An Examination of High Turnover Rate in CPF Refund Department

An examination of high turnover rate in CPF Refund Department Contents

Introduction

The central provident Fund which is abbreviated as the CPF is a primal source of income for many families in Singapore. This fund mainly substitutes for the families when the earning member of the family is no more into the job of earning money (Blondal, 2006). This is a compulsory savings plan that has prepared a comprehensive stage to stage development and monetary surety policy after the job period and the tenure of a person to work is over. This fund is very useful for the residents of Singapore. The main areas which this fund covers are: a. Retirement life b. Healthcare c. Housing requirements d. Other misc. needs. This mandated amount of fund taken from the employees help them largely. The whole of the world is now looking up to Singapore for the ideal processes to run a provident fund policy. The world is learning as to why and how a CPF policy can acquire so much importance.

The history of the CPF

Tracing the short history of the CPF, we have to go to the year 1955. It was in this year that the British colonial lords of Singapore introduced this comprehensive and authorized procedure of collecting the funds from the ones who are in the government jobs (CHIA, 2015). The main idea behind the contraception of this plan was to grant the employees of the Government a sense of peace and security. There was another very important aspect of the CPF. That aspect was that from the money that was accumulated from the income of the government employees every year granted a fixed rate of return to the government which again was rounded off to be used as a part of the revenue collected. Thus the CPF had two main advantages: 1. It granted the employees with the government a sense of peace and security. They were better placed after their retirement and also they feel gifted as because the government is gifting them an assured amount of money every month in return of their labor that they have been giving for so long years (Chia and Tsui, 2012). 2. The government deposited the money collected in the central bank and again took the money to run other government works. thus there was a two way benefit (Clark, Lang and Ma, n.d.). The fund of the CPF was working like the contingency fund and at the same time the fund was giving them returns which meant there were two way communication and dual benefit scheme!

The CPF had considerable changes in the past years. With the development of the policy of the economic sectors, the CPF frontiers were expanded. Till now it was only for the sustenance of the old man. Now the perimeters increased to the public housing scheme that aimed at providing the housing scheme. The year 1984 saw the development of the medical and medical care experiencing the inclusion in the CPF. The more the CPF started to cover grounds it was designed to target at more savings (Dempster, Mitra and Pflug, 2009). The option to invest at a higher risk was incorporated into the scheme and this started giving the members the chance to get a higher rate of return.

The growth of the return rate The government of Singapore was thinking big. They started to implement the wider program range and they started providing the supplements to the CPF like the Minimum Retirement Sum Scheme annuity, MediShield health insurance etc that furthermore aggravated the chances of the return to the common people (Koh and Mitchell, 2010). There were the additional programs via which an interest of 1% for the first $60,000 of retirement savings was incorporated with the total expenditure and earning scheme.

By and by it was seen that the CPF which demanded 5% of the pay of an employee and employers for creating the fund had increased the rate of contribution to about 25%. This implies clearly that the rate of income of the people of Singapore was considerably aggravated with the increment in the rate and ability of them to contribute.

In the present times, the CPF has over 3 million members with balances representing about 15% of Singaporeans’ total wealth (Jones, 2005). As the country rapidly ages, second only to Japan in terms of low fertility rates and longest life expectancy, government policymakers are paying close attention to whether its citizens and residents are saving enough for retirement.

Scope of the study Thinking on the point that why the identification of the factors of the increment of the CPF is necessary, the student has succumbed to the point that: a. if the country wishes it can envisage the right procedures and processes to make a fund not only beneficiary to the residents of the country but also make the fund equally benefitting the country itself. b. Singapore has proved that it is possible to collectively make a fund that shall help the country to prosper in all times and contribute to the total economic return of the country (Koh, Mitchell and Fong, n.d.). c. Singapore has taught to the world that small investments and small deposits can all total up to the big joint ventures and that can be yielding to the GDP of the country in the long run. Thus it is to be enumerated that why/ what: - Has caused the high rate of turnover by the CPF? - Are the costs that are associated with the total turnover of the CPF? - Is the high turnover rate management policy taken up by the government of the country in regards to the CPF? - is the rate of turnover stats available in CPF & to compare male V female, younger staff V older staff, frequency of turnover, different categories of staff etc?

