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1.56 The ERC recommended that the Government
defer for two years any further restoration of
the current CPF contribution rate of 36%. The
rate would thereafter be restored progressively
to the full 40%, although the pace and timing
will depend on prevailing economic conditions.
The ERC also proposed to proceed with the other
changes to the CPF scheme, which had been linked
to the full restoration.
1.57 The Government accepts these recommendations.
The Singapore economy has not yet fully recovered
from the 2001 recession. Moreover, the current
slowdown is not just a cyclical downturn, but
a reflection of a fundamentally changed environment.
Even as we pursue longer term strategies to adapt
to this new landscape, we must maintain Singapore’s
competitive position and make sure the recovery
is firmly on track.
1.58 Deferring any further CPF restoration for
two years will ensure that we do not increase
the burden on employers before the economy has
fully recovered. It will send a strong signal
to investors that Singaporeans understand what
is at stake, and are determined to face up to
the new challenges.
1.59 Some Singaporeans have expressed concern
that delaying the CPF restoration will hurt workers’
savings. But the more urgent priority now is to
help them keep their jobs. When companies are
assured that their business costs are not going
up, they are less likely to retrench workers or
move out of Singapore. They may even be encouraged
to hire more workers as soon as business picks
up.
1.60 At the same time, we will proceed to phase
in other changes to the CPF system that we had
intended to do when we restored the CPF contribution
rate. These are changes to restructure and improve
the CPF scheme, and we should begin to implement
them progressively, giving Singaporeans enough
time to adjust.
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