[ST forum]: CPF min sum amount vs Inflation: the 3 letters thus far:
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The Straits Times, Published on Jun 8, 2012
CPF Minimum Sum should reflect 'true' inflation
THE report ('CPF Minimum Sum to be raised'; May 31) stated that the Government has decided to raise the Central Provident Fund (CPF) Minimum Sum from $131,000 to $139,000 from July, instead of $143,000.
The reduction is aimed at cushioning CPF members from the impact of the acute, inflation-driven spike, spreading the balance of $4,000 until the new target date of 2015.
When Trade and Industry Minister Lim Hng Kiang addressed the concerns over rising inflation in Parliament ('When big policies impact the little man in the street'; May 15), he cited big-ticket items like housing rentals and car prices as being responsible for the bulk of inflation. As most Singaporeans own their homes, the issue of rents is irrelevant to citizens, he explained. As for private cars, only a small part of the population buy cars, so the majority of people are also not affected by the high inflation.
If these are the reasons for rising inflation, why is the Government applying the full annual inflation rate when adjusting for the increase in the Minimum Sum?
Shouldn't the Government moderate the figure downwards - say, to two-thirds the actual inflation rate - to recognise that some major contributors to inflation do not affect most CPF members?
Young Pak Nang
http://www.straitstimes.com/STForum/Story/STIStory_808456.html
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The Straits Times, Published on Jun 15, 2012
CPF MINIMUM SUM
Increase doesn't fully reflect total inflation
MR YOUNG Pak Nang inquired about the use of the headline consumer price index inflation rate to adjust the Central Provident Fund Minimum Sum ('CPF Minimum Sum should reflect 'true' inflation'; last Friday).
As he noted, increases in imputed housing rentals on owner-occupied homes and certificate of entitlement prices for private cars contributed to higher-than-normal headline consumer price index inflation last year.
For the majority of retirees, these are not items that would lead to increased cash expenditures.
The Minimum Sum is aimed at providing for CPF members' basic retirement needs.
The original target, adopted in 2003, was for the Minimum Sum to increase in real terms to $120,000 (in 2003 dollars) by 2013.
Further, besides this real increase, the Minimum Sum has to keep pace with long-term inflation trends.
The Minimum Sum has therefore been increased each year to meet the required real increase and to take into account inflation.
However, this year's Minimum Sum increase was moderated, and hence did not fully reflect the consumer price index inflation that occurred over the last year.
This year's increase in Minimum Sum, by $8,000, was one-third less than it would have been if we had followed the usual formula for Minimum Sum adjustments. With the moderated increase, we have stretched out the 2013 target to 2015.
Some of the factors that have led to higher consumer price index inflation in the last year are cyclical, and likely to even out over the long term.
For example, imputed housing rentals on owner-occupied homes have significant short-term impact on the consumer price index, but tend to even out over time.
Over the 15-year period from 1996 to last year, which like most such periods saw the property market fluctuating in both directions, headline consumer price index inflation averaged 1.6 per cent.
This is comparable to the average inflation of 1.5 per cent over the same period if imputed rentals on owner-occupied homes were excluded.
We thank Mr Young for his useful query.
Farah Abdul Rahim (Ms)
Director, Corporate Communications
Ministry of Manpower
http://www.straitstimes.com/STForum/Story/STIStory_811083.html
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The Straits Times, Published on Jun 23, 2012
CALIBRATING INFLATION FOR CPF MINIMUM SUM
Govt can't have it both ways
IT IS difficult to understand how the Ministry of Manpower's reply ('Increase doesn't fully reflect total inflation'; June 15) addresses the point made by Mr Young Pak Nang ('CPF Minimum Sum should reflect 'true' inflation'; June 8).
Imputed housing rentals and private road transport do not affect most people who are at least 65 years old when they draw down on their CPF Minimum Sum.
Therefore, inflation related to these two items should be excluded when adjusting the target Minimum Sum (which is stated in 2003 dollars) for inflation.
Alternative inflation indicators, which exclude the effects of imputed housing rental and private road transport, are readily available and should be used.
Second, the ministry's reasoning that some of the factors that led to higher consumer price index inflation last year are cyclical and likely to even out over the long term is contextually flawed.
A person reaches the age of 55 years only once in his life, at which point he sets aside his Minimum Sum.
If, for example, the cumulative consumer price index since 2003 is higher than the corresponding cumulative consumer price index excluding imputed housing rental and private road transport, it is no comfort to him that the difference may even out after his 55th birthday because he would have already set aside his Minimum Sum.
Finally, the ministry's point that this year's Minimum Sum increase did not fully reflect last year's consumer price index inflation cannot be taken to mean that the ministry did not intend to use last year's consumer price index inflation.
Rather, consumer price index inflation was used, but the ministry determined that the increase in the Minimum Sum was too large to go down well with the affected 55-year-olds and decided to moderate the increase.
The ministry will use the full cumulative consumer price index inflation to determine the Minimum Sum next year (and every year in the future), and then decide whether or not to moderate the formula-based increase.
The conclusion is obvious: The ministry should use a more appropriate inflation indicator such as the consumer price index excluding imputed housing rental and private road transport when adjusting the Minimum Sum for inflation.
It doesn't make sense for the Government to tell us that inflation due to imputed housing rental and private road transport does not affect most of us, but at the same time adjust the Minimum Sum for inflation as if it does.
