In light of the recent heated debates, discussions, and protests about the Central Provident Fund (CPF) here in Singapore, I think there are some issues that are implicitly contested but not brought to light. Which is possibly the reason why both parties – the Government and the People – feel like they are simply talking past each other, and hence the unhappiness in the entire matter.
The point I will make here is this: the heated discourse has very little to do with factual disagreements (or the need for more transparency or more information). No, this heated discourse, and especially the uproar from the people, has everything to do with ethical issues, questions of what should and shouldn’t be done. These ethical issues have been implicit in much of the discourse online and offline and the Government hasn’t really addressed it (or if the Government did, it was done poorly because nobody seemed to have heard it).
Of course, to complicate the problem further, the government hasn’t been very effective in communicating the necessary factual information. To be fair, CPF is not a system that one can easily understand. It’s complicated and there are so many policies and clauses for all sorts of things. Transparency is one thing – it’s easy to throw out a ton of information, laws, and policies on government websites and in the news – but, communicating these information in a way that’s easy to access and understand by the general public is another matter altogether.
The Government has consistently failed to communicate factual information well through its websites and newspapers. Perhaps they’re running on the assumption that the mere presentation of information is sufficient. It may be the case for experts, but it certainly isn’t the case for everyone else. Explanation is required.
We must remember that state policies necessarily impose a certain value/moral system on the People. For those who share the same value/moral system, there is much agreement. But for everyone else, it appears unreasonable or crazy. Or, in the case of CPF that’s close to peoples’ hearts, and where the Government hasn’t done much to discuss these ethical issues, many have judged the Government as “immoral” or worse, “evil.”
But what really are the ethical issues at the heart of public discourse?
In this post, I will reconstruct several key ethical issues underlying the debate, which I hope would help contribute to a more fruitful public discourse between the Government and the People. I’ll begin first with the small and simple issues, and slowly work my way up to more difficult ethical issues. But, I will not attempt to answer them. I’ll leave this questions open ended as I prefer these questions to be the questions that will guide public discourse in a more constructive manner.
Ethical Question 1: Should the government impose a mandatory retirement savings fund on me – even if its against my will?
This is the first and most fundamental question that should be tackled in public discourse.
After all, CPF is imposed upon every citizen against their will. 37% of their salary (or 20% if you wish to argue on semantics) is taken and locked away, where one will not be able to touch it until many decades later. It is a significant chunk of one’s salary, and so the disposable income that one has is greatly reduced.
The Government tells us: it’s a retirement fund – a better alternative to the pension system. If you don’t save up, how will you take care of yourself when you retire? The Government does have valid concerns. The failure of individuals to plan for their retirement will eventually translate into a social problem which both the People and the Government will have to deal with later – and it will be more unpleasant a matter to deal with.
Do we agree with this? Is this good justification for imposing it on us?
There are people who do not agree with the justification. And so nothing else matters (or matters trivially) until this question is settled.
But if we accept the justification above, we then have another question to ask:
Ethical Question 2: Since it’s our money and our retirement, shouldn’t we be allowed to choose whether we want to save with CPF, or opt out of CPF and switch to a different retirement plan?
For the sake of argument, let’s imagine that there are retirement savings plans out there that are conservative enough, so that people do not lose their capital sum, and are just as good as the CPF or better. Wouldn’t this scenario give us the same result as the scenario where everyone is on CPF?
Conceivably, this is the case. But from a very conservative point of view, the worry then is that private retirement funds do not have the same stability as the CPF. And so, while the returns may be equal or better, the risk of losing a portion (or all) of one’s retirement savings is higher.
But, is this a fair concern to justify not giving people the autonomy to opt out of the CPF and save with another private company? Or are there other concerns at play?
Some will argue that if you are truly financially savvy, you can still go ahead and invest whatever disposable income that you have for your retirement. CPF then becomes a backup if you did badly; or a second source of money when you retire and enjoy the earnings from your own investment. Wouldn’t this be better? Of course, this option is only available to those who have high salaries.
We do know that part of the reason for a mandatory CPF is that the money is eventually channelled and used in the sovereign wealth fund for investment purposes. Which leads us to the next question:
Ethical Question 3: Despite the complex mechanism by which our CPF money is protected yet channelled to the sovereign wealth fund, should we be entitled to the fortunes made by successful investments?
The government borrowed our money to make money. Shouldn’t we be entitled to some of the gains? After all, had it not been for our money, the Government wouldn’t have been able to carry out those investments.
One way to consider the entire affair is to conceive the use of CPF money based on the bank model (an argument that I’ve seen circulating around the Internet to counter the above question). The bank pays us interest for our money, and uses our money for its own investments. Whatever the bank earns, it gets to keep it, and we don’t get anything back except for the agreed interest. Conversely, if the bank loses money (and it’s not too bad a loss), we don’t lose money in our savings.
Based on this model, we are not entitled to the earnings made by the bank because, conversely, the bank has structured the savings in such a way that it is shielded from losses. Similarly, CPF is structured in a way that protects the capital sum while still giving it room for some growth, and we don’t have to shoulder the burden of the losses made from bad investments.
