CPF Special Account closure; need for better SkillsFuture, retrenchment support among concerns raised at Budget debate
Members of Parliament welcomed the SkillsFuture credit top-up but called for the scheme to be expanded in scope, on the first day of the Budget debate.
File photo of office workers in Singapore's central business district. (File photo: iStock)
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SINGAPORE: Members of Parliament (MPs) on Monday (Feb 26) raised concerns about Budget 2024 measures that would affect seniors and retirement plans, such as the imminent closure of the Central Provident Fund (CPF) Special Account.
They also echoed support for initiatives to improve the employability of Singaporeans across professions, even as they called for greater help targeting retrenched and lower-wage workers.
The Budget debate kicked off on Monday and is expected to last until Wednesday. In all, 56 MPs are expected to speak before Deputy Prime Minister Lawrence Wong wraps up the debate.
Mr Wong, who is also Finance Minister, delivered his Budget speech on Feb 16. He announced measures that reflected findings from the Forward SG exercise, including details on better support for Institute of Technical Education graduates and schemes to uplift lower-income families, prompting analysts to call it a “pro-social” Budget.
A total of 23 MPs, two Non-Constituency MPs and four Nominated MPs spoke on Monday in a debate that lasted around eight hours.
CPF, RETIREMENT CONCERNS
Among the concerns raised by MPs regarding retirement, several highlighted the move to close the CPF Special Account for those aged 55 and above from 2025 onwards.
CPF members who have excess funds in their Special Account will be able to transfer it to the Retirement Account until they meet the revised Enhanced Retirement Sum, earning them the same interest rate as the Special Account. Any remaining savings will be transferred to their Ordinary Account.
The announcement drew strong reactions online. Some people took issue with the lower interest rates of the Ordinary Account - typically used for housing and education - and restrictions on withdrawing savings.
MP Saktiandi Supaat (PAP-Bishan-Toa Payoh) asked whether the government would be willing to reconsider relooking the Ordinary Account interest rate mechanism.
He proposed, for instance, taking into consideration the promotional interest rates offered by the banks instead of only taking the CPF Board’s rates.
In Parliament on Monday (Feb 26), MP Louis Chua gave suggestions on possible revenue measures through wealth taxes and gambling duties, the latter of which could also serve as a deterrent function. He also highlighted the need for structural improvements to personal income taxes and corporate income taxes to better support individuals and businesses while keeping the tax system progressive and up to date. Mr Chua also expressed hope that the Government will consider providing greater tax relief to small- and medium-sized enterprises. Turning to retirement adequacy, he raised concerns over the closure of the CPF Special Account and its impact on seniors. He also wanted to know when the Government will be ready to roll out the Lifetime Retirement Investment Scheme.
MP Louis Chua (WP-Sengkang) had no qualms about the closing of the Special Account. But he pointed out that even though the stated interest rate of the Special Account and Retirement Account was identical, “the actual yield that is earned by the two accounts could not be more different”.
The funds in the Retirement Account would be used to pay the premiums for the CPF Life plan, which gives members lifelong monthly payouts. But any interest earned once payouts begin will be pooled together under CPF Life for all members rather than accrue to the individual member, he noted.
The Government can do more to make Singapore an affordable place to live in, said MP Yip Hon Weng in Parliament on Monday (Feb 26). He spoke on four areas. First, transport. Mr Yip said skyrocketing Certificate of Entitlement (COE) prices threaten to push car ownership out of reach for the average Singaporean. This is not a luxury car problem, but a family car problem, he said. He urged the Government to seriously consider a separate COE category for private-hire vehicles so that they are not in the same pool as individual buyers. Second, housing. Mr Yip said a fairer property tax system is needed, taking into account residents’ unique circumstances, especially for owner-occupied homes. He called for adjustments to Annual Value brackets and property rebates to be implemented faster, and asked if banks and financial institutions can be encouraged to offer reverse mortgages. Third, CPF. Mr Yip said there has to be clearer communication of changes, along with targeted support for those who are affected. The imminent closure of the Special Account for those aged 55 and above has caused a lot of concern, he said, with constituents telling him that it will disrupt years of financial planning with limited time to adjust. Lastly, social support. Mr Yip said refining means testing for essential schemes such as Silver Support and medical subsidies - such as by removing housing type as a criterion - is necessary for a more holistic and accurate view of individual and family incomes.
Money Talks: How will the closure of the CPF Special Account affect you?
On retirement, MPs also brought up the need to support retirees with their property tax.
MP Yip Hon Weng (PAP-Yio Chu Kang) called for a “fairer” property tax system to protect seniors, especially those living in owner-occupied homes. Many such retirees would have acquired their private properties decades ago and a property tax increase can “devastate” those who lack the income to absorb the cost.
Similarly, MP Lim Biow Chuan (PAP-Mountbatten) asked for a review of the owner-occupier property tax hike for retirees whose only source of income is from their savings or pension. He suggested a special property tax relief for this group as the 24-month instalment or tax measures such as the income tax rebate did not benefit them.
BEYOND SKILLSFUTURE SUPPORT
While many welcomed the enhanced SkillsFuture scheme that will see Singaporeans aged 40 and above get a top-up of S$4,000 in credits, some suggested that scope of the scheme be expanded.
Currently, the S$4,000 top-up can only be used for selected training programmes. These include part-time and full-time diploma, post-diploma and undergraduate programmes, and courses for the Progressive Wage Model sectors.
Leader of the Opposition Pritam Singh kicked off the debate on Monday, repeating the Workers’ Party's (WP) call for the government to introduce interest-free SkillsFuture loans.
