Pros And Cons Of Allowing Singaporeans To Make Emergency CPF Withdrawals To Tide Through This COVID-19 Crisis
As a result of the unprecedented public health and economic crisis caused by COVID-19, governments around the world, including Singapore, have implemented sweeping social distancing measures and committed vast amounts of financial resources in an attempt to prevent a bad situation from becoming worse.
In Singapore, no less than four Budget Statements have been rolled out since the start of the year that provide for wage subsidies, business financing, cash payouts, job creation, training programmes, and more.
However, there have also been some voices calling for the government to allow CPF members to withdraw some of their monies to meet the urgent needs of today, following in the footsteps of countries like Malaysia.
We examine the pros and cons of Singapore allowing CPF withdrawals, and what implications such a move might have on individuals and the country as a whole.
Why Some Are Calling For CPF Withdrawals As A Response To Present Difficulties?
Before we discuss the pros and cons of allowing CPF withdrawals during this extraordinary time of difficulty for many Singaporeans, we should understand the emotions that are behind this suggestion, which isn’t a new one.
We have previously seen viral posts about how some CPF members were unable to access their CPF monies even though they wish to use it to help fund a family member’s education or to meet urgent needs due to financial difficulties.
We can understand and sympathise with the desire to alleviate today’s suffering, even if that entails borrowing, or borrowing from our future selves, which in essence is what we’ll be doing if we tap on our CPF monies.
Merely Allowing CPF Withdrawals Without Solving Root Causes Won’t Be Enough
The CPF Board’s response to those members have always been that the purpose of our CPF funds is primarily for our long-term retirement needs, which is no less important than our current needs.
If we think about our future selves, we might accept that we’re probably more well-positioned to deal with challenges today, compared to during our old age, when vitality and ability might not be on our side. Instead of eyeing our CPF balances, we should first exhaust the myriad of schemes and support available, as well as be willing to make lifestyle adjustments during this period.
The temptation to draw on the CPF monies we painstakingly accumulated over many years will always be there, but if we do so, these financial resources will no longer be there for us in the future.
No matter how substantial, our CPF funds are finite, and if we don’t solve the root of our challenges, whether that’s not having income or having unsustainable living expenses. If we don’t solve these issues, then it will be a matter of time (perhaps months) before we’re back to needing more money – but this time, with an empty CPF account and a big dent in our retirement plans.
Support Measures Give Greater Support To Middle To Lower Income Singaporeans
All of the money that is now being deployed to help save jobs, companies and the economy comes from taxes paid by the current and previous generations. Because Singapore has a progressive tax system, those who do better pay a greater share of taxes.
On the other end, support schemes are means-tested, which means eligibility criteria and caps on support ensure that help is given to those who need it the most.
Thus, in both tax collection and support dispersion, the operating principles protect the lower and middle echelons of society. It is these same middle and lower income Singaporeans who would benefit from not touching their CPF monies and allowing them to compound without interruption and be able to draw on these savings when they retire.
Lower-Income Singaporeans Are Also The Hardest Hit By COVID-19
Perhaps the strongest argument for allowing CPF withdrawals during this challenging time would be for the portion of Singaporeans who have urgent, even desperate cashflow needs that must be met to prevent them from spiralling into an even worse financial situation.
These include payment of debts, utility bills, and perhaps instalments.
To a certain extent, we can see that some measures have already been introduced to help mitigate these problems, such as deferred mortgage payments, insurance premiums, and conversion of credit card balances into a non-compounding term loan.
U-Save credits and the newly announced $100 Solidarity Utilities Credit should keep the lights on, water flowing, and gas running for the majority of households. Further, the Temporary Relief Fund and COVID-19 Support Grant were designed to provide cash to those whose livelihoods were impacted by COVID-19.
In the Solidarity Budget, hundreds of millions of dollars of additional funding have been poured into Community Development Councils (CDCs) and Community Self-Help Groups (SHGs) to expand their capabilities to provide assistance to those who need them.
These agencies complement the network of Social Service Offices under the Ministry of Social and Family Development, which has schemes to provide cash assistance, grocery vouchers and other support.
All these schemes form a universal safety net available to all Singaporeans, even those especially for those who may not have much in CPF monies to tap on in the first place.