Why The Singapore CPF System Is The Envy Of Many Other Countries

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As we progress to the final week of 2023, it is also the time where many Singaporeans and Permanent Residents (PR) in the financial community flashing and showcasing the interests that they earn from their Central Provident Fund (CPF) account!  This seems to be a yearly affair for many individuals out there, and seeing all those eye-popping numbers definitely inspire and motivate me to try to push my numbers up (yes, I take this positively as a form of motivation, and nope, I am not jealous, probably just envy, lol).  As stated in my previous post, I have managed to reach Basic Healthcare Sum (BHS) in 2023, but with the increase in BHS limit in 2024 to SGD 71,500.00, my monthly CPF contribution will still need to flow to my Medisave Account (MA) to achieve the new limit.  For Special Account (SA), I am still very far away from the Full Retirement Sum (FRS), so just got to continue with my contribution and hope to build up soon.

Back to the topic of CPF, it has been a hot discussion topic in various countries.  In Taiwan, this video discussed and praised the CPF system in Singapore.  As a Malaysian myself, I also see much debate about the effectiveness of the EPF (Malaysia's version of retirement fund), with many praising the pros of CPF as compared to EPF.  I know that many Singaporeans and PRs dislike the CPF system, but to me, I think it is wonderful.  The Ordinary Account (OA) can be used to purchase property, for education, and also be invested in selected funds to increase returns.  SA, although strictly meant for retirement, can also be invested in selected funds to increase returns.  MA, on the other hand, is to be used for medical purpose, and also usable to pay for selected insurance premium.

Personally I do not have EPF as I only worked in Singapore, therefore I only contribute to CPF.  Personally I think CPF is good, and become the envy of many other countries as there is strict regulations regarding how the monies in CPF can be used, where and when it can be used by individuals.  This is precisely the part which irks many individuals who dislikes the system, as they do not like how, where and when their own money is being dictated by the government.  However, I think this is good as this system acts as a form of disciplined savings by individuals to cater for one's retirement, and this is why Singapore is not a welfare state (I support this totally) as the government has helped her citizens and residents to manage their retirement.

As a simple comparison, the EPF system is less stringent.  This is evident during the pandemic period, where the government allowed citizens and residents to withdraw a particular amount from one of the account in their personal EPF.  This is due to 2 reasons.  Firstly, many individuals need the money for their daily expenses due to loss of work or other repercussions of the lock-down period, and secondly, the government do not have sufficient resources to help her citizens at that time via cash distribution.  Details of the criticism towards allowing citizens to withdraw from EPF can be seen in this video.  The result of this is many Malaysians cannot afford to retire due to the limited funds remaining in their EPF.  

With this, I would like to repeat that I am privileged and I am not too badly impacted financially by the pandemic.  I understand the concerns of many individuals who wants access to their CPF (or EPF) funds because what is there to look forward in retirement if one does not even have enough to allow them to survive the next month, or week.  With regards to these individuals, I hope the government has resources to help them.  However for others, I hope that one day, they can appreciate the rules and regulations laid regarding CPF.  

Personally I regard the CPF as a bond component in my overall portfolio.  Therefore, I do not invest my CPF monies, instead, I let it compound at a risk-free 4%.  This shall remain as my safety net and I will continue to grow it, and hopefully I can hit the full retirement sum one day.  Barista FIRE, here I come...!

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