Some 60,000 or more than a third of Retirement Sum Scheme (RSS) members currently receiving their monthly payouts will see an increase in payouts from next year, following changes to the rules.
Payouts through the RSS, the main Central Provident Fund (CPF) retirement payout scheme for members born before 1958, will be capped at age 90 instead of the current 95 from next year, Manpower Minister Josephine Teo announced in Parliament yesterday.
The new rules will apply to all RSS members who turn 65 from July 1, 2020, and will take effect from Jan 1 next year for those who are currently getting payouts. Around 160,000 RSS members have passed the payout eligibility age and have started receiving payouts.
Mrs Teo was speaking during the debate on amendments to the CPF Act, which also seek to pave the way for a pilot of the Contribute As You Earn scheme from early next year.
On the changes to the RSS, Mrs Teo said the rules were reviewed following feedback that the current payout duration of up to age 95 was too long. Most CPF members aged 65 and above today receive retirement payouts through the RSS.
The first cohort of CPF Life members will reach their payout eligibility age in 2023 and will get payouts for as long as they live. Members are automatically included in CPF Life if they have at least $60,000 in their Retirement Account at age 65.
RSS payouts are currently designed to last up to 20 years from the payout eligibility age of 65 or until the Retirement Account balance is exhausted, and are extended with extra interest earned on Retirement Account savings.
Payouts are extended with extra interest earned on Retirement Account savings from age 55 until the member is 95 years old at most.
Under the revised payout rules, the extra interest earned from age 55 until the member starts getting payouts will be used to increase the payout amount. Extra interest earned after the member's payouts have started will be used to extend the payout duration up to age 90 at most.
Mrs Teo gave the example of a 65-year-old who is starting RSS payouts today and would have a monthly payout of $470 for 30 years under current rules.
Under the new rules, his payout will increase to $520 but end at age 90, after 25 years.
She noted that under the new rules, RSS payouts will cover the life expectancy of about two in three members. Those who wish to guarantee that they will not outlive their payouts have the option of joining CPF Life before they turn 80, Mrs Teo added.
The RSS payout computation will also be separately adjusted so that members will generally see an increase in their payout amount when they make a top-up to their Retirement Accounts or defer their payouts, which they can do so until the age of 70.
No changes have been made to the payout eligibility age or withdrawal rules for RSS members, and members will either get the same or higher payouts as a result of the changes, she added.
A spokesman for the Ministry of Manpower said the range of payout increase depends on individual member's circumstances, such as age, Retirement Account balance and existing payout amount. It will also take into account any top-ups to and withdrawals from the Retirement Account.
HELP FOR FREELANCERS ON MEDISAVE CONTRIBUTIONS
Freelancers working directly for the Government and public sector agencies will have a portion of their fees channelled automatically towards their Medisave accounts from early next year, as part of a pilot of the Contribute As You Earn (CAYE) scheme.
An initial 6,000 self-employed persons such as photographers and translators will benefit with the changes to the Central Provident Fund Act, approved by Parliament yesterday.
Manpower Minister Josephine Teo told the House that the CAYE scheme will help self-employed persons keep up with their Medisave contributions.
She gave an example of a 48-year-old football coach who has a net trade income of $30,000 and has to contribute $3,000 or 10 per cent of it to Medisave, based on his age and income.
Currently, he would contribute the $3,000 in a lump-sum payment or instalments the next year. Under the CAYE scheme, if $13,000 of his earnings are from government clients, they would contribute $1,300 directly to his Medisave account. He would have to make a lump-sum contribution of only the remaining $1,700.
Several association leaders and labour MP Ang Hin Kee (Ang Mo Kio GRC) have suggested that the Government provide some matching of freelancers' Medisave contributions when they take part. Mrs Teo said the Government will look into giving some support for those participating in the pilot. Self-employed persons who are up to date with their Medisave contributions can opt out of it.
Several of the seven MPs who spoke, including Mr Patrick Tay (West Coast GRC) and Non-Constituency MP Daniel Goh, asked about extending the scheme to the private sector and union representation for freelancers.
A decision has not been made on whether CAYE will be extended to include payments made to freelancers by private sector companies or intermediaries such as for insurance and real estate agents, Mrs Teo said.
The amended law also allows employees to apply for a refund of the CPF portion of sign-on bonuses if they have to return it to their employers. This can be made within one year of having to return the conditional wage.
Source: The Straits Times © Singapore Press Holdings Limited. Reproduced with permission.
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