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CPF - F1 or F9 : Poor get less % than the rich?

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  • lotus999's Avatar
    874 posts since Apr '05
    • Is the govt helping the poor or the rich?

      CPF - F1 or F9 : Poor get less % than the rich?

      Posted by theonlinecitizen on July 2nd, 2007
      By Leong Sze Hian

      I REFER to NTUC's proposal to reduce the CPF contribution for lower-income workers and put 40 per cent of the Workfare bonus to CPF.

      On the one hand, we are putting more of the Workfare Bonus cash payout to worker's CPF, but on the other, we are cutting their CPF contribution so that they can have more cash for living expenses.

      Since both Workfare and the CPF contribution cut are for lower-income workers, are these not contradictory?

      For example, if the employee's CPF contribution is lowered from 20 to 10 per cent, and the proposed 40 per cent of Workfare is channelled to CPF, for a worker earning $600 a month, his or her take-home pay would increase by only $20 a month ($600 multiplied by 10 per cent, minus Workfare - $1,200 multiplied by 40 per cent, divided 12).

      This is an increase in disposable cashflow of only 3.3 per cent. In contrast, if the Workfare bonus is left unchanged as a fully cash payout, the increase in cashflow would be $60, which is three times more. For those whose monthly HDB flat mortgage repayment is $120 or more, the CPF and Workfare changes may not improve their cash flow at all, as the net cash disposable income of $100 or lower would be less than the existing $100 Workfare cash per month.

      It may also be counter-productive to use Workfare to top up workers' CPF, and then pay them a lower interest when they retire.

      In the past, those who had less than the CPF Minimum Sum (MS), and chose not to withdraw half their account balance allowed, were paid 4 per cent on their entire CPF account balance. Now, those who turn 55 with less than the MS, currently $94,600, who choose not to withdraw half of their CPF balance, as the other half will be transferred to the Retirement Account (RA) which earns 4 per cent, are now only paid 2.5 per cent.

      Why is it that Singaporeans are not allowed to keep as much of their CPF as they like, to earn 4 per cent interest, when they retire? For richer Singaporeans who have more than double the MS, which is $189,200, they will be paid 4 per cent on the entire MS of $94,600. Hence, the current policy pays the rich more and the poor less.

      To further illustrate this unfairness, a rich man with $189,200 will get 4 per cent on $94,600, whereas a poor man with $94,600 will get 4 per cent on $47,300 and only 2.5 per cent on the other $47,300.

      According to the Department of Statistics' (DOS) General Household Survey 2005 (GHS), there were 106,384 households with no working persons, presumably most of which are retirees. With the rapidly ageing population, Singaporeans who are risk adverse or not investment savvy, may have a dire need for their CPF after the age of 55 to earn 4 instead of 2.5 per cent.

    • another eg of the poor losing out more:

      CPF - F1 or F9 : Pay up to 22% to use MediSave?
      Posted by theonlinecitizen on July 6th, 2007

      By Leong Sze Hian

      According to the Ministry of Health's (MOH) website, the Central Provident Fund (CPF) Board has been recovering the cost of Medisave deduction transactions to pay patients' medical bills through an administrative fee of $3.05 ever since Medisave was introduced in 1984.

      Information technology was still in its infancy 22 years ago and the number of Medisave accounts and transactions were much fewer than today.

      With today's advancements in information technology systems and economies of scale, how can the cost of a Medisave bill deduction transaction be still $3.05 plus another 70 cents to cover the cost of National Computer Systems, which in total is even higher than the $3.05 in 1984?

      What was the total Medisave administrative fee collected by the board in 1984 compared to now?

      MOH states that the fee 'is levied on all institutions, which may choose to absorb it as part of their running costs'.

      How many health-care providers have been absorbing the fee over the last 22 years?

      Why is it that a fee is charged for Medisave withdrawals, but not for housing loan, investment, education and retirement annuity withdrawals from CPF?

      More affluent Singaporeans probably do not need the $300 a year use of Medisave for out-patient treatment under the new chronic diseases scheme. It is the needy and lower-income who may have no choice but to use Medisave.

      The flat $3.75 administrative fee penalises those who need it most, because they may typically incur smaller medical fees for each treatment.

      For example, if the medical cost is $50, the amount that can be deducted from Medisave after the $30 deductible and 15 per cent co-insurance is only $17. In this example, the fee works out to be 22 per cent of the deduction amount.

      If you are poor and cannot afford to pay in cash, what choice do you have, even though it does not make much sense to pay 22 per cent? This is simply not right.

      I would like to suggest that charging on a percentage basis instead of levying a flat fee be considered.

      For example, if the percentage is, say, 1 per cent, those making a $50 deduction will pay 50 cents, and $3 for a $300 deduction.

