Chapter 3: The Provident Fund
Singapore’s Central Provident Fund (CPF) is the centrepiece of Singapore’s social economy. It is, second only to the family, the nest-egg that smoothes the passage through old age and dependency. It is the earmarked medical account that makes health care affordable. CPF can be used to buy a home. CPF converts private savings into public investment. CPF insulates a cautious government from the discretionary ratchet of populist tax and spend. This chapter is concerned with the contribution that forced saving makes to the well-being of the old and the ill in a country that has sought to avoid the pitfalls both of American Social Security and of British National Insurance. The chapter is divided into six sections. Section 1 defines the Provident Fund. Section 2 explains the Ordinary and the Special components. Section 3 examines the balance at retirement which, it suggests, might not yet be very large. Section 4 explores the maze of repayments and annuities. Section 5 identifies problem areas which the superannuation system will one day have to address. Section 6 asks the big question: will CPF be sufficient to afford its members a decent minimum in their sunset years? 3.1 THE CENTRAL PROVIDENT FUND The Central Provident Fund was established by the British in 1955. It was redesigned by the Singaporeans in 1963. The Fund is administered by a statutory board which is under the Ministry of Manpower. Membership is mandatory for all employees earning more than S$600 a year (S$50 a month). Contributions...
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