A2 Group 1

RETIREMENT AND HEALTHCARE 2019 | Sectional A2 Group 1
FIN3103
Group Project: Retirement and Healthcare
Sectional A2
Group 1
Team Members Matriculation No.
Huang Yunyi A0159667J
Sharon Fang Xuerong A0170647B
Ruben Goh Chang Xian A0167538R
Limmer Ferdinand Christian Ludwig Alfred A0208889H
Kozoderc Jan A0208897J
Zhou Weisheng, Bryan A0184320N

Table of Contents
1. Introduction 4
2. The Central Provident Fund (CPF) 4
2.1. Overview of CPF 4
2.2. CPF Contribution Rates (by CPF Account) 5
2.3. Growing CPF Savings - CPF Interest Rates 5
2.4. Growing CPF Savings - CPF Investment Scheme (CPFIS) 6
2.5. Retirement Payouts with the Retirement Account and CPF LIFE 6
2.6. Recent Changes to CPF 6
3. The ‘3M’ System: MediSave, MediShield, and MediFund 7
3.1. MediSave - Mandatory Savings Scheme 7
3.2. MediShield Life - Basic Health Insurance 8
3.3. MediFund - State Sponsored Endowment Fund 8
3.4. Recent Changes to the 3M System 9
4. Active CPF Management for Members 9
4.1. Enhancing Personal CPF Savings 9
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4.2. Taking Care of Loved Ones 9
4.3. Maximising Retirement Funds 10
5. Criticisms of CPF and the 3M System 10
5.1. Criticisms of CPF 10
5.2. Criticisms of the 3M System 11
6. Comparison of Alternative Approaches 12
6.1. Comparison of Alternative Pension Approaches 12
6.2. Comparison of Alternative Healthcare Approaches 13
7. Suggested Improvements to Singapore’s Retirement System 14
7.1. Improvement to the Contribute-As-You-Earn (CAYE) Scheme for Self-Employed Persons 14
7.2. Co-contribution to CPF for Self-Employed Persons 15
7.3. Revamping the CPFIS 16
7.4. Utilise Artificial Intelligence to Optimise 3M Spending 18
Bibliography 19
Appendices 24
Appendix 1: List of Schemes under CPF 24
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Appendix 2: CPF Contribution Rates 26
Appendix 3: CPF Interest Rates 28
Appendix 4: CPFIS Investment Options 29
Appendix 5: CPF Retirement Sums and CPF LIFE Payout Plans 31
Appendix 6: CPF LIFE Annuity Premiums and Payout Plans 32
Appendix 7: Upcoming Changes to CPF Contribution Rates 33
Appendix 8: Breakdown of MediSave Coverage 34
Appendix 9: Breakdown of MediShield Life Coverage 37
Appendix 10: Integrated Shield Plans for MediShield Life 38
Appendix 11: Policy on MediFund Coverage 40
Appendix 12: Healthcare Expenditure (% of GDP) for Select World Economies 41
Appendix 13: Out-of-Pocket Healthcare Expenditure (% of Healthcare Expenditure) for Select World
Economies 42
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1. Introduction
Singapore is widely hailed as an economic miracle for its remarkable achievements in just 54 years since gaining
independence. However, retirement adequacy is a growing concern for the nation moving forward. As regulators
consider retirement scheme reforms, there is a growing need for policymakers and the community to compare
programme developments with those of other countries. This report examines Singapore’s retirement and
healthcare system and provides recommendations on how the nation can better attain retirement sufficiency.
2. The Central Provident Fund (CPF)

