Parliament Passes New CPF Life Plan

ChannelNewsAsia ran this story on 20 July 2009:

Parliament passes new CPF Life plan with aim of celebrating longevity
By S.Ramesh

SINGAPORE: Celebrating greater longevity with CPF Life is the aim of changes to the CPF Act passed by Parliament on Monday to ensure members have an income for the rest of their lives.

But several MPs expressed concern over those who have less than S$40,000 in accounts to fully benefit from the scheme.

It started with 12 different plans for CPF Life and now it's down to just four - Life Plus Plan, Life Basic Plan, Life Income Plan and Life Balanced Plan.

Members with at least S$40,000 in their Retirement Account will be automatically included, while those with lower cash balances can opt-in.

LIFE Plus Plan offers higher monthly income but leaves behind less for beneficiaries.

For the LIFE Basic Plan, members accept a lower monthly income for higher bequest amount.

The LIFE Income Plan offers the highest monthly income but members would leave nothing behind when they pass away.

The default plan is the LIFE Balanced Plan which will provide a balance between a level of retirement income and some bequest amount if they pass away early.

Manpower Minister Gan Kim Yong, said: "Over the years our CPF policies have evolved to better address our changing needs and they will continue to evolve.

CPF Life is our unique response to address the challenges of our ageing population and it marks an important milestone in the evolution of the CPF."

This was a major concern for trade unionist Halimah Yacob as the number of Singaporeans working part time or on contract work has increased.

She said: "Our low-wage workers are the ones who need such a scheme the most as they are not likely to have discretionary savings or other assets. I would like to ask the Minister to study this issue carefully, so that we can have a truly inclusive CPF Life scheme."

In her maiden speech in Parliament, Nominated MP Pauline Straughan, suggested programmes for the vulnerable poor.

She said: "As we move towards a more comprehensive coverage for Singaporeans, it is even more critical for us to ensure that no group is omitted from the lifelong income fund. If we failed to do so, we may inadvertently entrench social inequality."

The CPF Board estimates that at least 70 per cent of members turning 55-years- old in 2013, will have at least S$40,000 in their retirement accounts.

Mr Gan said: "There is no minimum balance required to participate in CPF Life. All members, regardless of their CPF balances, can opt-in into the scheme.

“However, members with a very low balance may not be in a position to maximise the benefits from CPF Life."

For them, schemes like Workfare will come in handy where older, low-wage workers receive an income supplement, of which a portion is credited into the recipient's CPF to shore up his retirement savings.

Changes to the CPF Act also address the issue of members who are mentally incapacitated.

Currently, under the Mental Capacity Act, a court ruling cannot affect a CPF nomination.

So, rules dealing with nominations will also be amended to allow the courts to do this, in the best interest of the member.