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Written Answer by Mr Tharman Shanmugaratnam, Deputy Prime Minister & Minister for Finance and Minister for Manpower, to Parliamentary Question on the Revision of CPF Minimum Sum

Assoc Prof Fatimah Lateef: To ask the Deputy Prime Minister and Minister for Manpower whether the increase in the CPF Minimum Sum can be withheld till a next review, especially for certain segments of the population who need it the most, as many Singaporeans are feeling the impact of inflation.

Mrs Lina Chiam: To ask the Deputy Prime Minister and Minister for Manpower how many CPF account holders aged 55 years and above do not meet the current CPF minimum sum of $131,000 and the new minimum sum of $139,000 that will be effective from 1 July 2012, respectively.

Mr Tharman Shanmugaratnam:

The Minimum Sum, or MS, is meant to provide members with a monthly income to support a basic standard of living in retirement. Members set aside in their CPF Retirement Account the MS that is applicable to them when they turn 55. Members are not affected by the MS adjustments that take place after they turn 55.

We have been gradually raising the MS by $4,000 in real terms (or 2003 dollars) to reach the target of $120,000 in real value in 2013, as recommended by the Economic Review Committee in 2003. The actual increases in the MS are adjusted for inflation each year.

In 2011, CPI inflation was however significantly higher, mainly because of higher imputed rentals on owner-occupied homes and the spike in COE prices. The actual cost of living for 55 year olds did not go up by as much as this headline inflation rate; they own their homes, and the imputed rentals on their homes do not mean any expenditure. We therefore decided not to adjust the MS by the full amount implied by the increase in headline CPI. The increase in MS for 2012 is hence about one third lower than what it would have been. We are therefore not aiming to reach the target of a $120,000 MS in real terms (2003 dollars) in 2013. Instead, we are spreading out the remaining increases and will now reach the target MS in 2015 instead.

Even as the MS has been gradually raised, the percentage of active CPF members who met their MS has been improving over the years. For the cohort who turned 55 in 2011, 45% of active members attained their applicable MS, even after taking into account the lump-sum withdrawals they had made from their CPF accounts when they turned 55. This is an improvement over the 36% for those who turned 55 in 2007.1 We expect the MS attainment rate to increase with each successive cohort, as educational profiles improve and incomes rise.

For older Singaporeans who may not have met their MS, a key factor is that many of them have invested a large part of their CPF savings in their homes. For many members, their house is likely to be the biggest financial asset they own, which can be tapped on to supplement their retirement income if necessary. It is therefore important that we provide avenues to help members do so. The Silver Housing Bonus and the enhanced Lease Buyback Scheme, announced at this year‟s Budget, are meant to facilitate this.

We have also enhanced the Minimum Sum Topping-Up (MSTU) Scheme over the years to allow members to set aside more retirement savings for both themselves and their loved ones. We announced in April this year that the MSTU scheme will be expanded beyond spouses, parents, grandparents and siblings, such that those who make top ups to their parents-in-law and grandparents-in-law will also enjoy tax relief. We encourage members to take advantage of this scheme to bolster their own and their loved ones‟ retirement savings.


1 MS attainment for members who turned 55 in 2008, 2009 and 2010 were 34%, 38% and 41% respectively.