2.1. Overview of CPF
The CPF is a mandatory savings scheme for working Singapore Citizens and Permanent Residents that sets aside
funds for retirement, healthcare, housing and investment. The explicit goals of the CPF are to provide: (1)
retirement savings to meet basic living expenses in old age; (2) ownership of a fully paid-up property by the time
of retirement; and (3) sufficient savings for future medical expenses, which are expected to rise with age (CPF
Board, n.d.). The full list of schemes under CPF to facilitate this can be found in Appendix 1.
To achieve its stated goals, the CPF is split into four accounts:
Account Purpose
Ordinary Account (OA) For education, housing and insurance
Special Account (SA) For retirement and retirement-related investments
MediSave Account (MA) For healthcare expenses and approved medical insurance policies
Retirement Account (RA) For CPF LIFE, a lifetime annuity scheme offering monthly payouts from age 65.
Created at age 55 with funds from OA and SA.
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2.2. CPF Contribution Rates (by CPF Account)
Employer and employee contribution rates for each account vary in order to meet the changing needs of CPF
members at different life stages. The lower contribution rates for older workers also serves to incentivise firms to
hire older workers (Mokhtar, 2019). A breakdown of the contribution rates can be found in Appendix 2.
Age Bracket Purpose of the changing contribution rates (Inferred)
35 and below ● Most contributions allocated to OA to support first home purchase
35 - 55 ● Gradual shift in allocation from OA to SA and MA to prepare for retirement and future
healthcare needs
55 - 65 ● Both employer and employee contribution rates are lowered to incentivize employers to
hire elderly workers
● Contribution to OA and SA lowered as housing should already be fully paid and a
sufficient retirement sum should have already been set aside
Above 65 ● Mostly allocated to MA to maintain Basic Healthcare Sum for medical expenses in old
age
2.3. Growing CPF Savings - CPF Interest Rates
The funds deposited in CPF earn interest to compensate members for the lock-up of funds and enhance members’
retirement security. The interest is financed by investment returns earned by the Government of Singapore
Investment Corporation (GIC), a private company that manages CPF funds for the government (GIC, n.d.).
The government has instituted interest rate floors across all CPF accounts to ensure that CPF funds keep pace
with a 2% level of inflation. At present, the OA earns a minimal annual interest rate of 2.5% while the SA, MA
and RA earn 4%. Additional interest is offered on an initial portion of CPF funds and for CPF members aged 55
and above (CPF Board, 2019, Appendix 3). Since the interest on CPF funds exceed the bank deposit rates and
may be considered risk-free as returns are guaranteed by the government (sovereign debt in Singapore rated AAA)
(Seow, 2016), the CPF is an attractive proposition for wealth preservation.
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2.4. Growing CPF Savings - CPF Investment Scheme (CPFIS)
To further grow CPF savings, the CPFIS, known as the Approved Investment Scheme, was established in 1986
for members to earn higher returns on OA and SA by investing in various financial instruments such as stocks,
bonds and unit trusts. Although a cap is instituted on investible funds to prevent CPF members from taking
excessive risk on their savings, the returns or losses on investments belong fully to the CPF member. Thus, risks
associated with CPFIS are borne by the members. Details on the CPFIS can be found in Appendix 4.
2.5. Retirement Payouts with the Retirement Account and CPF LIFE
At age 55, a Retirement Account (RA) will be created with funds from the OA and SA. The combined amount
will be based on the CPF member’s selected retirement sum, depending on their desired retirement lifestyle. CPF
members can also withdraw the higher of SGD5,000 or the remaining OA and SA savings exceeding the Full
Retirement Sum or the Basic Retirement Sum (with property). The Retirement Sums that a member may choose
can be found in Appendix 5.
At age 65, members will be automatically enrolled (subject to conditions found in Appendix 5) in CPF LIFE, a
lifetime annuity scheme. Based on the chosen CPF LIFE plan, an annuity premium will be deducted from the RA
and channeled into CPF LIFE, from which members will receive lifetime monthly payouts commencing at any
time from age 65 to 70. These plans differ in terms of the monthly payouts and the amount individuals leave to
their beneficiaries. The Retirement Sum, CPF LIFE Payout Plans and bequests can be found in Appendix 6.
2.6. Recent Changes to CPF
The Singapore government regularly reviews the CPF system to ensure that the system is able to meet its goals.
The following is a list of recent changes to the CPF from 2018 to 2019:
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● 2018: Two-step reduction in sales charge and wrap fees on CPFIS investments to reduce cost for investors.
The second step-down is delayed to 2020 to provide additional time for financial advisors to adapt to the
changes (Ministry of Manpower Singapore, 2019);
Prior to October 2018 From 1 October 2018 From 1 October 2020

(previously 2019)
Sales Charge Cap 3.0% 1.5% 0%
Wrap Fee Cap 1.0% 0.7% 0.4%
● 2019: From July 2022, overall CPF contribution rates will be raised for older age groups (additional CPF
funds to be directed to the SA) to provide greater support for elderly Singaporeans amid escalating
healthcare costs, rising life expectancy and increases in the retirement age (Lee, 2019). The proposed
With the increase in overall CPF contribution rates from July 2022,
changes can be found in Appendix 7.
what are the implications for employers in this case? Won't they
have lesser incentive to hire older people with the increases in
3. The ‘3M’ System: MediSave, MediShield, and
contribution MediFund
rates?
Built on the foundation of CPF, the Singapore healthcare system is built on two core principles: individual
responsibility for healthcare needs and affordable healthcare for all. The healthcare system consists of three
pillars: MediSave, MediShield Life and MediFund.
3.1. MediSave - Mandatory Savings Scheme
Introduced in 1983, the MediSave is an individual medical savings scheme in which CPF members set aside a
fraction of their monthly income to defray personal medical costs or medical costs of immediate family members
(MediSave, 2019). As mentioned, the allocation of a member’s monthly CPF contributions to the MA is
determined by income and age. Currently, MediSave funds can be used to cover hospitalisation, day surgery, and
select outpatient expenses (Introduction to the 3Ms, n.d.). A breakdown of MediSave coverage can be found in
Appendix 8.
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3.2. MediShield Life - Basic Health Insurance
The MediShield Life is a compulsory basic health insurance scheme for all Singaporeans and Permanent
Residents, designed to cover large hospital bills and costly outpatient treatments (Introduction to the 3Ms, n.d.).
MediShield was revamped to MediShield Life in November 2015, providing improved insurance coverage with
higher claim limits and lower co-insurance rates (Appendix 9). Every Singaporean and Permanent Resident will
pay a premium (a portion can be paid with Medisave) to support the scheme. In addition, the premiums are risk-
pooled to guarantee payouts and benefits and various subsidies are provided to ensure affordability for all
(Ministry of Health, 2019). Depending on individual needs, one can also purchase Integrated Shield Plans (IPs)
from one of seven private insurance providers that have partnered with the government for additional coverage
beyond the benefits conferred by MediShield Life (About Integrated Shield Plans, 2019). Additional information
on IPs can be found in Appendix 10.
To supplement MediShield, the government also introduced ElderShield Life in 2002 for those in need of long-
term care in old age. The opt-out scheme provides cash payouts for up to 72 months, covering the out-of-pocket
medical expenses of severely disabled individuals. All CPF members with a MediSave account are automatically
enrolled at age 40 (ElderShield, 2019).
3.3. MediFund - State Sponsored Endowment Fund
Established in 1993, MediFund is an endowment fund run by the government as a safety net for Singapore
Citizens. MediFund assists needy Singaporeans with the payment of their medical fees should find themselves
unable to afford these expenses even after receiving government support through MediSave, MediShield Life and
other cash payouts (MediFund, 2018).
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3.4. Recent Changes to the 3M System
The Singapore government revises the 3M system elements on a regular basis to meet the ever-evolving healthcare
needs of the population. Recent changes from 2018 to 2019 include:
● 2018: Expansion of MediShield Life coverage for transfers from public hospitals to community hospitals,
chronic intestinal failure and surgical operations for two life threatening operations (Khalik, 2018);
● 2019: New subsidies on MediShield Life premiums for Merdeka Generation senior citizens (Budget
Speech 2019: A Caring And Inclusive Society, 2019); Greater support for individuals with severe
disabilities through CareShield Life (premiums payable using MediSave) and ElderFund payouts
(Ministry of Health Singapore, 2019).
4. Active CPF Management for Members

