Mr Chua Kheng Wee Louis (Sengkang): Chairman, I would like to once again take the chance to raise concerns that I have previously voiced out in Parliament over the past three years and also earlier this year, during the debate on our reserves.
There are already certain financial instruments available for members to invest their CPF balances, under the CPF Investment Scheme. However, for the benefit of all Singaporeans’ retirement, we need to ensure that the long-delayed LRIS is implemented. As described in a poster explaining the benefits of the LRIS, such a scheme involves low fees, is simple and fuss-free. CPF savings are pooled together with other members to enjoy economies of scale, investments follow a market index and there are fewer choices and less headache over which funds to choose and does not need active management to adjust risk.
Against the backdrop of inflationary pressures and headwinds in the global investment environment, I hope that the Minister will not respond to this cut calling for the LRIS to be implemented as soon as possible, once again, by saying that he will provide updates when ready; but that he is now ready to provide updates.
The Minister for Manpower (Dr Tan See Leng): Mr Louis Chua said that interest committed to CPF LIFE “will not accrue to the CPF holder” but is pooled together for all members. Let me explain why this risk-pooling is necessary.
CPF LIFE is an insurance scheme that addresses the risk of outliving one’s savings by providing members with lifelong monthly payouts. This risk-pooling allows CPF members to get monthly payouts for as long as they live. Upon a member’s passing, any unused premium is refunded to the member’s beneficiaries.
Hence, members need to be clear about what they are getting with their RA savings. CPF LIFE is a form of insurance. It is not an investment vehicle. Each member will need to assess for themselves what level of retirement payouts they desire. I would also like to highlight that CPF LIFE premium continues to earn interest, which is factored into members’ CPF LIFE monthly payouts that will last as long as they live.
The Business Times published an article, about a week ago, that called CPF LIFE “the best annuity in the market”. Members today are allowed to opt out, if they have a pension or an annuity that pays the same or higher monthly payouts for life. If Mr Louis Chua knows of any similar or better products, he, too, can apply to opt out of CPF LIFE.
The Government is also not locking up members’ savings. By age 70, members are required to start drawing down on their CPF savings through retirement payouts. And this is in line with CPF’s core objective of providing a lifelong retirement income.
In fact, some members have written to me, requesting to defer their payout start age to beyond 70 years old. But it is not possible. We want members to enjoy their hard-earned monies by that age.
CPF members, who have the appetite to take on more investment risk for potentially higher returns, can participate in the CPF Investment Scheme. However, I would like to remind members that higher returns come with higher risk. Ms Hazel Poa and Mr Louis Chua called on the Government to implement the Lifetime Retirement Investment Scheme, or LRIS.
With the benefit of hindsight on historical returns these few years, it is easy to comment on what should have been done. Although the current outlook for 2024 has improved, there is still considerable uncertainty, with risks tilted to the downside. No one can be sure how the markets will move.
Hence, as per Deputy Prime Minister Lawrence Wong’s and my previous explanations to Mr Louis Chua, it is not straightforward to introduce the LRIS. The LRIS will introduce a new element of risk for retirees. Regardless, we will continue to study the LRIS proposal, and we will work on making the CPF system even better for Singaporeans.
Mr Chua Kheng Wee Louis: Second, on LRIS, I recognise the Minister’s point about risk and that was what the Deputy Prime Minister mentioned as well. But in the advisory panel report, they have also noted that this can be overcome via the use of the glide path of the Lifecycle Fund. So, would the Minister not agree that with the implementation of LRIS, at least, based on the numbers they suggested, this would be beneficial for Singaporeans in the long-term?
Dr Tan See Leng: To the Member’s LRIS point, we said we are not putting it in abeyance. We have considered and we continue to consider in terms of making sure that the returns are stable. The last three to four years, the Member, as an analyst, would also agree with me, does he not, that we have gone through an extremely uncertain and volatile period? I take the Member’s nodding of the head as a yes, right? Many investors in equities have been burnt.
For us, it is making sure that the hard-earned monies of every single one of our CPF members, we try to go to the Nth degree to try to make sure that it is stable. We try to make sure that we reduce as much of the volatility and the risk as possible. Maybe, if the Member wants to put it as a fault – I do not think it is a fault – it is that we are very, very cautious because these are our members’ hard-earned monies. I hope that the Member acknowledges and understands that.
Ministry of Manpower
4 March 2024
https://sprs.parl.gov.sg/search/#/sprs3topic?reportid=budget-2369
Office of the Leader of the Opposition 