#Blog 4: Acronyms Galore
Central Provident Fund (CPF)
I conducted a short interview with my mother on Central Provident Fund (CPF). She managed to share lots of information regarding CPF and how it benefits the people in Singapore.
I asked her questions like: [script writing of interview]
What is CPF?
CPF basically is the Central Provident Fund. And this fund is beneficial and is good for Singaporeans. They can use the funds for housing needs, medical needs, retirement needs and other financial and investment plans that they may have. So for working adult, it will be good because every month, the working adult can contribute some money into their CPF accounts and on top of that, there will be an additional 20% contributions from the employer. Sorry it should not be 20%, it should be 12% of employer’s contribution for the staff. So this will enable the workers to make use of all these funds when they reach retirement age. When they reach retirement age, they can draw out a certain amount on a monthly basis and if once they meet the minimum amount requirement as stipulated in the CPF rules. So I think basically this funds is actually very good for Singaporeans because throughout their working lives, they can use it to, for their mortgage in terms of paying for their flats over a period of certain years. And besides paying for their housing, they can use it for education for their children, or certain investments they may have or plans and other needs. Besides these regular requirements or uses, some people they can use their CPF to fund certain erm..I should say certain erm..certain portion of the CPF may go to medical, medisave. So as we know, Singapore is an aging society so we may need all these medical funds when a person reaches a certain age. So this Medisave, medifund, medishield, the 3Ms, will be basically very good for Singaporeans as a whole. So that when they reach retirement age, they can use it for their medical needs and they don’t have to depend on their children. So as I believe, a lot of people these days, they do not want to burden their children so as far as we are concerned, we find that it would be good to have some CPF money so this means that we have to work so that we can have these contributions every month.
Why do you think CPF is necessary for everyone?
CPF is necessary and beneficial because there is many uses for these amount of money. Be it for educational needs, investment plans. Educational needs can be for their children. In terms of long term benefits, they can keep for their children. And a portion of the money can be for medisave, medical benefits, which a person may need to use when they grow old. And also, a portion will be under retirement funds. So these money can come in useful in due time when a person age. So as Singapore is an ageing population, so this CPF is..to me is a very good way to enable that Singaporeans can sustain themselves through old age.
What happens if we have no CPF?
For those people who are non-active members of CPF, they may have to pay a certain amount every month to the CPF board. For those people who are self-employed, they have to every month contribute a certain amount of money, but it is up to their personal choice. Some they may want to take out hard cash to put into their CPF account. But this plan does not appeal to everyone because if a person has hard cash, they won’t want to contribute this money or take this money to put into their CPF accounts. So basically this erm..for I would say those people who are self-employed or they are their own bosses, which means that they may be their own business or sole proprietors, operating their own food business or any other kind of business. So it is up to them whether they want to make a choice to contribute every month anot.
Do you think students who are working should have CFP at a young age?
It can be an advantage for those teens who have started working in their live or maybe doing some part time jobs. So there’s no harm in basically having some CPF contributions because these will be accumulated into their working life when they become working adults. So this amount will be accumulated, so there is actually no harm in teens doing some holiday jobs. And on the other side of the picture, they can also contribute some money into their CPF. So it’s a good thing. From the perspective of the teens, they can learn the importance of saving, benefits of having a CPF account and if they can start to contribute from a young age, though it may not be continuously because they may want to further their studies before becoming fully employed adults. So this can be something advantages for them also.
What do you think about those old people who currently have no CPF? Like what do you think we should do about it?
Yea. Because the pioneer generation. Previously this generation they don’t have access to good education like this generation do. So most of the people they either have very little or minimum CPF, or even none CPF money. So now that they are in to their old age, they may need to have some benefits or some social benefits from the government. So the government, Singapore government is working out and there’s a lot of benefits for these pioneer generation or they call it the PGP, Pioneer Generation Package. And besides social assistance, there is medical benefits and also other kinds of benefits to take care of this group of people. But for this generation, the current generation and the coming generations, they all have better access to education. Unlike the pioneer generation group. So I think down the road, this thing is going to benefit Singaporeans as a whole.
Personally, I don’t have a CPF account yet as I have not started working. However, when I start having a CPF account, I would want to save as much money as possible. Although some people might say that CPF is not helpful for them, but it really depends on the individual. It enables working Singapore Citizens and Permanent Residents to set aside funds for retirement. It also addresses healthcare, home ownership, family protection and asset enhancement. (CPF government website) In my opinion, if there is no such thing as CPF, people would not take the initiative to save up for their future. From this, I can foresee that in the future, many Singaporeans are going to have a hard time supporting themselves in their old age.
I feel that it is important to save money for the future. For a student like me, I often save money. Every week I am given $50 as my allowance and I save about $30 from it. I save as I feel that it will be hard to support myself financially in the future. And also, I save money for my education like when I go to university in the future. Other reasons on why we need to save is to firstly ensure we have an Emergency cushion. An Emergency cushion is like setting aside money for emergency needs. Like for example a fire broke out in your house and you need to make repairs. You we use our Emergency cushion for that. (http://pocketsmart.org/financial_management/save/ )
Is there such thing similar to CPF in other countries?
In Hong Kong, they have a similar retirement plan called the Mandatory Provident Fund (MPF). From their MPF, for each person, they will have to contribute 5% of their monthly income to their MPF. The pay-out age is at 65 years old. In MPF schemes, there are many types of funds like the bond fund. Bond funds are invested in bonds issued by the government. It is also sort of an investment. Other funds are like Equity fund and Money Market fund. In Malaysia, they have a similar retirement plan called Employees Provident Fund (EPF). For their EPF, each person contributes 11% of their income to their EPF. The pay-out age is at 50 years old and 55 years old.
Comparing these 3 schemes, Singapore’s CPF pay-out age is much younger than that in other countries. In Singapore, the pay-out age is 55 years old. (Tay Leong Tan)
What is CPF LIFE?
CPF LIFE is the abbreviation of CPF Lifelong Income For The Elderly. This scheme allows people to get a monthly payout for the rest of your life when you reach 65. It is compulsory for Singaporean citizens or Permanent residents born after 1958 to have CPF LIFE. There are 2 CPF LIFE plans. First plan is the CPF LIFE Standard Plan. For this plan, you will receive higher monthly payouts and lower bequest from the beneficiaries. The next plan is the CPF LIFE Basic Plan. For this plan however, you will get lower payouts compared to the first plan and higher bequest from the beneficiaries. (CPF government website)
Citation: Singapore Government. CPF LIFE. Available: https://www.cpf.gov.sg/Members/Schemes. Last accessed 19th Jul 2017. Tay Leong Tan. (2014). CPF: COMPARISON OF RETIREMENT PLANS AROUND THE WORLD. FIVESTARSANDAMOON. http://www.fivestarsandamoon.com/2014/05/cpf-comparison-of-retirement-plans-around-the-world/ https://www.gov.hk/en/residents/employment/mpf/ http://pocketsmart.org/financial_management/save/ https://www.cpf.gov.sg/members/aboutus/about-us-info/cpf-overview