This research shall help to understand the general economic policy of Singapore and the main clauses under which such a universal deposit and provident fund scheme can flourish. It is really mind blowing that such a small country like Singapore has been able to create such a big back up for the employees? It is really astounding to know that such a small country can get to such a big bound (KOH et al., 2007).At the same time the research shall also aim at knowing the demographic fact that was it the low rate of the populace that empowered Singapore in taking this step?

What has caused the high rate of turnover by the CPF?

To enumerate the norms and reasons of the boost in the central provident fund in Singapore, we must know the processes in which the CPF works (Koh et al., n.d.). Without knowing the procedure of the work of the CPF the real reasons can never be apprehended.

How the CPF Works

One of the primal reasons of this great turnover by the CPF is the procedure of the accounting they are delving into. There are three sets of interest rates set by the government. The three rates are:

A. The ordinary rate account or the OA: this account earns an interest of 2.5%. the interest that is earned through the OA can be utilized in the action of purchasing the homes and other insurances, in the task of fending for the education of the children and others (Kortleve, Nijman and Ponds, 2006). Many other expenses and misc expenses are also covered by this account.

B. The special rate account or the SA: this is an account that is solely made for the purpose of the post retirement life expenses. This rate of interest earns 4% of interest. This account pays an annuity those tenures to 20 years and above or up to age 82. This is solely made keeping in mind the ways of lifestyle after the retirement of an employee from an office (Kumar, 2014). In other terms this account safe guards the after service life of a person. This account is largely supported by the government too.

C. The medi save rate account or the MA: as the name suggests this account is for fending the expenses that what so ever may arise in the medicinal expenses and the hosipitalizational expenses for any illness. With an income ceiling of more than S$4,500 per month the contribution rate becomes 8.5% and for the general ones the rate is 4%. This is a very useful; account that preserves the money for the definite purpose of bring spent at the medicinal expenses only (Low and Aw, 2004).

The aforementioned schemes have been able to suitably store the amount of savings so much so that it totals to the GDP of the country. The balances of the savings totaled to S$120 billion! Thus this is a fund that gives the government good revenue and assures a good return. The savings are made easily as the total deductions are step by step and not on a lump sum basis.

On the basis of this theory and the practice of collecting the revenue and the deposit of the above mentioned funds, the economy of the country is boosted to a great extent (Mitchell and Koh, n.d.). The rate of the return is made high. The next reasons follow next.

Asset Rich Cash Poor Phenomenon

Reading through the famous writing of Koh, Mitchell, Tanuwidjaja, and Fong named as “Investment Patterns in Singapore’s Central Provident Fund” it has been well enumerated and apprehended that this great bulk of the collections and contribution have been possible due to the consciousness of the asset rich cash poor theory. It was observed that 44%of the total CPF contributions have been spent in buying the properties in the country while only 10% of the total funds were dispatched in raising the capitals.

The asset rich cash poor theory is an age old theory of the macro economics which states that in a country of enough populace like Singapore if the total investment on the property topples over the total investment of the people on the capital raising then everything is on the brink of total dismay (Mitra and Schwaiger, 2011). The heavy investment on the single property thus needed to be stopped and the capital rising should be done.

Thus the policymakers restricted the amount of the investment on the action of purchasing the property. This was done to ensure that the pensioners have enough funds when they retire and also to keep the investment in capital high. The government also tended to reverse the growth in the reality estate market and imposed changes in the renting system to discourage people from investing too much in the same.

This was done to ensure that there is enough cash for the capital investment and the country can run high on cash. This was a really prudent measure taken up by the government of the country to elude the problem of ceaselessness and increase the return to four fold extent.

Asset Allocation

The CPF not only managed the assets and preserved the money; they also tried to influence the money market by envisaging the efficient control over the assets.

The people who have the CPF accounts are redirected to a new investment plan by the government. These all are done to ensure the cash in the country ad to increment the return.