4.1. Enhancing Personal CPF Savings
Depending on individual needs and risk appetites, CPF members may pursue a variety of measures to maximise
their retirement savings. These measures include:
● Retirement sum cash top-up scheme, which offers tax relief up to SGD14,000 (CPF Board, 2016);
● Transfer of savings from OA to SA (below age 55) or from OA to RA (above age 55);
● Voluntary contributions to MediSave account are tax deductible;
● Investing OA and SA funds through CPFIS;
● Reaping cash refunds on CPF savings used for purchase of property (CPF Board, n.d.).
4.2. Taking Care of Loved Ones
The CPF also offers members peace of mind over the well-being of loved ones by allowing funds to be deployed
for their needs. Some ways to provide for loved ones include (CPF Board, 2019):
● Transfer of CPF savings above the BRS to spouse (if spouse’s retirement sum < BRS);
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● Transfer of CPF savings above the BRS to parents/grandparents (if the CPF member owns a property and
if the parent’s/grandparent's retirement sum < BRS);
● Cash top-ups or transfer of CPF savings above FRS to loved ones is eligible for tax relief of up to
SGD7,000/year.
4.3. Maximising Retirement Funds
Despite the loss of income from work upon retirement, the CPF continues to offer avenues by which its members
may maximize their retirement funds. Examples include:
• Deferment of CPF LIFE payouts up to age 70. For every year deferred, payouts increase up to 7%
(SGD240-SGD260 more per month for life) (CPF Board, 2019);
● Extend employment by working longer/part-time;
● Exercising the lease buyback option on HDB flats (applicable to all HDB flats from 1 January 2019), with
the proceeds used to top up RA (HDB Board, n.d.);
● Subletting/downsizing current place of residence.
5. Criticisms of CPF and the 3M System

5.1. Criticisms of CPF
Firstly, the CPF system has come under repeated criticism for being too complex and difficult to understand
(Krishnadas, 2014), which hinders the ability of the populace to fully benefit from the schemes offered under the
CPF. The complexity of the system is likely to benefit the more educated and runs the risk of exacerbating social
stratification and inequality.
Secondly, there have been complaints that the CPF offers insufficient protection to self-employed persons (SEPs),
which include sole proprietors, taxi drivers, and hawkers. Current regulation enforces compulsory contribution to
MediSave only, with contributions to OA and SA being entirely voluntary (CPF Board, n.d.). SEPs are at risk of
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not having enough funds for their retirement as the majority do not even contribute enough to benefit from the
most basic CPF LIFE scheme (Ministry of Manpower Singapore, 2018).

Why did CPFIS have a low take-up rate?
Finally, a CPF Advisory Panel assembled in 2016 found that the CPFIS had failed to meet expectations, achieving
low take-up rates with reports of investors entering the scheme haphazardly without sufficient knowledge in
investing (NUS, n.d.). The panel recommended the introduction of the Lifetime Retirement Investment Scheme
(LRIS) to complement the CPFIS by offering simplified and curated investment options for CPF members that
would be more accessible to novice investors, although no change has yet to be implemented.
5.2. Criticisms of the 3M System
With regard to the 3M system, while the system is largely held in high regard for its efficiency and effectiveness
in delivering positive health outcomes, high out-of-pocket expenditure continues to be a key shortcoming of the
system. The government’s belief in individual responsibility for the meeting of personal healthcare needs has
What's the rationale/purpose behind the government doing this (subsidising vs FOC)?
produced policies that provide subsidized, rather than free-of-charge, healthcare (Ramesh, 2017). As of 2016,
out-of-pocket expenditure took up more than 30% of current health expenditure in Singapore, one of the highest
among developed nations (The World Bank, n.d.). The relatively high out-of-pocket expenditure is of particular
concern to the elderly, who are at greater risk of experiencing health complications while receiving less income
to cope with their escalating healthcare needs.
In addition, one in four SEPs do not adhere to their annual lump-sum MediSave obligations (Teo, 2018). The
current Self-Employed Scheme creates time-lag and cash flow issues for SEPs, who struggle to meet their
MediSave obligations due to the variable nature of their income (Ministry of Manpower Singapore, 2018).
Without stable MediSave contributions, SEPs are less able to fund their MediShield Life premiums to reduce
future out-of-pocket healthcare expenditure.
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6. Comparison of Alternative Approaches

