Concerns raised about CPF Special Account closure and its impact on seniors’ retirement planning
In the first day of the Budget 2024 debate, People’s Action Party (PAP) Member of Parliament (MP) Foo Mee Har proposed that the closure of the Central Provident Fund (CPF) Special Account (SA) for members aged 55 and above should be “grandfathered” for those who are already in that age group. This suggestion would allow the current seniors to retain their SA accounts, while younger members would be subject to the planned closure set to take effect in 2025.
The closure, part of a move to rationalize the CPF system, will see SA savings transferred to the Retirement Account (RA) up to the Full Retirement Sum, with any remaining funds directed to the Ordinary Account (OA). This shift is concerning for many seniors, as the SA and RA offer an interest rate of at least 4%, while the OA provides only 2.5%. Once the SA closes, members who have maxed out their RA savings will earn the lower OA rate on any excess funds.
Foo Mee Har expressed concern that the sudden closure of the SA could disrupt the retirement planning of many middle-income seniors, for whom CPF savings are a primary retirement fund source. She argued that it may be unfair to apply this change to those already planning their retirement based on the higher interest rate provided by the SA.
Other MPs, including Progress Singapore Party Non-Constituency MP Leong Mun Wai and PAP MP Yip Hon Weng, also voiced concerns about the impact of the change on seniors’ retirement planning, particularly around the limited withdrawal options and the flexibility that the SA offers compared to the RA.
Additionally, Workers’ Party MP Louis Chua called the closure a “step backwards” in ensuring retirement adequacy and suggested increasing CPF interest rates or allowing Singaporeans to invest part of their CPF savings with the Government of Singapore Investment Corporation (GIC), which offers higher returns than the OA interest rate.