The CPF account holders are asked to invest a lot of their return on the fixed deposits, bonds, property funds, equities, annuities, endowment policies, unit trusts, investment-linked insurance policies (ILPs), exchange traded funds and gold. If we take in to all these things keenly then we shall see that through the engagement of the hard cash in these services the country also is getting a good amount of duties and return from the customers and thus the gain is two way (Muralidhar, 2001).

In spite of this, the step is yet to be blooming as still people are not so willing to invest equally on so many a places. The main reason being that the:

People are unaware of the fact that what they should invest and how much they should invest. The lack of the awareness of the people are making them perplexed and they are still losing the right moment and place of investing.

In the past year the asset management sector of Singapore reports in their annual report that:

Out of the total amount of the fund and cash that was disbursed by the government which prices to about S$27.9 billion, 67% went into insurance policies such as annuities, endowment policies and ILPs, a percentage of 20% in equity and loan stocks, while only 12% was in unit trusts , collective insurance schemes offered by fund management companies. This is a matter that thus must be delved deep with. Inference

The hidden costs behind the expenditure and the deposit are almost nullified. There are many procedures and processes of investment. The country has wished that the cash deposit is in the capital raising business. As recorded the cash is really deposited in the country as a result of which there is a continuous turnover of the money and funds (Musalem and Palacios, 2004). This constant flow of the money is needed by any country to flourish. The CPF thus is a successful venture.

What are the costs that are associated with the total turnover of the CPF?

This is a very vital question that is associated with many more aspects of the same. The total costs that are associated with the CPF must be enumerated in detail to get the total picture of the return index of the investment criterion (Nelken, 2006). The main reason is that in Singapore as there are three to four different accounts of the same and there are the different rates one must know the exact areas that he or she can invest to get the maximum and the proper return. From the first of January of the next year 2016 there shall be two kinds of drawing sum namely the full retirement sum and the basic sum. These two sums shall suffice the later living standard of the life of the retired person. Apart from these two there shall be the remaining cash balances from the ordinary account or the special accounts as mentioned in the module proceeding to this one.

There are some more places where there shall be the chances of getting a sum of money at the retirement life. The CPF ensures the total security of the old at the retirement life.

The monthly payouts The draw down age is the age that is the eligibility age for getting the monthly payouts. The payout eligibility age at the present moment is 64 and the same shall be incremented to the age of 68 within a few years keeping in mind the aggravation of the life expectancy limit rate.

Here is a table allocating the costs associated with the monthly payout.

Parameter of the members Your monthly payout* for life from 65

Retirement Account savings required at 55

For members who:

 Have a property of their own.

It is estimated that these people have sufficient money to hold the property to them.

$660 - $720

Basic Retirement Sum (BRS)

$80,500

For members who either:

 Do not own a property.

 Has a property but it is not sure that they shall be able to resolve the property or keep it back or not.

Full Retirement Sum (FRS) $1,220 - $1,320

$161,000

$1,770 - $1,920 The members who wish to put in

Enhanced Retirement Sum more money in the CPF LIFE to (ERS)# have more return down the time

$241,500

ERS = 3 X BRS The CPF lifeThe life is a scheme of monthly income and associated expenditures. One can get the cpf payouts till he or she attains the age of 70. The CPF life is a good option for the investment and the management of the costs. The medi saveThe medi save is a great option for the control of the health care pay. The costs that are incurred in the health care systems are controlled by this scheme. This scheme really covers a lot of the incurred costs that are for the medicinal expenses (Pan, n.d.). The medi save can save the costs of:Hospital expenses and the total expenditure that one may incur while the person is admitted in a hospital. This cost covers all the departments of the hospitals ad hoc. The costs incurred during the treatments of chemotherapy and radio therapy which is largely outpatient treatments and the patient is to be brought from the home. This can be used to disburse the payments of the Premiums for Medi Shield / Medi shield Life or Medi save-approved integrated shield plans. These plans help the patient to be safe in respect of the cost of the treatment incurred.Elder Shield premiums. Elder Shield is said to be a severe disability and illness insurance scheme that supplies essential economic guard to older CPF members who necessitate long-term heed (Saw, 2001