MANPOWER Minister Gan Kim Yong has assured Singaporeans they will receive a monthly payout from the CPFLife annuity scheme for the rest of their lives, despite a 'disturbing' provision in the new law.
He gave this pledge on Monday when replying to Madam Halimah Yacob (Jurong GRC) and Madam Ho Geok Choo (West Coast GRC).
They were debating a major change to the Central Provident Fund (CPF) Act that will introduce the CPFLife scheme. This will give members a steady stream of retirement income from age 65. However, both MPs were worried by the lack of guarantee on premiums and payouts in the new law, which they argued gave the Government too much discretion in deciding the amounts.
Mr Gan, in his bid to allay any fears, said it was not feasible to guarantee the amount paid. This is because the monthly sum would have to be adjusted regularly, 'taking into account interest rates and mortality experience to ensure the solvency of the Lifelong Income Fund'.
The fund, administered by the CPF Board, holds the money that members use to participate in the annuity scheme. But the minister was quick to add: 'CPFLife members can rest assured they will receive payouts for as long as they live.'
The remark was directed at Madam Halimah, chairman of the Government Parliamentary Committee for Manpower, who noted that the law allows the CPF Board to stop CPFLife payments unless the Lifelong Income Fund is solvent. 'While I can understand the legal basis for this provision, I find it quite disturbing to have it reflected in the Bill,' she said.
There are similar clauses for commercial insurance companies, she noted, but added: 'The relationship between the CPF Board and the CPF members, however, is not just a legal contract but... a social contract as the board has a social responsibility to manage CPF funds prudently in order to help Singaporeans meet their retirement needs.' She wanted to know what are the safeguards for protecting CPF members against the risk of the fund's insolvency.
In his reply, Mr Gan said CPFLife has to be self-funded and sustainable. 'The minister cannot make changes at will but must base his decisions on sound actuarial principles to ensure that fund solvency will not be compromised.'
The CPFLife scheme will be rolled out in September for those who are 55 this year - ahead of its implementation date in 2013. They can choose one of four plans that offer different amounts of payouts.
Other changes to the Act, which was passed on Monday, also help members to enjoy the benefits of CPFLife. One is the Lease Buyback Scheme for low-income senior citizens to unlock the value of their housing assets. The Housing Board buys back the tail-end of their flat's lease, leaving members with a shorter 30-year lease. Part of the sale proceeds can be used to join the CPFLife scheme, said Mr Gan.
