless they instruct CPF to delay the payouts.
This is because in the past, there was no option to defer payouts and the default option is to start payouts at their 65, Mrs Teo explained.
For this group of CPF LIFE members, about 35,000 of such members had already started to receive their payouts upon reaching 65 by end of 2018.
Members who join CPF LIFE after July 2015 will be like members on the RSS. They can start their payouts any time between 65 and 70 by instructing CPF Board, Mrs Teo said.
WHY NOT START PAYOUTS AUTOMATICALLY AT 65?
MPs Jessica Tan, Liang Eng Hwa, Chong Kee Hiong, Png Eng Huat and Lim Biow Chuan asked if the Government would consider starting retirement payouts automatically at 65.
"If the CPF Board can (make the payout automatic) at 70, why not make the payout automatic at the age of 65? Just credit their account automatically unless the member opts and chooses to fill in an application to say they don't want to withdraw. I think the point is we need to assure every member that CPF Board will honour any request to withdraw their CPF savings when it's due for payment. Really, this is about preserving the good faith and trust in the CPF Board," Mr Lim said.
In her response, Mrs Teo said that she has given "serious thought" to the possibility of shifting the automatic start age to 65 but that there are several concerns to that.
Currently, members receive tangible benefits to start payouts later. Members get to earn risk-free interest of up to 6 per cent a year and enjoy enhanced payouts, she said.
"This 6 per cent includes the extra interest of 1 per cent for the first S$60,000 and additional extra interest of 1 per cent for the first S$30,000. For members on CPF LIFE, for every year deferred, the payouts go up by up to 7 per cent. For five years of deferral, that is up to 35 per cent more," Mrs Teo said.
Members may therefore prefer to start their CPF retirement payouts later. This is especially if they have other savings to draw on or if they are still working, she added.
Nominated MP Walter Theseira asked if MOM has information on how members use their payouts.
Mrs Teo said that there are no "clear indications" on how members use their monthly retirement payouts, but that the withdrawals at age 55 could provide some information.
"Our survey suggests that slightly over half of the members after taking the withdrawals from their CPF accounts at the age of 55 just put it in a bank account earning much poorer interest rates. That's a very useful reminder that people are not always so savvy about what's the best deal they can get on their savings. There is some merit to the current practice of automatically deferring it for them," Mrs Teo added.
In 2017, six in 10 CPF members on the RSS who had reached their PEA that year did not start their payouts. Even by the time RSS members reached the age of 70, about half had not come forward to start their retirement payouts, she said.
This, she said, could be because the members decided to keep their savings in the CPF because they had no need of the payouts or were not aware that they could have started their payouts earlier.
"The right thing to do therefore is to reach out to those members who may not have a good understanding, and give them clear and simple information to help them make their decisions. With the benefit of knowledge, those who wish to can still start their payouts any time after 65," Mrs Teo said.
If CPF Board changes its automatic payout age date to 65, members who want to defer their payouts may, too, forget to come forward to instruct the CPF Board, Mrs Teo added.
"When we weigh these two groups. I think both groups may not be so happy that the CPF Board made an assumption to start the payouts (and) deprive them of the benefits if we were indeed to have such a mechanism approach," she said.
Mrs Teo added that she is reluctant to "make yet another sudden change" because it could risk confusing members even more.
"Every time there is a change, it actually takes a long while for people to get used to it," she said.
"On balance, I suggest that we focus on improving the communication for the policy as it currently stands ... I think if we keep to this consistent line, there is less risk of further confusing," Mrs Teo added.