Keeping CPF Special Account for 55+ may create 'generational divide': Tan

The proposed change primarily impacts higher-income earners, said an official.

Minister for Manpower Tan See Leng has warned of a potential generational divide if the Central Provident Fund (CPF) Special Account (SA) for members aged 55 and above get retained, whilst those of younger members are closed.

Tan said the suggestion, put forth by West Coast Member of Parliament Foo Mee Har during the Budget Debate, will benefit the current generation of older Singaporeans but disadvantage younger Singaporeans.

Tan added that the closure of the SA for CPF members aged 55 and above will mostly impact individuals with higher financial means. 

Specifically, only 8,400 members, accounting for less than 1% of those aged 55 and above, who fall into the category of relatively high-income earners, will encounter limitations in fully transferring their SA savings to their Retirement Account (RA). 

The move allows the majority, over 99% of CPF members aged 55 and above, to seamlessly transfer their SA savings to their RA, ensuring the continued accrual of higher long-term interest rates and increased retirement payouts.

He noted these individuals can transfer their CPF savings to their RA or grow them outside the CPF system.

The minister also touched on raising the Enhanced Retirement Sum from three to four times the Basic Retirement Sum in 2025 to benefit the broader middle-income group.

Moreover, concerns also arise for the 720,000 members with withdrawable SA balances, facing potential liquidity loss. 

Tan outlined options, including retaining balances in the Ordinary Account, investing, topping up the RA, or withdrawing funds outside the CPF system.

He said the SA closure aligns with CPF's purpose for retirement, housing, and healthcare. 

“With these clarifications, I trust that members of this House and Singaporeans will better appreciate why we are closing the SA for those aged 55 and above,” said Tan, emphasizing that it “is a matter of principle, not about saving costs for the government.”

“The SA closure should be seen alongside the other significant measures we are making to boost the retirement adequacy of Singaporeans,” he noted.