18th September 2012
I think it may defy common sense as to why anyone would not prefer cash, because cash can be used for housing (like the CPF Ordinary Account (OA)), medical (like the MediSave Account (MA) abeit with restrictions of use), and the Special Account (SA) can only be utilised from age 65 as monthly payouts under the CPF Life annuity scheme?
Even for those who may want the higher interest rate in CPF, they can always use cash to top-up their CPF under the CPF Topping-up scheme.
Workfare helps retirement?
As to “WIS was introduced to help low-wage workers build a retirement nest egg, said Mr Zanal, who heads a NTUC division that looks after contract, casual and low-wage workers, “But the reality is that their net incomes are actually insufficient to help them cope with rising costs”, he said”, I thought the original main purpose of introducing Workfare was to help older low-wage workers increase their wages to help them with their living expenses.
Self-employed: 100% to MediSave
Notwithstanding the above, if the purpose is to help low-wage workers build a retirement nest egg, why is it that 100 per cent of the Workfare payout for the self-employed is to their MediSave?
MediSave helps retirement?
The MediSave of low-wage households may be depleted by rising medical costs.
After all, in theory, isn’t MediFund supposed to help those low-wage families who are unable to pay for their medical expenses, under Singapore’s “affordable” healthcare system?
Workfare ratio – 1 : 2.5 (Cash/CPF)
Clearly, the current Workfare cash to CPF ratio of 1 : 2.5 for workers, is overskewed towards CPF.
For example, for a Workfare monthly payout of $100, only about $29 is cash, with the balance $71 evenly split between the OA, SA and MA accounts. This cash payment of just $29 may not be of much help to low-wage workers, particularly in the light that inflation is now running at 5.3 per cent.
Let the people choose
Actually, there may be a simple solution – have a default option of a combination of CPF and cash, and allow people to opt for cash only.
Leong Sze Hian
Leong Sze Hian is the Past President of the Society of Financial Service Professionals, an alumnus of Harvard University, Wharton Fellow, SEACeM Fellow and an author of 4 books. He is frequently quoted in the media. He has also been invited to speak more than 100 times in 25 countries on 5 continents. He has served as Honorary Consul of Jamaica, Chairman of the Institute of Administrative Management, and founding advisor to the Financial Planning Associations of Brunei and Indonesia. He has 3 Masters, 2 Bachelors degrees and 13 professional qualifications. He blogs at http://www.leongszehian.com.
That is the reason I did not apply for any workfare benefits because it does not solve the problems for the low income workers, it is just a “show” that the government is “helping” but what is the use of “money” you cannot put to good use unless you use it to pay your housing loan, but most of the low income is staying in rental flats, will it makes a difference?
– Contributed by Oogle.
18th September 2012