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For the second time in just over a decade, the CPF system provided the economy with the key adjustment mechanism to regain cost competitiveness. The employers' CPF contribution rate was reduced from 20% to 10% on 1 January 1999 thus reducing the overall CPF contribution rate from 40% to 30% of wages. Though it is too early to draw any comfort, the relief in wage cost provided by the CPF cut is decisively persuading companies and employers to move from a retrenchment to at least a holding, if not, expansion mode. The current economic difficulties will be overcome as Singapore did in 1986.
The CPF cut is a temporary setback to the build up of CPF savings for retirement. It has also affected a number of home owners' ability to repay their housing loans. To help them tide over this difficult period, the Government and the Board have come up with a number of measures - suspension of the 4% contribution to the Special Account, use of the Special Account savings to service the housing loan, as well as the introduction of the Government Bridging Loan Scheme.
CPF members who find investing under the CPFIS perplexing may leave their savings in the CPF with a guaranteed minimum interest rate of 2.5% per annum tax free. It was announced in March 1999 that the CPF interest rate will be improved by giving a higher weightage to fixed deposit rates in the formula used to compute the CPF interest rate. As from 1 July 1999, the CPF interest rate will be computed based on 80% fixed deposit rate:20% savings deposit rate instead of the present 50%:50% formula. It will also be adjusted more frequently - quarterly instead of half yearly - to be more in tandem with market changes. The savings in the Retirement Account and Special Account will continue to enjoy a spread of 1.5%. This and the revised CPF interest rate formula will help members build up their cash component in the CPF for retirement.
Planning early for retirement is crucial. As a major component for financial security in retirement, CPF savings have to be well managed. Given much freedom of choice in the self management of CPF savings, a CPF member has to exercise his or her choice prudently. It is thus a challenge to the Board and other relevant agencies to help Singaporeans commence their financial planning early. The Board will actively assist members to do this.
The sluggish economy in 1998 saw more employers encountering difficulties in paying CPF contributions for their employees. The situation was however much better than expected as the monthly default rates did not reach the high levels seen in the economic slowdown of the mid 1980s. This is attributed to better management of the situation by the tripartite efforts of the Government, unions and employers, as well as timely action by the Board. The Board will balance the interests of employers and employees in its enforcement of CPF contributions.
With the new millennium just round the corner, much effort was put in by the Board to be Y2K ready by late 1998. The Board has also enhanced its electronic and telephone services in its constant drive to provide better services to customers. The Learning Journey directed at junior college students was launched as the Board's contribution to the National Education Programme. The Board was conferred the Singapore Quality Class Award and the National Productivity Award by the Productivity and Standards Board for its quality work and service. In community relations, the Board received the Platinum Award from the Community Chest of Singapore, the SAF Outstanding Award for Employer and the Singapore Civil Defence Force Award for Employers during the year.
In July 1998, the Board bid farewell to Dr Andrew Chew who had been the Chairman of the Board for the last four years. On behalf of the staff and the Board, I would like to express our appreciation to Dr Chew for his outstanding leadership. We wish him success in his new appointment as Chairman, Public Service Commission.
Mr Chionh Chye Khye of the Housing Development Board and Madam Ng Mie Ling from the Ministry of Manpower completed their terms as Board Members in 1998. I would like to thank them for their invaluable contributions to the Board. They are succeeded by Mrs Wong-Tan Poh Hong and Mr Ong Yen Her respectively. We extend them a warm welcome.
During the present period of economic uncertainty, my Board Members and I are confident that together with the Management and staff of the Board, we will be able to help CPF members adjust to the changing circumstances, and continue to save for their old age.
Ngiam Tong Dow
Chairman
Central Provident Fund Board
July 1999 |