K.I.S.S. CPF

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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.

  1. The government is just using this scheme to delay us from withdrawing our money.
  2. 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.

http://www.straitstimes.com/singapore/cpf-review-6-things-to-know-about-the-new-cpf-lifetime-retirement-investment-scheme

https://services.mom.gov.sg/cpfpanel/media/recommendations/part2/Chapter%205_Simpler%20Investment%20Choices%20for%20CPF%20Savings.pdf

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 :-).

http://gotmoneygothoney.blogspot.sg/2016/08/new-cpf-changes.html

http://investmentmoats.com/saving-money/what-is-this-new-cpf-life-escalating-plan-and-cpf-lifetime-retirement-investment-scheme-lris/

Keep It Simple CPF ! Keep It Simple !

  1. LOL!

    Just educate CPF members how to DIY an escalating payout on their CPF OA on top of their CPF Life should be enough.

  2. Nice article, me too also like the CPF Life Scheme, till now I still do not understand the LRIS…. They should focus more in educating us and not coming out more schemes to confuse us…..

    • Lady, You Can Be Free

      Hi Wealth Building,
      Glad to hear that I am not the only confused one… 🙂

  3. I thought CPF is already complex enough. Now one more complexity. Is easy to be complex but hard to simplify. Some people getting lazy ?

    • Lady, You Can Be Free

      Hi Cory,
      Don’t think is laziness. More of trying too hard to pleased everyone but forgetting the core purpose of what CPF was set out to do in the first place and which segment needed this most.

  4. Melanie Lee

    Read yest’s Sunday Times Invest story on CPF… frankly, I am just confused overall. And the committee plans in introduce new recommendations. I cant agree with you more – CPF should keep it simple. And the reason people are losing trust and misinterpreting its good intentions is that it is information overload and clutter!

    • Lady, You Can Be Free

      Hi Melanie,
      Thanks for the note. Hopefully someday CPF can finally understand why it’s more important to harness the power of the people to help them spread the benefits of CPF life than a couple of roadshows and articles to confuse all. I was irritated with the wide range of options because it made my conversation with my aging parents so much more difficult. It would have been so simple if the options had been kept to the minimal. CPF should make it so simple that every tom, dick and harry even children in schools can go home and tell their parents that if they managed to achieve $x in their SA, they would have a safety net of $x per month for life for retirement at age y. The END. Simple as that.

  5. “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 :-).”

    A case of Do what I say, not what I do.

    For me, I minimize contributions to CPF whenever I can.
    There are bloggers who thinks moving CPF OA into CPF SA to earn that 4.5%(not fixed) and compound it till retirement is wise. I doubt it.

    There have not consider the risk premium is already built in to the 4.5%. The risk premium is “Your money is your money but is subject to onerous rules and conditions that is subject to change, meaning I can withheld part or more of your money by a stroke of the pen”.

    Would you want to put your your money in a BANK that promised you a fixed deposit rate of 4.5% (probably a Sibor plus 2% spread) but the BANK can unilaterally revise the rules and conditions of when you withdraw and how much you withdraw and how you can withdraw?

    I don’t think I will.

  6. I share the same sentiments as you!

    Not entirely sure why people think they can try beating the risk free rate that CPF gives using monies meant for retirement. There is simply no guarantee that the investments will turn out well.

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