[CPF Min Sum] Govt can't have it both ways

The Straits Times, Published on Jun 23, 2012
CALIBRATING INFLATION FOR CPF MINIMUM SUM
Govt can't have it both ways 
IT IS difficult to understand how the Ministry of Manpower's reply ('Increase doesn't fully reflect total inflation'; June 15) addresses the point made by Mr Young Pak Nang ('CPF Minimum Sum should reflect 'true' inflation'; June 8).

Imputed housing rentals and private road transport do not affect most people who are at least 65 years old when they draw down on their CPF Minimum Sum.
Therefore, inflation related to these two items should be excluded when adjusting the target Minimum Sum (which is stated in 2003 dollars) for inflation.
Alternative inflation indicators, which exclude the effects of imputed housing rental and private road transport, are readily available and should be used.
Second, the ministry's reasoning that some of the factors that led to higher consumer price index inflation last year are cyclical and likely to even out over the long term is contextually flawed.
A person reaches the age of 55 years only once in his life, at which point he sets aside his Minimum Sum.
If, for example, the cumulative consumer price index since 2003 is higher than the corresponding cumulative consumer price index excluding imputed housing rental and private road transport, it is no comfort to him that the difference may even out after his 55th birthday because he would have already set aside his Minimum Sum.
Finally, the ministry's point that this year's Minimum Sum increase did not fully reflect last year's consumer price index inflation cannot be taken to mean that the ministry did not intend to use last year's consumer price index inflation.
Rather, consumer price index inflation was used, but the ministry determined that the increase in the Minimum Sum was too large to go down well with the affected 55-year-olds and decided to moderate the increase.
The ministry will use the full cumulative consumer price index inflation to determine the Minimum Sum next year (and every year in the future), and then decide whether or not to moderate the formula-based increase.
The conclusion is obvious: The ministry should use a more appropriate inflation indicator such as the consumer price index excluding imputed housing rental and private road transport when adjusting the Minimum Sum for inflation.
It doesn't make sense for the Government to tell us that inflation due to imputed housing rental and private road transport does not affect most of us, but at the same time adjust the Minimum Sum for inflation as if it does.
David Boey
http://www.straitstimes.com/STForum/Story/STIStory_814046.html
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