The Central Provident Fund (CPF) is a mandatory social security savings plan implemented by the government with the idea of providing Singaporeans with a sense of security in their old age. Citizens are able to retire with sufficient savings to meet their medical needs in their old age. About 20% is taken from each Singaporean's salary and put into this CPF account. They can only withdraw this amount upon reaching their "retirement age" at 62.
CPF savings earn a minimum risk-free interest of 2.5% guaranteed by the Government. It is interesting to note also the inflation rate in Singapore was recorded at 3.6% in November of 2012.
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Prudent move, but needs reconsideration
This is indeed a uniquely Singapore trait - a system not implemented by most of the other countries, yet highly sought after and reflected upon.
The Singapore government has made their stance - we are not, and have never been a welfare state. (even as social spending in Singapore is definitely increasing) So the setting up of the CPF to ensure individual responsibility is not a least bit surprising.
If we look at the huge government budget deficits of those European welfare states, CPF seems to be a wise move. A very intelligent method to ensure that Singapore does not become economically impoverished. Yet many concerns about the use of our CPF money has been raised in the recent years, and I believe that it is time the government should reflect on the system that nobody questioned until now.
While the CPF aims to ensure individual responsibility and financial independency into old age, the government should still implemented the necessary social safety nets for those without CPF accounts or those with insufficient funds, especially with inflating inflation rates. This should be so regardless of our status as a non-welfare state.
Enforced safety net
I feel that the CPF is a brilliant scheme, not 100% for the man of the street but indeed 100% for the government. This is because, at zero costs to themselves, the government has managed to create a safety net to ensure that Singaporeans in general will not lack of want in their twilight years, totally funded by themselves.
By enforcing the policy, one can expect a pile of money after 10-20 years after you begin your career. Naturally, there would be resentment by citizens at this amount of money being locked away from them, despite all good intentions. Hence, another stroke of brilliance here would be allowing the use of CPF for large purchases such as housing (HDB flats) and expensive bills such as healthcare. Hence, this leads to the betterment of lives in general and the catch here is that in the process, the money is still kept out of reach of the account owner since the government also administers HDB housing and monthly deductions will suffice as a form of payment.
With the CPF ever changing in the face of the modern Singaporean's changing needs as well as ensuring that everyone plays a role in provision of healthcare years (The employer is also required to match CPF contributions dollar by dollar), this ensures that the man of the street's worries about old age can be more or less put at ease.
Extremely good foresight by the government and a policy sound in its rationale and principles.
CPF building at Tampines calls for refurbishment!
Calculations is definitely no forte for me. Hence, I am rather oblivious to the going-ons of CPF. Doesn't it need calculations what with the word funds embedded within the acronym?
However, I frequent the CPF building for a class located within it. The exterior was far from attractive what with the numerous reddish brown and brownish beige tiles being plastered all over. I entered the lobby and there was surprisingly no hustle and bustle anywhere. Did I venture into a library unknowns' to mankind? There was a table at the corner where a security guard was stationed occasionally. The elevators there were ancient. It creaked! The elevator at the end of the corridor has the knack of being switched off without warning after it lands on the first floor. How queer.
The CPF building here totally ought to be rejuvenated via refurbishments!
Many Singaporeans will complain to the government about many things, and CPF is definitely one of them. CPF is some sort of "forced" savings for Singaporeans by the government to help "protect" them when they grow old and don't have savings. When deciding upon this policy, the government was deciding if Singapore could be a sustainable welfare state like UK or USA, or be a self-sustaining state. The choice is obvious; with Singapore lacking natural resources, there is no way we can be a welfare state which provides free healthcare for poorer citizens.
Personally, I feel that this policy is quite well rounded and very thoughtful. Though many people complain that they cannot use the money inside, i feel that too many people are seeking instant gratification, and do not really see the importance of saving. The money in the account can be used to purchase houses and also medical insurances for oneself that can cover all types of diseases and illnesses. Additional hospitalization insurance can be purchased with companies like Great Eastern or AIA to increase coverage and sum assured.
This policy is one that other countries should look at to have a better welfare system.
Good or bad - depends on how you look at it.
CPF I guess is a way of forcing people to save your own money and thus create a retirement fund for oneself, which is probably not really enough. A good move by the government so that instead of imposing taxes for social security needs, a retirement account that is self funded by yourself and your boss is created. You are thus held liable for how much you want to retire with.
But that being said, I do feel that there should still be a better way of allowing people to touch their own money. No doubt the OA account is now more flexible. Besides buying houses, I still can use it purchase investment policies. However, the medical account is still buggy.
Although we say that medisave and medishield are mainly for large expenditures medical bills in the old age, thus the controls are very strict on how medisave could be used. However, I do feel that under special circumstances, the government should allow the sick to utilise the money. Have you heard of anyone that has substantial money in the medisave account, but as his sickness falls out of the coverage, he has no choice but to loan money legally and illegally to seek medical treatment. Well I have, and it is sad to hear such cases. Hope this gap can be plug. There is no point having so much money for the future if the person cannot even live to that age.
Left pocket, right pocket.
This scheme is the ultimate of "left pocket, right pocket". I just sold my flat after paying the loan using my CPF for about 10 years. When I sold my flat, there was a profit of about 15% so I thought I should be getting some cash back.
So I happily submitted the documents to HDB and guessed what. I totally did not get any cash. Even the $5,000 deposit I got from the buyer needed to be given to CPF because mine was considered a "negative" sale.
So how do you get negative sale when the actual value in sale is a profit of 15%? Simple. If you had not used your CPF to pay for your housing loan, the amount could have earned you a certain amount of interest and CPF paid good interest. After all the calculations had been made, the amount I put back into CPF was still negative and CPF was so gracious to not demand cash from me to top up the difference.
A very smart and good move by the government.
I think this act of helping their citizens to save for the future is indeed a well though action. Of course every action has its pros and cons, but weighing them, i still think that it largely benefits us.
By making this mandatory savings account, they ensure that we will have some money to rely on next time when we are old and have little or no income. In this sense the government does have foresight. They are like our parents who are responsible to make sure that we will be safe and sound throughout our lives. Not many of us will bother or try to save money for their future, most would just spend their money in the early years of their lives, knowing that we have a sum of money kept in the CPF savings account, we will have a sense of security.
That said, the money may not be enough to foot the inflation which is happening and increasing as the years passed, but this is the least that the government can do, the rest depends on ourselves.