Saturday, June 7, 2014

Random thoughts: CPF, the minimum sum

I read with shock and disappointment the protests at HongLin. I understand their grouses, knew the flaws of the system, but the placards and messages on them are outright ungracious.

The main bug, the high minimum sum. The system benefits everyone disproportionally. The middle income whose CPF is not dump on property, should have a amount in excess of minimum sum and has a fat life plan, thus this group should be contented with it.

Those not able to meet the minimum sum should still be better off, given That 90% of Singaporeans own a property, and hence could pledge that property. Assuming they don't die in the early 70s, they should be better off than if they are allowed to take out all their CPF money.

Why then the amount of angst?

1) trust, and connection. Cold hard cash is always easier to understand than projection of returns.

Shifting of goalpole further erode trust. Minimum sum need to account for inflation, and minimum sum is raise several times from 30000 to 80000 and then to 120k in 2003 dollars. Even I feel uncomfortable about that. The fact that the powerful PAP can changes the rules easily, although for the greater good and with valid reasons is scant comfort to the lower-income earners.

Personally, I feel the issue is not so much the merits or lack of the system, but the lack of connection and respect of people's money.

First, acknowledge the system benefits the poorer less. Forget about the rebates in property etc. payout more in cash when they turn 55 for the lower income, top up by government.

Allow CPF interest free loan for those unemployed after a period of time say 1 year. Allow half of last drawn pay subjected to a cap, this could act as unemployment insurance for 6-12 months. When they find their job, they can return the debt with the govt and worker co- repaying it over a longer. Period of 5 -10 years. The debt limit can be set to prevent abuse.

Let people see cold hard cash is a good start to establish trust.

Lastly, next time a change is going to be made to CPF, no matter how well intended, allow a longer gestation period, and prepare to watered down the changes. If Ex PM Goh can says employer's contribution reduced to 10% just by informing parliament, it is scary. Any changes to CPF, should allow whip to be lifted in parliament, robust debate and concerns addressed before moving on. Not just Maths and number, but people angst and distrust. Respect people savings.

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