CPF BALANCES AND WITHDRAWALS : A SIMULATION

Abstract

Till today, CPF contributions have been exceeding its withdrawals and this situation is expected to persist for years to come. This excess is mainly attributed to the increasing contribution rate, the majority of the population being in their economically active age and the rapid economic growth. Singapore experienced a "post war baby boom" in the mid fifties and has declining birth rates since then. This would mean that an aging population would prevail in the future. As such, withdrawals will exceed contributions when the relatively large cohorts born in the mid fifties reach 55 years of age. With the contribution rate expected to stabilise at fifty per cent of wages, one concern is whether the CPF would face undue financial stress in the relevant future period. The main aim of this exercise is to build models to estimate the population of Singapore and the amount of contributions, withdrawals and balances of the CPF for the years 1984 to 2050. The figures generated by the models can then be studied to gauge the effect of t 11e change in age structure on the financial position of the CPF.