To understand how the Singapore pension and healthcare system compares against that of other nations, we have
chosen to analyse the systems adopted by China, the United States (U.S) and Denmark. China and the U.S were
selected due to their standing as leading nations within the current global economic order (Radu, 2019), and
Denmark was selected for its ranking among the best pension and healthcare systems in the world (Mercer, 2018).
6.1. Comparison of Alternative Pension Approaches
Singapore China United States Denmark
Scheme The Central Provident The National Social Security 401(K) Arbejdmarkedets
Fund Fund (IRS, 2019) TillaegsPension(ATP)
Livslang Pension
Type of Plan Defined Contribution Defined Contribution Defined Contribution Defined Contribution
Contribution Employee: 20% Employee: 8% of salary Democratic System: ATP contribution:

Rates Employer: 17% Employer: 20% of salary Employee and employer Employee: 33%
Rigid: compulsory Voluntary are free to decide on the Employer: 67%
contribution rates amount of contribution (ATP, 2019)
Uses Multiple Retirement only Retirement only Retirement only
Choice Mandatory Mandatory Opt-in Mandatory
Interest Rates ● Guaranteed interest ● Variable rates, dependent ● Variable rates, ● Variable rates
rates (up to 2.5-5% on growth rate of local dependent on fund ● 21.7% in 2019
before 55, 6% after average wage, bank deposit returns (Reuters, 2019)
55) interest rate and the pension ● 401(K) offers a default ● Flat-rate, means-tested
fund investment rate investment option payout to accommodate
(Wharton School, 2019) lower income individuals
● Different schemes for rural
and urban locations
Withdrawal 55 (first tranche), then 60 for Males 59.5 for All Gradually raised from 65 to
Age 65 (CPF LIFE) 55 for Females and 50 for 67 in 2022 (OECD, 2019)
blue-collar Females
In our analysis, we discovered notable points for the pension systems of our selected peer group. Firstly,
contribution rates in China are determined based on geographical means-testing as opposed to the standard
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income-based means-testing adopted by most other countries. Secondly, the U.S. system is employer-led and
offers a default investment option - life-cycle products - which aim to be simple to understand, low-cost, and
well-diversified. This provides an avenue for pensioners to make higher risk-adjusted returns on their pensions.
Thirdly, contribution rates to Denmark’s ATP are instituted in a similar manner to Singapore’s CPF system, with
both systems having been modelled after The World Bank Pension Conceptual Framework (World Bank, 2008).
6.2. Comparison of Alternative Healthcare Approaches
Countries mainly adopt a two-tiered healthcare system but differ in the proportion of basic (universal public) to
secondary (private) healthcare. Some European welfare states place a greater emphasis on public healthcare,
whereas Asian countries such as China and Singapore offer a more balanced model of public and private
healthcare distribution. The choice of healthcare system results in different levels of funding required, levels of
efficiency achieved by the system, and the quality of health outcomes attained.
Singapore China United States Denmark
Role of Government Public and private Fully supervised by the Medicare for people aged Fully nationalized health
healthcare are subsidized country and health 65 and above. Medicaid care system. Healthcare
by the government, but at authorities at the national for low-income services are provided at
different rates. and local level. In some individuals the regional level through
Coordinates the 3M cases, the government municipalities
system, and performs directly provides
central planning and healthcare services
financing
Funding Source(s) General tax revenue Three publicly-financed Medicare - Payroll and Income tax earmarked for
insurance schemes based federal tax healthcare
on type of employment
and income Medicaid - Federal and
state tax
% of GDP Spent on 4.9% 5.6% 17.2% 10.7%

Healthcare
Healthcare Spending Int$2,752 Int$420 Int$9,364 Int$5,012

per capita (PPP Int$*)
Out-of- Pocket Int$1,273 Int$273 Int$1,094 Int$698
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Expenditure per capita

(PPP Int$*)
Out-of-Pocket 31% 30% 11% 14%

Expenditure (% of
current health
expenditure)
(WHO, 2019)
Life Expectancy 83.1, ranked 3rd 76.1, ranked 53rd 79.3, ranked 31st 80.6, ranked 27th
(WHO, 2016)
*An international dollar would buy in the cited country a comparable amount of goods and services that a U.S
dollar would buy in the United States.
Based on the tables above, China and Singapore have lower healthcare expenditures on a percentage of GDP
basis. These systems place greater responsibility on citizens to be self-sufficient in meeting their healthcare needs,
as reflected in the higher levels of out-of-pocket expenditure (Appendix 13).
However, China spends less of its GDP on public healthcare than Singapore. The Chinese public healthcare
system offers only simple healthcare services in comparison to the health services offered by the Singapore system
(Mossialos, Djordjevic, Osborn, & Sarnak, 2016). The lack of quality public healthcare has incentivized the
Chinese to acquire private insurance to fund their healthcare needs. On the other hand, the robustness of
Singapore’s healthcare system has enabled the government to classify public healthcare services into different
levels of service quality, thereby providing consumers with greater choice based on their willingness to pay.
7. Suggested Improvements to Singapore’s Retirement System

