My Open Letter to Josephine Teo about CPF Life payout process

This is my open letter to Mrs Josephine Teo, Minister of Manpower and Second Minister of Home Affairs, and Member of the Singapore Parliament for Bishan-Toa Payoh GRC about her response in Parliament on why CPF payouts are not started automatically at age 65.

Dear Mrs Josephine Teo,

I write to you as a fellow Singaporean and as someone who intends to retire gracefully in Singapore with CPF Life forming part of my retirement income.

Yesterday, you have addressed your fellow members of Parliament in response to their questions on whether CPF information can be better related to the public. In this open letter, I will be referring to the Youtube video of your speech posted by Gov.sg.

There is insufficient proof that Singaporeans prefer to delay their CPF Life payout

In your speech, you have 60% of members on RSS who have reached their PA that year did not instruct CPF Board to start their retirement payouts. Out of this segment, you were not able to provide a further breakdown of RSS members who consciously decided to keep their savings in CPF and those who did not know that they could have started receiving their payouts.

“6 in 10 members on the RSS who had reached their PA that year did not start their payouts even by the time RSS members reach 70, about half have not come forward to start their retirement payouts. Some among them may have consciously decided to keep their savings in CPF because they have no need of the payouts and also because they wanted to earn a higher interests. Others may not have known that they could have started their payouts earlier and thus did not instruct CPF Board.”

– Josephine Teo on “why not start CPF payouts automatically at age 65?” –

As a member of the public, I would have preferred to have more clarity. If you had provided a more detailed breakdown of the number of RSS members who started their payouts at the age of 70 and later. It would be a fair assumption that majority of this group are intentionally keeping their savings in CPF.

For RSS members who started their retirement payouts between the age of 66-69, it would be fair to consider them as RSS members who did not know they could have started their payouts earlier.

Having this detailed breakdown could have helped Singaporeans better understand the current situation of our CPF Life payouts and justify the actions taken by the CPF Board today.

Unfortunately, we do not have these figures today to make better judgement.

Broken Promises: Not honouring the default CPF Life payout age automatically

The default CPF Life payout age is 65. I’m glad that you have mentioned that this have not changed. However, by making it compulsory for RSS members to take action, in order for the default CPF Life payout to commence does not seem fair and reasonable.

As a member of the public, it’s natural that I would perceive that the CPF Board is going back on its word and breaking promises on its obligations of paying out CPF Life on time.

Imagine you bought an annuity insurance from an insurer that promised to start annuity payouts at 65. You did your part in paying the monthly premiums to the insurer year on year as a responsible policyholder.

The insurer then decides to delay your annuity payout by 5 years if you do not take action to indicate that you want to start receiving payouts at 65.

Although your annuity policy will continue to accumulate bonuses, does that seem fair to you?

We are wasting taxpayers’ money if we do not change existing processes

Today, we lack data-driven proof to justify the current process of CPF Life payouts. Precious manpower in the CPF Board are being wasted on attending to RSS members to process a redundant CPF Life payout process and it seems that in your speech, you are committed to spend more taxpayers’ money to tell RSS members to head to CPF Board to process their CPF Life payout.

“The right thing to do therefore, is to reach out to those members who may not have a good understanding and give them clear and simple information to help them make their decisions. With the benefit of knowledge, those who wish to, can still start their payouts anytime after 65.”

– Josephine Teo on “why not start CPF payouts automatically at age 65?” –

It just does not feel like it’s the best use of manpower and taxpayers’ money.

What the CPF Board should do, is to gather and analyse more data about existing CPF Life payout behaviours and make an informed decision based on data.

Educating the public on benefits of deferring their CPF Life payouts

As a personal finance blogger, I started planning for financial independence and retirement much earlier than my peers. I can definitely see the benefits of delaying my CPF Life payouts to by 5-10 years if I have other sources of retirement income to pay for my expenses between the age of 65 to 70, or even 75.

“Members may therefore prefer to start their CPF Life payouts later. This is especially so if they have other savings to draw on…”

– Josephine Teo on “why not start CPF payouts automatically at age 65?” –

However, we can’t expect all Singaporeans to be like me and it wouldn’t be fair to the local majority.

While I feel that the CPF Board has done a great job with their marketing communication efforts over the past year in engaging the public, more could be done in educating the public, the benefits of delaying their CPF Life payouts and the other types of retirement income sources they could consider pursuing at the same time.

Conclusion

While there is still a lot of negativity around CPF Life in some of the public but I believe many are starting to turn around and understand the benefits of CPF Life.

I hope the government can make informed decisions and focus on addressing what’s wrong with our CPF Life payout system today. Taxpayers’ money can then be spent on educating Singaporeans to make better retirement planning decisions.

I understand that you may have lots to do on your hands right now and may not be able to reply to this lengthy email. But I hope you would reconsider your stance on the current CPF Life payout process for the benefit of Singaporeans.

Best Regards,Mickey JPersonal Finance Blogger at RetireBy50.me