Personal Finance
Central Provident Fund – Nest Egg|Retirement Egg|Smaller Egg?
By Five Cents Ten Cents  •  January 3, 2009
CPF Many of us rely on our Central Provident Fund or CPF as the main source of retirement funding. I’ve explored in my retirement series why this is risky. The Government has allowed the CPF to be used for housing as well as for medical and even education and for investments. It’s retirement purpose is getting more diffused even as the Government continues to reduce the amount of employers’ CPF contributions back in Oct 2003 from 16% to 13% before reinstating it to the current 14.5%. Mind you, the reinstatement doesn’t cover the fact that CPF contributions are also capped at monthly income of $4,500 so your employer doesn’t have to contribute more if you earn more than that amount. I ran a poll along with Derek from TheFinance.sg because there were ominous noises that the convening of the National Wages Council earlier would herald the risk of a employers’ CPF contribution rate cut. The sample size is 46 participants. Such a cut may help lower employers’ payroll costs but unlike the previous economic downturn during SARs, this period of recession has its roots in the global financial meltdown due to sub-prime and the US banks taking the whole world for a ride on their toxic collateralised debt obligations and other risky products. A move to cut CPF may save jobs, but it damages retirement savings for the next 20-30 years. Many of you are skeptical that the Government will NOT cut CPF employers’ rates until Lim Boon Heng came out to reassure the public as majority 65% believed that the Government will actually cut CPF employers’ contribution rates. 28% felt that the Government would not while 7% actually didn’t know what CPF stands for! Other than the 7%, I think many who have gone through CPF cuts in the past know that nothing is cast in stone. If jobs have to be saved, CPF cut appears to the blunt policy option favoured by the Government. As the current indication appears that no cut is imminent, the question then is are elections around the corner? Who knows, only time will tell. In the meantime, tell Panzer your own stories about CPF cuts in the past affecting you in the comments section. Be well and prosper. Source: Five Cents Ten Cents
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By Five Cents Ten Cents
PanzerGrenadier is a 30-something accountant who finally grasped the concept of financial freedom at the ripe old age of 32. Ever since, he has been travelling on his journey towards financial freedom and documenting his adventures through his blog "fivecentstencents". PanzerGrenadier allocates his non-work time in between living within his means, saving and investing as well as spending quality time with family. He is an avid toastmaster and has completed 10 years of being a reservist conscript in the Lion City.
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