When CPF announced the Lifetime Retirement Investment Scheme (LRIS) scheme few days ago, I was disappointed. I think CPF have failed to understand what people meant by “Flexibility”. To be honest, I am a big fan of the CPF Life scheme. It was very simple and clear. If you haven’t heard of it, check it out here http://ladyyoucanbefree.com/2014/06/08/my-retirement-planning-project-2014-sgd-1-k-per-month-guaranteed-for-life-with-cpf-life/.
I thought that was a brilliant scheme to bring peace of mind to folks who are on their way to retirement. It also gives their kids peace of mind that if they could help coach their parents to achieve that minimum sum target before their retirement, they are assured that their parents would at least have a decent retirement income for the rest of their life, thus the kids can finally focus on building up their own family and retirement.
When I was sharing the CPF Life scheme with my friends, these were the typical feedback.
- The government is just using this scheme to delay us from withdrawing our money.
- The basic monthly income is questionable, they will just keep increasing the minimum sum.
If you really look deep into these feedback, basically it’s the lack of TRUST. Instead of focusing on creating that trust with the citizen through education or finding ways to help all citizen achieve that minimum sum targets, they have instead focused on creating more confusion with the introduction of LRIS scheme.
If I am a retiree, the last thing I need is risk and I really do not know how long I am going to live. Thus, I don’t really understand the purpose of having a LRIS scheme that introduce risk, give me a lower payout so that I could perhaps get a 2% increment every year to match “inflation”. Maybe you may find this a sweeping statement but that is the first impression I have and probably many other citizens might have just by reading the press releases.
To me, everyone should regard CPF as their basic survival safety net for retirement, nothing more. Why bother addressing the segment that are capable and willing to take risk. If they are willing to take risk, they should be using whatever additional assets they have to take that risk. Focus instead on the ones that cannot fulfill the minimum sum e.g. the spouses who are not working, the low income group. Increase the financial literacy of the entire population so that they can then be savvy enough to build good money management habits and make better investment decisions.
To find out more about this LRIS scheme, check out this 15 pages published by CPF or a high level overview by Straits Times.
Here are some of the interesting views from the bloggers you may want to check out. It’s funny though, many of the financial bloggers thought the LRIS scheme is a good one, but many would not want to opt for it :-).
Keep It Simple CPF ! Keep It Simple !