7.1. Improvement to the Contribute-As-You-Earn (CAYE) Scheme for Self-Employed Persons
SEPs form 14% of the Singapore labour force (Ministry of Manpower Singapore, 2018), yet one in four SEPs
face problems meeting their MediSave obligations due to time-lag and cash flow issues. To combat this, the
government will be rolling out the CAYE scheme in 1Q 2020 to assist SEPs with allocating funds into their
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MediSave when they are paid, instead of the current system of yearly contributions (Ng, 2019). The scheme
reduces the time-lag between annual payments to MediSave, better ensuring that SEPs will be able to keep up
with monthly MediSave contributions without having to worry about cash flow issues in the future.
Upon initial rollout in 2020, the CAYE scheme will only apply to SEPs contracted by the government and not to
SEPs in the private sector (Ng, 2019). We believe that the scheme should be expanded to all SEPs from both the
public and private sector to protect the interests of all SEPs. While we recognise that additional administrative
costs are likely to be incurred in maintaining the MediSave accounts of SEPs, we believe that the scheme is
ultimately beneficial in enhancing the financial security of all SEPs.
7.2. Co-contribution to CPF for Self-Employed Persons
One of the shortcomings of the CPF is its weakness in providing a secure retirement for SEPs, with a majority of
SEPs unable to receive any Retirement Sum payout from CPF LIFE due to insufficient funds. This issue is of
particular concern as 14% of the labour force comprises SEPs (Ministry of Manpower Singapore, 2018), which
implies that 10% of the Singapore population may not have sufficient CPF funds to retire comfortably.
We believe that a system of co-contributions can improve the retirement security of SEPs by enhancing their CPF
savings. Co-contributions may be provided by the government to enhance the CPF savings of SEPs such that it
falls closer in line with the CPF contributions for public and private sector employees. Co-contributions may also
provide stronger impetus for SEPs to make voluntary contributions into their CPF accounts as this increases the
likelihood of SEPs reaching the minimum sum required for the Basic Retirement Sum payout under CPF LIFE.
You mean previously they have no incentive to meet the sum required for BRS? Isn't it due
to time-lag and people not being educated enough on these CPF schemes?
However, there are certain drawbacks to co-contribution. Firstly, if the co-contributions were to be provided by
the government, such a scheme would likely place significant strain on the government budget as greater spending
would be required to operate the CPF for SEPs. Secondly, we anticipate some degree of public displeasure due
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to perceived unequal benefits for SEPs in being able to receive co-contributions. To address this, the government
could set a cap on the amount of co-contributions offered. Despite these challenges, we believe that co-
contributions will provide SEPs a more secure retirement future (Ministry of Manpower Singapore, 2018).
7.3. Revamping the CPFIS
The CPFIS has fallen short of its goal to enhance the retirement savings of its members. Taking a page from
401(K) programmes in the U.S., we believe that the CPFIS can better achieve its goals by offering simpler, low-
cost, well-diversified investment products to CPF members by incorporating them in LRIS, where investment
products have yet to be announced.
Firstly, a limited selection of investment products can be introduced under the LRIS to provide greater appeal and
access to its members. The smaller selection of products and the economies of scale achieved through the pooling
of CPF funds makes investment through the CPF more appealing and accessible (Fong & Koh, 2018).
Furthermore, as the CPFIS targets more experienced investors, the LRIS system can complement CPFIS by
targeting investors who are less financially literate or who have less time and resources to actively select
investment options. As with the CPFIS, a cap on investible funds should be established for the LRIS to ensure
that CPF members do not take on excessive risk.
Secondly, we envision technology playing an integral role in enhancing the effectiveness of investing CPF funds
by enabling greater customisation of investment options. Technology can be leveraged to obtain data on CPF
members such as income, personal lifestyle, expenditure patterns, risk aversion, and retirement goals, which may
then be used in the construction of investment portfolios tailored to the specific needs and preferences of CPF
members. Glide paths can be built into portfolios to progressively alter risk exposure by increasing portfolio
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allocation to safer assets with age. This is on the assumption that investors are willing to take on more risk in their
younger years and less risk in their later years due to changes in lifestyle and needs.
Finally, to prevent CPF members from investing haphazardly or with speculative intent, the CPF Board should
provide basic courses on financial literacy to achieve its goal of making investing understandable and hence more
accessible to the masses. In addition, while the revamped CPFIS and LRIS systems serves to provide room for
flexibility amid changing investment targets and life circumstances, the CPF Board may consider implementing
structural measures. For instance, imposing a minimum investment period can encourage investors to thoroughly
consider their retirement goals before making investments. How?
However, we have noted some potential pitfalls. Given that investment is a separate function, the CPF Board will
likely have to partner with external investment houses or GIC to conduct rigorous analysis of investment products
in order to offer sound investment advice to passive CPF investors. Moreover, the cost of such partnerships may
erode investment earnings. However, the economies of scale from the volume of CPF funds are likely to reduce
the cost per dollar invested incurred from engaging external investment professionals.
A second drawback stems from citizens bearing the risk of making an investment. As a result of technology
incorporation for passive investment, this may blur the line as to who is responsible for losses incurred. It may be
perceived by the average CPF member that the government is losing the money of the people. Clear
communication and management of expectations will be key in preventing negative perceptions from developing.
All in all, while our recommendation does not profess to be a one-stop solution for the wealth management needs
of all CPF members, we believe that a restructured CPFIS will be better positioned to promote accessibility of
investing, which will be critical in shaping the overall investment and savings landscape in Singapore.
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7.4. Utilise Artificial Intelligence to Optimise 3M Spending
While Singapore’s healthcare system is currently one of the most efficient in the world, the system is far from
perfect. Reports show inefficiencies with regard to screening and detecting preventable diseases, such as diabetes,
before the onset of disease (Lim, 2016).
Instead of the current focus on treatment, the 3M system can pivot towards a greater emphasis on disease
prevention to reduce cost for the government and out-of-pocket expenditure patients. This may be achieved by
Won't this be expensive
taking a page out of China’s healthcare industry in promoting the integration of Artificial Intelligence (AI)
technology. China has become one of the global leaders in terms of technology integration in healthcare. One AI
system, Ruining Zhitang, has been developed to predict the likelihood of a patient developing diabetes as early
as 15 years in advance of the initial onset of the disease and has successfully identified patients at high-risk of
developing Type II diabetes with an accuracy rate of 88% (Shen, 2018). On the other hand, the use of AI in
Singapore has largely been confined to administrative tasks, such as manpower staffing and allocation and the
scheduling of patient appointments (Kurohi, 2019).
We believe that the lack of AI integration represents a missed opportunity for Singapore to improve disease
prevention and disease detection accuracy in order to optimise the use of funds under the 3M system. We foresee
a future where AI is fully integrated into the Singapore healthcare system, with preventive healthcare technology
driving down long-term healthcare costs. Patients will be better able to detect diseases early-on and make the
necessary, low-cost lifestyle changes today rather than incur high treatment costs later on.
Though our recommendation will require the government to plough significant resources into healthcare
investment and research and development, we believe that these investments will unlock better quality health and
a better standard of living for the population at lower cost.
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23
Appendices
Appendix 1: List of Schemes under CPF
Scheme Description
Retirement
CPF LIFE Provides CPF members with a monthly payout for life when they reach their payout
eligibility age.
Retirement Sum Scheme Provides CPF members with a monthly payout when they reach their payout
eligibility age.
Retirement Sum Topping- Helps CPF Members build up their retirement savings by topping up their own or
Up Scheme their loved ones' CPF Accounts.
Withdrawals of CPF savings CPF members can withdraw their CPF savings after they have set aside their Full
from 55 Retirement Sum in their Retirement Account. The Full Retirement Sum can be set
aside fully with cash, or with cash (i.e. at least the Basic Retirement Sum) and
property.
Workfare Income Encourages eligible workers to work and build up their CPF savings for their
Supplement Scheme retirement, housing and healthcare needs, by supplementing their income and
retirement savings through cash payments and CPF contributions.
Silver Support Scheme Provides additional retirement support to elderly Singaporeans aged 65 and above
who had low incomes through life and currently have little or no family support.
Housing
Public Housing Scheme The Public Housing Scheme (PHS) enables CPF members to use their CPF Ordinary
Account savings to buy new or resale Housing and Development Board (HDB) flats.
Private Properties Scheme The Private Properties Scheme enables CPF members to use their CPF Ordinary
Account savings to buy or build private residential properties in Singapore for their
own occupation or investment.
Home Protection Scheme The Home Protection Scheme (HPS) protects CPF members and their families from
losing their HDB flat in the event of death, terminal illness or total permanent
disability.
Healthcare
MediSave MediSave is a national medical savings scheme which helps CPF members put aside
part of their income into their MediSave Accounts to meet their future personal or
approved dependant’s hospitalisation, day surgery and certain outpatient expenses.
MediShield Life MediShield Life is a basic healthcare insurance scheme that helps pay for large
hospital bills and expensive outpatient treatments.
24
Private Medical Insurance Scheme which allows CPF members to use their MediSave savings to buy Integrated
Scheme Shield Plans for themselves and their dependants.
ElderShield ElderShield is a severe disability insurance scheme that provides basic financial
protection to those who are not able to do simple daily activities and need long-term
care, especially in their old age.
Source: CPF Board
https://www.cpf.gov.sg/Members/Schemes
25
Appendix 2: CPF Contribution Rates
26
Source: CPF Board