MP Ng Ling Ling (PAP-Ang Mo Kio) pointed out the “low take-up rate” among those attempting to upskill or considering mid-career switches through the SkillsFuture scheme. She asked how the government could further support employers in giving employees more training leave and time off to attend upskilling courses.
In September last year, it was reported that seven in 10 people across all ages have not used the SkillsFuture Credit since the scheme started in 2015.
As Singapore charts its course through the rapidly changing global and technological terrain, its policies must embody a steadfast dedication to fairness, meritocracy and innovation, said MP Gerald Giam. It must nurture an ecosystem that champions fair competition, leverages the power of artificial intelligence (AI) and robotics, and places the welfare and progress of every Singaporean at its heart, he added. Speaking in Parliament on Monday (Feb 26), Mr Giam stressed the need to remain committed to building a society where access to opportunities, a culture of excellence and the value of each individual’s contributions shape the Singaporean journey for generations to come. Mr Giam highlighted the need to tap the opportunities in AI and robotics, saying the Government can spur a broader uptick not only for scientists and businesses but also for general purpose use by ordinary citizens. He said Singapore needs the right institutions and opportunities to attract and retain the best minds, including talented Singaporean students, scientists and entrepreneurs. At the same time, it needs to proactively re-train workers who are most at risk of displacement from AI. He called for interventions against AI-driven job redundancy, saying it is better to be the “architects of our own disruption”. He suggested giving every Singaporean hands-on practice and tacit learning with AI and robotics to ensure that the gains of these technologies go to everyone. Turning to the SkillsFuture Level-Up Programme, Mr Giam wanted to know how the Government arrived at the conclusion that diploma and degree programmes have better employability outcomes. He suggested that the Government subsidises apprenticeship programmes.
Other MPs questioned the employment prospects of those who utilised the credits.
MP Gerald Giam (WP-Aljunied) asked how the government concluded that those who completed diploma and degree programmes had better employability outcomes. He also suggested the government subsidise on-the-job training and apprenticeship programmes as much as they do for diploma and degree programmes.
NCMP Leong Mun Wai from the Progress Singapore Party (PSP) argued that the SkillsFuture programme has “contributed little to the employability of Singaporean workers” and that more needs to be done.
“To that end, we would also suggest a level up for the skills development fund, so as to co-opt employers into the process, thereby ensuring that the training undertaken by workers (is) relevant to raising productivity in their current jobs,” he said.
HELP FOR RETRENCHED, LOWER-WAGE WORKERS
Some MPs sought more details on support for those who are retrenched, which Mr Wong touched on during his Budget speech.
Mr Wong noted that the government was working out the parameters of a new temporary financial support scheme to help retrenched workers while they undergo training or look for another job.
Noting that temporary financial support would be “greatly beneficial” to retrenched workers seeking new jobs, NCMP Hazel Poa said she hoped the government could finalise the scheme as soon as possible. She also sought confirmation that a retrenched worker’s training allowance would not be affected by their period of unemployment.
WP’s Mr Giam asked whether the temporary financial support scheme would include an insurance component, such as what his party had proposed through its redundancy insurance scheme.
This would “ensure that premium contributions from employers and employees during times of plenty can be drawn down during economic downturns when retrenchment levels are higher”, he said.
A strong sense of personal responsibility, efficient risk-pooling through insurance and sufficient Government support largely funded by taxes. These are the key components for a multi-tier approach to unemployment support, said MP Henry in Parliament on Monday (Feb 26). He proposed options for those who have lost their jobs, such as a full or partial freeze on housing loans for a limited time to help with cash flow and the availability of Government transfers such as GST rebates ahead of schedule. Mr Kwek said in implementing unemployment support, Singapore must find its own way forward. He also hopes the Government and fellow MPs can think through the cost-of-living implications when passing new laws and regulations or asking for more enforcement. They must bear in mind the regulatory and enforcement cost imposed on society, businesses and the people, he added.
MP Henry Kwek (PAP-Kebun Baru) suggested a multi-tiered approach to supporting retrenched workers, including tapping on unemployment insurance. He noted that such insurance was available at major insurance companies, but that the take-up was not high.
Mr Kwek suggested that insurance be paid for using CPF. Apart from insurance, those who have disrupted cashflows may be offered options including having their premiums, taxes or loans partially or fully frozen for a limited period.
Government transfers, such as GST rebates, can be provided ahead of schedule, and those with healthy CPF balances may also be permitted to borrow some of their own monies, Mr Kwek suggested.
The culture of work in many countries, including in Singapore, is changing, said NMP Raj Joshua Thomas in Parliament on Monday (Feb 26). While Mr Thomas welcomes some trends such as flexible working hours and working from home, he urged caution for other trends and suggestions, such as a very short work week and the right to disconnect from work. He said Singapore should be careful in adopting some of these trends and warned that they may have severe consequences on the productivity and competitiveness of the workforce. Mr Thomas also highlighted the plight of those who work hard but are not living as well as they should - many of whom are working in Progressive Wage Model (PWM) sectors such as cleaning, retail, F&B, security and waste management. He called on the Government and tripartite partners to go further in helping them earn more money and respect.
Meanwhile, NMP Raj Joshua Thomas proposed that the average wage of workers in Progressive Wage Model (PWM) sectors, which include cleaning and retail, “rise to be on par” with the average wage of fresh university graduates in the long term.
Mr Thomas, who is president of Security Association Singapore, a trade association in the PWM sector, also suggested an acceleration of the PWM wage increase. He asked that consumers be ready to support wage increases by paying more for the services provided by these sectors.
The debate will continue on Tuesday.
