‘Fairer’ to retain CPF Special Account for those already aged 55 and above: Foo Mee Har
Renald Yeo
Published Mon, Feb 26, 2024 · 4:45 pm
From 2025, the Special Account will be closed for Central Provident Fund members aged 55 and above, with the monies going to the Retirement Account and Ordinary Account instead.
PHOTO: YEN MENG JIIN, BT
RATHER than closing the Central Provident Fund (CPF) Special Account (SA) for all members aged 55 and above, it “may be fairer” to grandfather the scheme for those who have already reached that age, suggested People’s Action Party (PAP) Member of Parliament (MP) Foo Mee Har on Monday (Feb 26).
This would mean retaining the scheme for them, while allowing the change to take effect for younger cohorts of CPF members.
In the first day of the Budget debate, Foo was one of several PAP and opposition MPs who raised concerns about the impending closure of SAs for CPF members aged 55 and above, as announced in the Budget statement.
The move, which takes effect from 2025, aims to “rationalise the CPF system”, Finance Minister Lawrence Wong said in his Budget speech. Upon closure, SA savings will be transferred to the Retirement Account (RA) up to the Full Retirement Sum, with remaining monies going to the Ordinary Account (OA).
Savings in the SA and RA earn an interest rate of at least 4 per cent, while OA savings earn 2.5 per cent. Upon the closure of the SA, CPF members who have maxed out their RA savings will only be able to earn the lower OA savings rate on their excess monies.
“Whilst I support the government’s rationale behind the move, the sudden closure of SA accounts affects many middle-income seniors,” said Foo. Noting that many seniors rely on CPF savings as a key source of funding for retirement, she added: “This sudden unexpected change disrupts their retirement planning.”
Progress Singapore Party Non-Constituency MP Leong Mun Wai said the change will impact the “retirement plans of many Singaporeans who can no longer enjoy a higher CPF interest rate and withdrawal flexibility of the CPF funds at the same time”.
PAP MP Yip Hon Weng similarly highlighted the impact of this change on retirement planning. Noting that his residents are concerned about the SA closure, he said: “Years of financial planning based on the SA’s higher interest rate are disrupted, leaving them with limited time to adjust.”
“The limited withdrawal options from the RA raises concerns about accessing emergency funds, unlike the SA which has more flexibility,” added Yip. He asked the government to explore ways to “minimise the impact of the SA closure”, particularly regarding withdrawal flexibility.
Workers’ Party MP Louis Chua said the SA closure is a “step backwards” in ensuring retirement adequacy, and reiterated calls for CPF interest rates to increase.
One way to do this, he suggested, is to let Singaporeans invest part of their CPF monies with GIC, which has a 20-year nominal rate of return of 6.9 per cent per annum, compared with the OA’s interest rate of 2.5 per cent.