David Boey
http://www.straitstimes.com/STForum/Story/STIStory_814046.html
===============
The Straits Times, Published on Jun 8, 2012
CPF Minimum Sum should reflect 'true' inflation
THE report ('CPF Minimum Sum to be raised'; May 31) stated that the Government has decided to raise the Central Provident Fund (CPF) Minimum Sum from $131,000 to $139,000 from July, instead of $143,000.
The reduction is aimed at cushioning CPF members from the impact of the acute, inflation-driven spike, spreading the balance of $4,000 until the new target date of 2015.
When Trade and Industry Minister Lim Hng Kiang addressed the concerns over rising inflation in Parliament ('When big policies impact the little man in the street'; May 15), he cited big-ticket items like housing rentals and car prices as being responsible for the bulk of inflation. As most Singaporeans own their homes, the issue of rents is irrelevant to citizens, he explained. As for private cars, only a small part of the population buy cars, so the majority of people are also not affected by the high inflation.
If these are the reasons for rising inflation, why is the Government applying the full annual inflation rate when adjusting for the increase in the Minimum Sum?
Shouldn't the Government moderate the figure downwards - say, to two-thirds the actual inflation rate - to recognise that some major contributors to inflation do not affect most CPF members?
Young Pak Nang
http://www.straitstimes.com/STForum/Story/STIStory_808456.html
===============
The Straits Times, Published on Jun 15, 2012
CPF MINIMUM SUM
Increase doesn't fully reflect total inflation
MR YOUNG Pak Nang inquired about the use of the headline consumer price index inflation rate to adjust the Central Provident Fund Minimum Sum ('CPF Minimum Sum should reflect 'true' inflation'; last Friday).
As he noted, increases in imputed housing rentals on owner-occupied homes and certificate of entitlement prices for private cars contributed to higher-than-normal headline consumer price index inflation last year.
For the majority of retirees, these are not items that would lead to increased cash expenditures.
The Minimum Sum is aimed at providing for CPF members' basic retirement needs.
The original target, adopted in 2003, was for the Minimum Sum to increase in real terms to $120,000 (in 2003 dollars) by 2013.
Further, besides this real increase, the Minimum Sum has to keep pace with long-term inflation trends.
The Minimum Sum has therefore been increased each year to meet the required real increase and to take into account inflation.
However, this year's Minimum Sum increase was moderated, and hence did not fully reflect the consumer price index inflation that occurred over the last year.
This year's increase in Minimum Sum, by $8,000, was one-third less than it would have been if we had followed the usual formula for Minimum Sum adjustments. With the moderated increase, we have stretched out the 2013 target to 2015.
Some of the factors that have led to higher consumer price index inflation in the last year are cyclical, and likely to even out over the long term.
For example, imputed housing rentals on owner-occupied homes have significant short-term impact on the consumer price index, but tend to even out over time.
Over the 15-year period from 1996 to last year, which like most such periods saw the property market fluctuating in both directions, headline consumer price index inflation averaged 1.6 per cent.
This is comparable to the average inflation of 1.5 per cent over the same period if imputed rentals on owner-occupied homes were excluded.
We thank Mr Young for his useful query.
Farah Abdul Rahim (Ms)
Director, Corporate Communications
Ministry of Manpower
http://www.straitstimes.com/STForum/Story/STIStory_811083.html
===============
The Straits Times, Published on Jun 23, 2012
CALIBRATING INFLATION FOR CPF MINIMUM SUM
Govt can't have it both ways
IT IS difficult to understand how the Ministry of Manpower's reply ('Increase doesn't fully reflect total inflation'; June 15) addresses the point made by Mr Young Pak Nang ('CPF Minimum Sum should reflect 'true' inflation'; June 8).
Imputed housing rentals and private road transport do not affect most people who are at least 65 years old when they draw down on their CPF Minimum Sum.
Therefore, inflation related to these two items should be excluded when adjusting the target Minimum Sum (which is stated in 2003 dollars) for inflation.
Alternative inflation indicators, which exclude the effects of imputed housing rental and private road transport, are readily available and should be used.
Second, the ministry's reasoning that some of the factors that led to higher consumer price index inflation last year are cyclical and likely to even out over the long term is contextually flawed.
A person reaches the age of 55 years only once in his life, at which point he sets aside his Minimum Sum.
If, for example, the cumulative consumer price index since 2003 is higher than the corresponding cumulative consumer price index excluding imputed housing rental and private road transport, it is no comfort to him that the difference may even out after his 55th birthday because he would have already set aside his Minimum Sum.
Finally, the ministry's point that this year's Minimum Sum increase did not fully reflect last year's consumer price index inflation cannot be taken to mean that the ministry did not intend to use last year's consumer price index inflation.
Rather, consumer price index inflation was used, but the ministry determined that the increase in the Minimum Sum was too large to go down well with the affected 55-year-olds and decided to moderate the increase.
The ministry will use the full cumulative consumer price index inflation to determine the Minimum Sum next year (and every year in the future), and then decide whether or not to moderate the formula-based increase.
The conclusion is obvious: The ministry should use a more appropriate inflation indicator such as the consumer price index excluding imputed housing rental and private road transport when adjusting the Minimum Sum for inflation.
It doesn't make sense for the Government to tell us that inflation due to imputed housing rental and private road transport does not affect most of us, but at the same time adjust the Minimum Sum for inflation as if it does.
David Boey
http://www.straitstimes.com/STForum/Story/STIStory_814046.html
