WP proposing to start payout from 60 yo. What are your thoughts?
First of all, we already have a minimum CPF withdrawal age of 55. Some people can withdraw a lot (even the bulk) of their savings at 55, and others can withdraw a little. But you can already get a monthly payout of some size from age 60 to 65 (or even 55 to 65) if you wish: just make some withdrawals, paced within your pre-65 limit. If you wish, you can get a big monthly income from age 60 to 65 — over $1,500/month it looks like — if you simply make a property pledge or charge and start reducing your Retirement Account from the Full Retirement Sum to the Basic Retirement Sum at age 60, paced monthly. (Take $90,500 — the current 2020 difference between the FRS and BRS — and divide it by 60 months.) That’s way bigger than your BRS-level CPF LIFE monthly income would be.
In terms of the life annuity portion (CPF LIFE), with a hypothetical age 60 payout start you substantially reduce the monthly payout amount in both real and nominal terms. The nominal reduction in payout amount looks like it would be roughly 25% at least (based on a quick check using an annuity calculator) versus age 65 payout start. What this means in practice is that functional poverty among 60 to 64 year olds would decrease a little (among individuals who are “CPF poor,” not working, have no other sources of wealth, have already exhausted their age 55+ withdrawals, and/or don’t qualify for a hardship withdrawal), and poverty among 65+ year olds — particularly among 80+ and 90+ year olds — would increase rather more. That’s not a great trade!
If you are concerned about poverty within the age 60 to 64 bracket, then it’d be much better to solve that problem without increasing poverty among the oldest Singaporeans (often the same people in their future selves, plus more people), which is already worse than it should be. For example, if you are concerned about poverty due to disability, then you could tweak CareShield Life so that it has a 2 out of 6 ADLs disability definition for everyone under age 60 and a 1 out of 6 ADLs definition from age 60. That’ll increase CSL premiums (among those who can pay them — subsidies would also increase), but why not? And/or you could increase ComCare payouts and loosen eligibility, which in turn could be funded with an income tax increase — for example, a new 30% top income tax bracket starting at S$1 million. Or maybe an ABSD-like property tax, meaning you pay not only ABSD but also a higher property tax rate for second and subsequent holdings. This’d be a form of wealth tax. And/or tax interest paid by banks and other institutions in Singapore to depositors (foreign and domestic) on a tax withholding basis (the institution collects and remits the tax), at the same rate as GST. Add a portion of this interest tax to the GST rebate vouchers, and keep the rest.