If our retirement funds were exposed to the same risks of gain and loss (as in the case of the state investments), then we once again expose ourselves to the likelihood of future social problems of poor homeless elderly folk which both the People and the Government will have to deal with.
Is this a valid justification? Are there other ways of conceiving the relation between our CPF money and the sovereign wealth fund? Do any of these ways change the relationship, and thus makes for a stronger case for us having a stake in it?
Ethical Question 4: But surely, everyone does have a stake in the state’s investments, and like investors in a company, shouldn’t citizens be entitled to some sort of dividend at the very least for the years where state investments perform well?
In other words, do citizens have a stake in state investments? Should citizens be considered to have a stake (at least)?
After all, investors have a stake in whatever company they invest their money in. And, as is the case of having a stake in things, what are the returns?
But perhaps part of the problem is in how we understand what it means to have a stake and the expected returns. The understanding most people will have in their minds is to be paid some kind of dividend in return. Nothing wrong in that.
Or should we broaden our understanding of what it means to have a stake in state investments and the logical consequences that follow?
Perhaps it doesn’t translate immediately to cold hard cash for everyone.
Perhaps the returns we enjoy are in the form of properly maintained and upgraded facilities? (Personally, it seems to me that the quality of maintenance for public roads and everything else has gone from good to bad to worse, but that’s a different matter for another topic.)
Perhaps the returns is that we get to enjoy better amenities, or better education, services, treatment, etc., for ourselves, for the elderly, and for our children?
Should we conceive of returns in this way? (If yes, why? If no, why not?) If so, then we should begin to ask if quality of life and access to better facilities and amenities have gotten better. How then do we evaluate whether we have been shortchanged or if we have received our just returns?
Or is this just propaganda to blind us of the fact that we do not get cold hard cash in return for the money that the Government borrows from us?
But even if we, for the sake of argument, just accept that all the questions above have been adequately answered, we are faced with more ethical questions.
Ethical Question 5: Should people be allowed to withdraw all their CPF money upon reaching retirement age?
It’s our money, so shouldn’t we have the right to do whatever we want with it?
The media lately, has been reminding us that not everyone has the moral strength to deal with a big sum of money appropriately. Many people end up ruining their lives. The sudden large sum of money in our hands can lead people to do stupid things, or be easily cheated/conned by others. This being the case, it thus seems more prudent on the side of policy, that people receive their retirement money bit by bit so that they don’t spend everything at once and then bring about social problems for everyone.
Fair/valid concern? What do you think?
While some of us may be offended by the fact that the Government has a tendency to treat everyone like small children (it’s no wonder many citizens, though adults or elderly, behave like small children too), there are questions we should ask:
Is this the right thing for a government to do?
Or should the state respect the rights and decisions made by adults – who should know wiser and should therefore carry the burden of their decisions, no matter how stupid these decisions may be? If so, should the state let everyone, upon the age of retirement (let’s just leave Minimum Sum out of the picture first), be allowed to withdraw their entire retirement savings?
Or is there a better way that will allow us to navigate between these two extremes, where there is still some degree of patriarchal control (to protect society at large from stupid people and their stupid destructive decisions) and where people’s individual rights and decisions can be respected, and people who wish to withdraw one lump sum be allowed to do so?
With the above considerations in mind, is the policy regarding the Retirement Account and the Minimum Sum an attempt at trying to navigate through this middle way? Is this fair? Or a good attempt at navigating between the two extremes mentioned above?
You are allowed to withdraw whatever that is above the Minimum Sum. And everything else will be paid back to you on a monthly basis. (There are exception clauses to this, so the above scenario, though it being the general principle, is not universally the case for everyone). Sounds good? Maybe, maybe not?
But even so, the Minimum Sum and the exception clauses does not allow everyone to enjoy a good retirement. This leads us to the last ethical question.
Ethical Question 6: Is everyone entitled to a decent life of retirement?
Ideally, the answer is yes. Having done so much in one’s life, one rightly should enjoy the twilight years of one’s life, living somewhat comfortably, and getting a chance to enjoy the last few years of our life. It is ideal.
But is this possible? Is this realistic?
Of course, part of the problem is that the idea of a “decent retirement life” is subjective. Some have the expectations of luxury and comfort. Others have something a little more modest.
But the main question is: are we really entitled to it? If we are entitled to it, what are the grounds for such entitlement?
Or do we have to work towards it?
I’ll leave these questions open because they’re very sensitive. But it matters a lot how we answer the questions above.
And until these questions are thrown into public discourse and discussed as mature adults (without blaming, shaming, or scolding anyone), I don’t think we will get anywhere in our discourse about the CPF and the retirement fund.
Of course, there are many more questions that should be asked, but I think these are the ethical questions that we should honestly try to answer. The Government too should discuss these ethical issues and try to convince people of its stand. For as long as it keeps quiet about this, differences of values tends to result in judgements that so-and-so is wrong and therefore immoral or evil.