SINGAPORE: Deputy Prime Minister Lawrence Wong defended the decision to close the CPF Special Account for individuals aged 55 and older, asserting that it aligns with “the purpose and intent of the CPF.”
However, the online community emphasized the importance of public consultation, understanding the people’s needs, and granting them more decision-making power over their own hard-earned retirement savings.
During a recent interview with Singapore state media CNA, DPM Wong addressed the closure of the CPF Special Account and the ensuing online reactions.
In his budget speech for 2024 last Friday (16 February), DPM Wong unveiled significant CPF reforms, including a 1.5% contribution rate hike for the 55-65 age group. Additionally, in 2025, the government plans to increase the maximum CPF Retirement Account deposits to enhance retirement payouts.
As part of streamlining the CPF system, Mr Wong announced the closure of the Special Account (SA) for members aged 55 and above, commencing in early 2025.
Consequently, CPF members will maintain three accounts: the Retirement Account (RA) for housing savings intended for retirement payouts, the Ordinary Account (OA), and the Medisave Account (MA).
SA savings will be transferred to the RA up to the Full Retirement Sum, attracting the same long-term interest rate.
The remaining SA savings will be transferred to the OA and members have the option to voluntarily transfer OA savings to the RA for higher interest and increased retirement payouts.
Alternatively, members may choose to retain savings in the OA, where they remain withdrawable and earn the short-term interest rate.
The long-term interest rate, applicable to SA, RA, and MA, is currently set at a minimum of 4%, while the short-term interest rate for the OA is at a minimum of 2.5%.
When queried by panellists during CNA’s Ask the Finance Minister show on Wednesday (21 Feb), DPM Wong emphasized the underlying principle that the Ordinary Account (OA) holds funds available for withdrawal for housing and earns short-term interest rates.
In contrast, the SA is designated for long-term purposes, thus justifying a higher interest rate.
“Of course, at age 55, you also have a Retirement Account. So instead of now having SA and RA, we are streamlining it into just one, which is the RA, which is for the long-term, for your retirement needs.”
As part of this restructuring, CPF members with surplus funds in their SA can seamlessly transfer these funds to the RA, extending up to the revised Enhanced Retirement Sum, all while earning the same interest rate as the Special Account, according to Mr. Wong.
“The vast majority of Singaporeans will be able to do so. And if they do so, they will get more in their RA. And eventually, when they retire, they will get higher CPF payouts for life.”
Concern over Retirement Account Lock-In unaddressed
However, the PAP minister did not directly address concerns raised by CPF members regarding the lock-in of funds in the Retirement Account.
This account disburses payments incrementally through CPF Life starting at the age of 65, in contrast to the SA, which previously allowed members more immediate access to their funds.
Notably, netizens commenting on CNA’s Facebook post suggesting that DPM Wong seemingly evading crucial questions.
There is an advocacy for granting CPF members more control over their retirement savings, allowing them the flexibility to decide whether to withdraw part of their savings or allocate them specifically for retirement purposes.
A netizen posed a thoughtful question, questioning how to define retirement within the context of CPF being considered a retirement fund.
He asked whether citizens should have the option to fully withdraw the savings from the retirement account when they retire and how one could still classify it as a retirement account if only partial funds are withdrawn.
Another comment questioned the rationale behind closing the SA after age 55, argued that SA served its intended purpose and benefited a generation of people, and questioned whether the government is now victimizing those who contributed to CPF for their retirement.
The comment argues that such changes may force people to continue working beyond retirement age and could lead to increased hardship instead of assistance.
“Public opinion should be sought first”
A netizen questioned whether the closure of the CPF SA aligns with its intended purpose or if loopholes led to its shutdown.
“In the 1st place, why do they even set up SA? If it doesn’t serve initial purpose, may as well close for ALL age groups, instead of just 55 yr above, ” the netizen expressed concern that frequent rule changes create insecurity among Singaporeans.
She further emphasized that before amending any CPF regulations, public opinion should be sought first.
A netizen advocated for CPF members to have the choice to close their CPF accounts after turning 65.
He questioned the mandate to allocate the funds to the RA and stressed the importance of granting members the autonomy to manage their retirement.
Simultaneously, another commenter suggests introducing a new CPF Young Senior Account, featuring a monthly government top-up of S$500.
The funds can be withdrawn at age 75, complementing CPF Life payouts, ensuring a higher quality retirement lifestyle for young seniors.
