NTIAL
Level of Benefits Payable from a CPF
Annex
Introduction
1.
The purpose of this Annex is to illustrate in broad terms the levels of benefit for the individual employee provided by a central provident fund at varying rates of contribution over varying periods of time, and to consider what they are worth in terms of providing security for an employee upon retirement. To this end, projections have been made on the bas is of combined contribution rates of 10%, 15% and 20% of salary respectively. For purposes of comparison, an indication is also given of the amount of the lump sum which an employee might receive under the long-service payment provisions.
2.
The justification for choosing these levels of contribution is that a 10% joint contribution is the level most often suggested by supporters of a CPF in Hong Kong, a 15% joint contribution (split either 5% - 10% or 7 1/2% - 7 1/2%) is a typical level of contribution to existing provident funds and retirement schemes in Hong Kong, and a 20% joint contribution (split 9% 11%) is the level of contribution in the Malaysian
in the Malaysian CPF, which is a reasonable example of a south-east Asian CPF the benefits
CPF the benefits of which are confined to a lump-sum payment on retirement. As discussed in para 5 of the paper, the Singapore CPF, with a joint contribution rate of 35% of wages, is an exception in that its range of benefits is wider than would be necessary for a Hong Kong CPF.
Assumptions
3.
For purposes of calculation, it has been necessary to make broad assumptions as to real wage increases during the
during the contribution
contribution period, real rates of return on investment of the assets of the CPF and the costs of administering the CP F. The following assumptions
have been made :-
on
(a) A 3% real rise in
in wage levels is assumed. Wages over the last fifteen years have risen in real terms by 2%
2% per ann um average, and a further 1% rise is assumed for increments and promotion contribution period.
during the
DORPENTIAL