https://www.cpf.gov.sg/Employers/EmployerGuides/employer-guides/paying-cpf-contributions/cpf-
contribution-and-allocation-rates
27
Appendix 3: CPF Interest Rates
For CPF members aged below 55:
CPF Account Min. Interest Rates (no cap) +1% Extra Interest Max. Interest Rate
Ordinary Account 2.5% 1% p.a. extra interest on the first 3.5%

SGD60,000 of combined CPF
balances, of which up to
SGD20,000 comes from the OA
Special Account 4% 5%
MediSave Account 4% 5%
For CPF members aged above 55:
CPF Account Min. Interest Rates +1% Extra Interest + 1% Additional Max. Interest Rate
Extra Interest
Ordinary Account 2.5% On the first SGD60,000 On the first SGD30,000 4.5%
of combined CPF of combined CPF
balances, of which up balances, of which up
to SGD20,000 comes to SGD20,000 comes
Special Account 4% from the OA from the OA, for CPF 6%
members aged 55 and
above
MediSave Account 4% 6%
Retirement Account 4% 6%
(55 and above)
Source: CPF Board Retirement Planning Booklet

https://www.cpf.gov.sg/Assets/members/Documents/RetirementPlanningBooklet_Eng.pdf
28
Appendix 4: CPFIS Investment Options
Type of Investment CPFIS-OA* CPFIS-SA
Unit Trusts (UTs) Yes Yes, but higher risk UTs not included
Investment-linked Insurance Yes Yes, but higher risk products not included
Products
Annuities Yes Yes
Endowment Policies Yes Yes
Singapore Government Bonds Yes Yes

