Extra CPF interest 'more than sufficient' to cover premiums
THE Government is already funding the longevity insurance, said Manpower Minister Ng Eng Hen yesterday.
How?
With the extra interest to be given out on Central Provident Fund (CPF) members' savings.
That would be "more than sufficient" to pay for the premiums of the basic longevity insurance product, said Dr Ng.
He was responding to MPs who had wanted to know what the Government's contribution to the new scheme would be. Over the three days of debate, several of them said that the Government ought to also step in and put something into the fund, along with what members put in.
Dr Ng revealed that the extra one percentage point which CPF members are getting for their first $60,000 balances will cover the premiums of the basic product of the longevity insurance.
But this was not the same as the Government directly funding or subsidising the new insurance scheme, he said.
"We are strengthening our CPF system, by putting in place a missing piece, a missing critical piece with longevity insurance for those who live longer than expected so that they savings don't run out.
"But this system must be put into place for many generations after us. We should not begin with the philosophy that it should be subsidised from the outset," he said.
"CPF system works and is sustainable because it is based on savings, not tax. Each must save for himself and his own needs. We must not depart from this fundamental strength of our CPF system." |
COMPULSORY, but there will be choice.
Manpower Minister Ng Eng Hen assured Parliament yesterday that while the longevity insurance is mandatory for all CPF members, aged 50 and younger, it will be flexible to cater to different needs.
More importantly, it will be 'fair to all', he said.
The scheme, which he called 'another integral piece' of the Central Provident Fund system, will also be administered by the CPF Board, ensuring that the premiums are affordable.
In response to Madam Halimah Yacob (Jurong GRC), who was concerned that the scheme signalled a move from self-provision to shared responsibility, he also argued that it was quite the opposite.
'That is a cardinal principle on which our individual accounts in our CPF is based, that each must save enough to last his lifespan for his own needs,' he said.
The longevity insurance would actually strengthen the principle of self-provision, he said, with each person setting aside a small sum of money to guarantee monthly income for life - if he lives longer than 85.
Reiterating a point which Prime Minister Lee Hsien Loong made after he announced this annuity scheme during his National Day Rally speech last month, Dr Ng pointed out that the goal was to provide 'basic, affordable and flexible' options.
The Committee for the National Longevity Insurance Scheme, led by Professor Lim Pin, would consider the options and propose the design of the scheme.
Many of the options suggested by MPs would be possible, said Dr Ng.
Members could decide what kind of longevity insurance they prefer, ranging from the basic product to an additional rider, he said.
They could also choose when they want to get their annuity payments. It may be possible to get it at 75 instead of 85, or even kick in only when they reach 95.
The scheme is also likely to be flexible on how they can pay for it with their CPF Minimum Sum.
Even the payout amounts are not cast in stone yet, said Dr Ng, suggesting that they not be preset and that the committee be allowed to recommend whether it should be at subsistence, $300, $400, $500 or more.
Indeed, to all these options suggested by the backbenchers, Dr Ng replied: 'I say, why not?'
He acknowledged that stretching out the Minimum Sum - as some in and out of the House had suggested - could be yet another option but noted that it would reduce the sum's monthly payouts.
It would also not cover the scenario of significantly extended longevity because of medical breakthroughs.
Dr Ng argued that the longevity insurance was better because it would use only a small fraction of the retirement savings to guarantee monthly income for life.
Since only a small fraction of the Minimum Sum would be for this insurance, the monthly payouts that members would get from the Minimum Sum could then be higher.
He took pains to stress that the insurance, which filled a 'missing gap' in the CPF scheme, would be fair to all.
'No specific group should feel that they are disadvantaged. We should let professionals determine the risks and the adjusted premiums,' he said.
'The actuarial information will be transparent - how long you need to live to break even or get more with your premium, should be supplied, so that people can choose the plans with full information.'
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