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Proposed Changes To The CPF System (Part I) – AK (ASSI)
Aspire, Investments | 09 February 2015
By: AK(ASSI)
Articles (41) Profile

I think it won’t be wrong to say that almost everyone is talking about the changes to be made to the CPF system. I have decided to do a blog as well. However, I am going to have some fun in the process.

Before I start telling the story, we have to remember that there is a sequel. Yes, like many good movies that people would talk about after watching, there is actually a Part 2 to this saga. This is one reason why I was thinking of taking a wait and see approach instead of blogging about the changes right away.

We can only hope that Part 2 is going to be as exciting as Part 1 if not more. Do I hear someone giggling? Yes, sequels can be so disappointing sometimes.

Anyway, what about Part 1?

Part 1 was about how a creature called the MS (full name “Minimum Sum”) gained mutant powers. In gaining mutant powers, MS was able to mutate into a smaller creature half of its original size or into a bigger creature 50% bigger than its original size.

The creators of MS hoped that more would take a liking to MS which had been verbally abused in some quarters. So, with newly gained mutant powers (and a new marketing team), MS took on new names for its various forms.

The smaller and cuter MS mutant was called the BRS (full name “Basic Retirement Sum”). In its original size, the MS was renamed the FRS (full name “Full Retirement Sum”). The bigger and more powerful MS mutant was called the ERS (full name “Enhanced Retirement Sum”).

Everyone had to adopt a MS but they didn’t have a variety to choose from in the past. It was a little like the first mass produced car by Ford, the Model T. Everyone had a choice of color. Remember? It was either black or black or black. People still had to adopt a MS but at least they would have a choice of size with the mutant forms.

The MS had been badly misunderstood by many and far from being a monster, a closer look revealed that it was actually a cow. Yes, it was a simple farm animal! The MS was supposed to provide sustenance to its owner for an indefinite period of time once the owner turned 65. That was when the MS would become a deity-like bovine called the CPF-Life.

Whichever choice people should make between the BRS, FRS and ERS, these cows retained their power to become deity-like bovines later on with their powers to provide more or less sustenance for life to their owners, their powers being proportional to their sizes.

Oh, the movie had a compulsory audience participation section as well. It was a bit like a “Choose Your Own Adventure” component. Yes, some of us older folks would remember flipping through what seemed like random page numbers in those storybooks with outcomes depending on the choices we made. They were the craze at one time.

How would things play out? Well, with miniaturization still a craze, I suspect that the BRS might win hands down. Kawaii! The apathetic would probably stick to the FRS. A smaller more prudent but insecure feeling group would choose the ERS.

If I were to use another analogy, the BRS is like a hut made of straw while the FRS is like a hut made of wood and the ERS a hut made of bricks. Remember the story? The hut made of straw was the easiest and fastest to build while the hut made of bricks was the hardest and took the longest time to build. Then, remember the three little pigs which stayed in the huts?

In a less child friendly (and more realistic) version of the story, the little pigs which stayed in the straw and the wooden huts were eaten by the big bad wolf. Only the little pig which stayed in the brick hut survived. In most versions, however, all three little pigs survived because the first two pigs ran to the house made of bricks to escape the big bad wolf. So, the little pig who took the trouble to build the hut made of bricks had to share his living quarters with his brothers. Well, we can choose our friends but we cannot choose our family, as the saying goes.

I believe that the movie would not only have a sequel but there could be remakes in future. Whatever the case might be, in the audience participation section, we would do well to choose wisely in the meantime and hope that many more would choose wisely too.

“The panel is proposing that the sum of S$80,500 for CPF members turning 55 in 2016 be called the Basic Retirement Sum. This Basic Retirement Sum should increase by 3 per cent each year for cohorts turning 55 from 2017 to 2020, to keep pace with inflation and changes in household expenditure.

“For CPF members who are not homeowners or who do not have a CPF pledge on the their property (which refers to the sum of money that will go into his CPF account if he sells the property), the panel thinks they should set aside a sum of S$161,000 in 2016 – equivalent to the Minimum Sum for those turning 55 from July. This could be called the Full Retirement Sum, the panel said.

“Those who want to put more into their Retirement Account for higher annuity payouts should be allowed to do so, felt the panel, which is proposing that they be allowed to have up to three times the Basic Retirement Sum to pay for CPF LIFE premiums (or S$241,500 in 2016).

“Also addressed in its first set of recommendations is lump-sum withdrawal of CPF savings at the age of 65. The panel suggests allowing the withdrawal of up to 20 per cent of Retirement Account savings, inclusive of the S$5,000 that can be withdrawn from age 55.”
Source: Today Online, 4 Feb 15.

AK is a Singaporean stock market investor and a popular blogger. His blog was created with the intention of educating investors and sharing his investing journey with the target of having a more secure financial future in an uncertain world by creating a stream of reliable passive income with high yields.

AK is a Singaporean stock market investor and a popular blogger. His blog was created with the intention of educating investors and sharing his investing journey with the target of having a more secure financial future in an uncertain world by creating a stream of reliable passive income with high yields.

Please click here for more information about this author.


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