(SGBs)
Treasury Bills (T-bills) Yes Yes
Exchange Traded Funds (ETFs) Yes No products currently available
Higher risk ETFs are not included
Fund Management Accounts Yes No
Fixed Deposits (FDs) No products currently available
Statutory Board Bonds
29
Bonds Guaranteed by Singapore

Government
Shares Up to 35% of investible savings No
Property Funds Up to 35% of investible savings No
Corporate Bonds Up to 35% of investible savings No
Gold ETFs Up to 10% of investible savings No
Other Gold Products (such as Gold Up to 10% of investible savings No

certificates, Gold savings accounts,
Physical Gold)
*Investible savings of CPF OA refers to the account balance + the amount withdrawn for housing and education.
Source: CPF Board

https://www.cpf.gov.sg/Assets/members/Documents/CPFISInvestmentProducts.pdf
30
Appendix 5: CPF Retirement Sums and CPF LIFE Payout Plans
At age 65, if the CPF member is a Singaporean Citizen or Permanent Resident born in 1958 or after with at least
SGD60,000 in their RA six months before turning 65, he will be automatically enrolled in CPF LIFE.
Source: CPF Board

https://www.cpf.gov.sg/members/schemes/schemes/retirement/cpf-life
31
Appendix 6: CPF LIFE Annuity Premiums and Payout Plans
Payout Plan Information
Standard: Higher monthly ● All savings in RA will be deducted as the annuity premium into the Lifelong
payouts (Default option) Income Fund
● Monthly payouts funded from the Lifelong Income Fund
Basic: Lower monthly payouts ● A portion of RA savings will be deducted, ranging from 10% to 20%
● The rest of RA savings remain in the RA, and both RA savings and funds in the
Lifelong Income Fund earn interest
● Monthly payouts come from RA first until 1 month before the CPF member turns
90, then payouts come from Lifelong Income Fund
Escalating ● All savings in RA will be deducted as the annuity premium into the Lifelong
Income Fund
● Monthly payouts funded from the Lifelong Income Fund and escalate by 2%
every year
Source: CPF Board

https://www.cpf.gov.sg/members/schemes/schemes/retirement/cpf-life
32
Appendix 7: Upcoming Changes to CPF Contribution Rates
Current 2021/2022* By 2023
Retirement Age 62 63 65
Re-employment Age 67 68 70
CPF Contribution^ 26% 28% 37%

(55 to 60 years old)
CPF Contribution^ 16.5% 18.5% 26%

CPF Contribution^ 12.5% 14% 16.5%

*CPF contribution changes will be effective 1 Jan 2021, while retirement age changes will take on by 1 Jul 2022
^Increased CPF contributions will be directed to CPF members’ SA
Source: MoneySmart
https://blog.moneysmart.sg/budgeting/cpf-contribution-retirement-age/
33
Appendix 8: Breakdown of MediSave Coverage
Usage Description
Premium Payments To pay for insurance premiums for MediShield Life, Integrated Shield Plans and
ElderShield or CareShield Life
● MediShield Life and ElderShield or CareShield Life premiums can be covered
fully by MediSave.
● Integrated Shield Plan (IPs) and ElderShield Supplement premiums can be
covered up to withdrawal limits.
Inpatient Care To pay for an individual’s own / approved dependents’ hospitalisation expenses in
Singapore
Inpatient and Day Surgery at Acute Hospitals
● Daily hospital limit
● Surgical limit
● Colonoscopy screenings
Inpatient stay at other settings
● Stay in approved community hospitals
● Stay in approved convalescent hospitals
● Treatment in approved day hospitals
34
Treatments to help with conceiving, pregnancy and delivery expenses
● MediSave Maternity Package
● Assisted Conception Procedures (ACP)
Outpatient Care MediSave500 Scheme
Use up to $500 per MediSave account a year from June 2018 for:
● Outpatient treatments of the 20 conditions under the Chronic Disease
Management Programme (CDMP) (subject to 15% co-payment by patient)
● Childhood Vaccinations (under the National Childhood Immunisation Schedule)
● Adult Vaccinations (for target populations under the National Adult
Immunisation Schedule)
● Health Screening
Other outpatient uses
● Flexi-MediSave for the Elderly
● Outpatient renal dialysis treatment
● Outpatient radiotherapy, radiosurgery, chemotherapy, and MRI/CT/other
diagnostics for cancer patient
● Outpatient scans for diagnosis or treatment of a medical condition
● Outpatient anti-retroviral treatment for HIV patients
● Outpatient Hyperbaric Oxygen Therapy
● Outpatient Intravenous Antibiotic Treatment
● Outpatient Long Term Oxygen Therapy and Infant Continuous Positive Airway
Pressure Therapy
35
● Outpatient Immuno-Suppressants for patients after organ transplants
● Long-term Parenteral Nutrition
● Outpatient Autologous Bone Marrow Transplant for multiple myeloma treatment
Long-Term Care ● Stay in approved hospices
● Day Rehabilitation at approved day rehabilitation centres
● Home palliative and day hospice care
● MediSave withdrawals for long-term care
Source: Ministry of Health Singapore

