SINGAPORE — Amid a worsening economic outlook, the government cannot preclude cutting Central Provident Fund (CPF) contribution rates by employers and employees in the future, said Manpower Minister Josephine Teo on Thursday (4 June).
However, should there be a decision to do so, it would be taken “very carefully and certainly not lightly at all”, Teo said in Parliament, because of the permanent loss to a person’s ability to accumulate savings for retirement.
Teo was responding to Marine Parade GRC MP Seah Kian Peng, who had asked if the government would consider temporarily reducing CPF rates until the economy recovers from the COVID-19 crisis.
The country’s gross domestic product forecast for 2020 was last week revised to a contraction of 7% to 4%, down from a projected decline of 1% to 4%.
Every little bit on the table will help: MP
Seah, who is also chief executive of NTUC Fairprice Co-operative, noted the increasing prospects of job losses and wage cuts. In a supplementary question, he called for the government to consider CPF cuts “proactively”.
“For most employees, the fact is that many of them are bringing back less. So every little bit that we could put on the table for them is something which will certainly help them,” he said.
Referring to Teo’s initial reply, Seah added, “I know you have said that you will consider this, this is still on the table, but I think we need to do it a bit more proactively, given the looming and the likelihood of more wage cuts coming on stream.”
Seah said he hopes the minister will consider the issue as a “high priority item” and effect the changes to the CPF rates earlier rather than later.
Teo replied that the government is mindful that employers are trying to keep their workers employed.
While the government cannot preclude the possibility of CPF rate cuts, she said, “Once that savings opportunity is forgone, it cannot easily be reclaimed. And it usually takes a very long time to eventually restore whatever rates that have been cut. And certainly for the individual, there is very little likelihood that they can make up for what they were not able to grow in their CPF savings.
“So it is a decision that we have to take very carefully and certainly not lightly at all, especially in consideration of the fact that our people will continue to live long lives.”
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