      Alternatively, patients could be allowed to transfer the maximum $300 a year in one go to the health-care provider, so as not to incur multiple fees for each treatment.

      We often see replies from government agencies justifying an existing practice by saying that it has been around for a very long time.

      Instead, perhaps we could try to ask the question - Why are we still doing it the same way after 22 years.

  • pearlie27's Avatar
    1,142 posts since Nov '04
    • Very sadly this is what is happening in Singapore, the poor aren't getting the protection they need.

      Btw, NTUC is a govt-controlled union and has never fight for the workers.

  • dragg's Avatar
    49,241 posts since Mar '05
  • pearlie27's Avatar
    1,142 posts since Nov '04
    • lotus999 seemed to have missed out this piece that is useful to those who have a some money but not that much in the CPF:

      CPF - F1 or F9 - Do you know who gets your CPF when you die?

      Posted by theonlinecitizen on June 28th, 2007

      By Leong Sze Hian

      CPF announced the amendment of the treatment of Special Account savings invested in fixed deposits, and media reports that the CPF Board has reminded three non-bank investment administrators (IAs) that members' CPF Investment Scheme (CPFIS) money used for investments cannot be parked in cash accounts.

      Since the net interest rate currently, and that earned on these cash accounts for last year, was between 2.6 and 3 per cent, is it to the benefit of CPF investors to have these monies sent back to their CPF Ordinary Account (OA), which pays a lower interest of 2.5 per cent?

      As fixed deposit interest rates now and since the CPF Special Account Investment Scheme (CPFSA) started about five years ago have never exceeded the 4 per cent interest paid for the Special Account (SA), why would anyone want to invest his or her SA in fixed deposits? So, why does the CPF Board allow SA monies to be invested in fixed deposits?

      Keeping CPF money in cash accounts earning higher interest than the OA is not allowed, but fixed deposits earning less than the SA are allowed?

      By allowing investment in an investment category that has always returned less than 4 per cent, CPF account holders who are not so savvy in investing may end up with less than the SA default interest.

      I received a letter from one of the three IAs, informing me that

      'any balance CPF monies in your Cash Account(s), if not invested by Feb 5, 2007, will automatically be refunded to your CPFOA Investment Account with your Agent Bank and/or CPF Special Account by Feb 26, 2007. We wish to highlight that no interest will be accrued and payable to your Cash Account(s) with effect from Feb 1, 2007'.

      So, what happens between Feb 1 and Feb 26? Nobody (IA or CPFIS Agent Bank or CPF) is paying any interest at all?

      The change to treat SA savings invested in fixed deposits as part of the estate may mean that more of Singaporeans' CPF could be subject to estate duty, because there is unlimited exemption from estate duty for CPF. Every time the CPF Board decides to make CPF utilised as part of the estate like the CPFIS, New Singapore Shares, etc, the benefit of unlimited CPF exemption is diminished.

      In a way, the only party that benefits from such changes is the Inland Revenue Authority, by way of more estate tax collection.

      The other implication is that the SA invested will be distributed in accordance to one's will or intestacy, instead of by CPF nomination. Last year, when the Dependants' Protection Scheme (DPS) was transferred to two private insurance companies, most of the 1.7 million insured did not know their CPF nomination was no longer valid, and they had to re-nominate or write a will depending on which insurer they were assigned. After much public furore in the media, the insurers have individually notified those insured to inform them.

      I would therefore like to suggest that the CPF Board notify CPFSA account holders individually of the change as soon as possible. Otherwise, as in the case of DPS, every day there are people dying, without realising that their CPFSA fixed deposits may go to beneficiaries other than those they had intended under their CPF nomination.

      For lower-income Singaporeans who die with a will and have, say, about $6,000 in their CPFSA fixed deposits, he or she would have to pay at least $3,000 in legal fees and costs for the estate probate and distribution.

      Why not maintain the status quo and leave the SA as part of CPF, so that it can be paid to nominees without incurring any costs, shrinkage to the estate, or delay? How many people are savvy enough to know that if they know that they are going to die, they can liquidate all their CPFIS investments, CPFSA, use cash to redeem the CPF used for property purchase, for return to their CPF account to enjoy the unlimited estate duty exemption for CPF?

      By the way, why is it that the Economic Restructuring Shares (ERS), which were given later than the New Singapore Shares (NSS), are not part of the estate, whereas the NSS are?

  • ShutterBug's Avatar
    6,078 posts since Feb '04

    • Without reading everything here, by instinct all these while, I know CPF is just a device for government to make money and an excuse to say we are "cared" for...

      I, Don't, give, a SH|T about it...!!!

    • Ain't it funny, nobody wants to talk about CPF???

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