https://www.moh.gov.sg/cost-financing/healthcare-schemes-subsidies/medisave
36
Appendix 9: Breakdown of MediShield Life Coverage
Usage Description
Inpatient/Day Surgery ● Daily ward and treatment charges
● Surgical procedures
● Implants
● Radiosurgery
● Continuation of Autologous Bone Marrow Transplant Treatment for Multiple
Myeloma
Outpatient Treatment ● Chemotherapy and radiotherapy for cancer
● Kidney dialysis
● Immunosuppressants for organ transplant
● Erythropoietin for chronic kidney failure
● Long-term prenatal nutrition

https://www.moh.gov.sg/medishield-life/what-is-medishield-life/what-medishield-life-benefits
37
Appendix 10: Integrated Shield Plans for MediShield Life
38
Source: Seedly
https://blog.seedly.sg/singaporean-integrated-shield-plan-comparison/
39
Appendix 11: Policy on MediFund Coverage
“Every MediFund-approved institution has an independent MediFund Committee to consider and approve
applications, and decide on the appropriate quantum of assistance to provide. The actual amount of assistance
you receive depends on you and your family members' financial , health and social circumstances, as well as the
size of the medical bill incurred.”

https://www.moh.gov.sg/cost-financing/healthcare-schemes-subsidies/medifund
40
Appendix 12: Healthcare Expenditure (% of GDP) for Select World Economies
Source: The World Bank
41
Appendix 13: Out-of-Pocket Healthcare Expenditure (% of Healthcare Expenditure) for Select World Economies
Source: The World Bank
42

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RETIREMENT AND HEALTHCARE 2019 | Sectional A2 Group 1

Group Project: Retirement and Healthcare

Team Members Matriculation No.

Huang Yunyi A0159667J

Sharon Fang Xuerong A0170647B

Ruben Goh Chang Xian A0167538R

Limmer Ferdinand Christian Ludwig Alfred A0208889H

Kozoderc Jan A0208897J

Zhou Weisheng, Bryan A0184320N

2. The Central Provident Fund (CPF) 4

2.1. Overview of CPF 4

2.2. CPF Contribution Rates (by CPF Account) 5

2.3. Growing CPF Savings - CPF Interest Rates 5

2.4. Growing CPF Savings - CPF Investment Scheme (CPFIS) 6

2.6. Recent Changes to CPF 6

3. The ‘3M’ System: MediSave, MediShield, and MediFund 7

3.1. MediSave - Mandatory Savings Scheme 7

3.2. MediShield Life - Basic Health Insurance 8

3.3. MediFund - State Sponsored Endowment Fund 8

3.4. Recent Changes to the 3M System 9

4. Active CPF Management for Members 9

4.1. Enhancing Personal CPF Savings 9

4.2. Taking Care of Loved Ones 9

4.3. Maximising Retirement Funds 10

5. Criticisms of CPF and the 3M System 10

5.1. Criticisms of CPF 10

5.2. Criticisms of the 3M System 11

6. Comparison of Alternative Approaches 12

6.1. Comparison of Alternative Pension Approaches 12

6.2. Comparison of Alternative Healthcare Approaches 13

7. Suggested Improvements to Singapore’s Retirement System 14

7.1. Improvement to the Contribute-As-You-Earn (CAYE) Scheme for Self-Employed Persons 14

7.2. Co-contribution to CPF for Self-Employed Persons 15

7.3. Revamping the CPFIS 16

7.4. Utilise Artificial Intelligence to Optimise 3M Spending 18

Appendix 1: List of Schemes under CPF 24

Appendix 2: CPF Contribution Rates 26

Appendix 3: CPF Interest Rates 28

Appendix 4: CPFIS Investment Options 29

Appendix 5: CPF Retirement Sums and CPF LIFE Payout Plans 31

Appendix 6: CPF LIFE Annuity Premiums and Payout Plans 32

Appendix 7: Upcoming Changes to CPF Contribution Rates 33

Appendix 8: Breakdown of MediSave Coverage 34

Appendix 9: Breakdown of MediShield Life Coverage 37

Appendix 10: Integrated Shield Plans for MediShield Life 38

Appendix 11: Policy on MediFund Coverage 40

Appendix 12: Healthcare Expenditure (% of GDP) for Select World Economies 41

2. The Central Provident Fund (CPF)

Ordinary Account (OA) For education, housing and insurance

Special Account (SA) For retirement and retirement-related investments

2.2. CPF Contribution Rates (by CPF Account)

Age Bracket Purpose of the changing contribution rates (Inferred)

35 and below ● Most contributions allocated to OA to support first home purchase

2.3. Growing CPF Savings - CPF Interest Rates

(Seow, 2016), the CPF is an attractive proposition for wealth preservation.

2.4. Growing CPF Savings - CPF Investment Scheme (CPFIS)

can be found in Appendix 5.

2.6. Recent Changes to CPF

changes (Ministry of Manpower Singapore, 2019);

Prior to October 2018 From 1 October 2018 From 1 October 2020

Sales Charge Cap 3.0% 1.5% 0%

Wrap Fee Cap 1.0% 0.7% 0.4%