Chapter 3: How Cah We
How does Central Provident Funds (CPF) benefit society?

In recent years, policymakers around the world have been attracted to the concept of integrating a consideration of assets into policy efforts aimed at securing and enhancing social welfare. The theory behind asset-based welfare policy suggests that while income facilitates immediate consumption, social development over the long-term occurs primarily through asset accumulation and investment (Sherraden, 1988, 1991). Assets may not only provide individuals with the ability to exert control over resources that can increase their financial security, they might also orient owners to future aspirations and be linked with positive economic, psychological, and social effects. To explore policy efforts consistent with this theory, Sherraden (1991) proposed the establishment of life-long asset accounts for each individual, preferably for newborns, as a vehicle to implement asset-based welfare policies. He further suggests that asset-based policy should be inclusive, progressive, and built around a single integrative and coherent framework (2003a).The experience of Singapore provides an instructive case study for the potential of this approach. This affluent city-state in Southeast Asia has developed an innovative and comprehensive set of policies that employs an asset-based approach to social welfare (Asher & Nandy, 2006). At the center of these efforts is Singapore's Central Provident Fund (CPF). The CPF has gained international recognition as a particular model for meeting social policy objectives (Hateley & Tan, 2003). As one of the key pillars of Singapore's social safety net (Central Provident Fund Board, 2007b), the CPF seeks to facilitate retirement security while minimizing welfare transfer payments in a manner consistent with a national philosophy of self reliance (Central Provident Fund Board, n.d.-e).

While Singapore became independent in 1965, the CPF was originally established by the British colonial government in 1955 as a compulsory defined-contribution savings scheme. It was designed to provide financial security for workers after retirement or when they were no longer able to work (Asher, 1991). However, over the years, the CPF has been used to accelerate national economic growth (Central Provident Fund Board, n.d.-e) and has since evolved into a comprehensive social security savings plan with various pre-retirement uses such as financing healthcare, post-secondary education, home ownership, and other asset enhancement investments. Furthermore, the CPF is an integral part of the continuum of asset-based policies in Singapore that extend throughout the life course (Loke & Sherraden, 2009). Policies such as the Children Development Accounts (CDAs) that target children from birth to age six, the Edusave Scheme that benefits school-going children, and the Post-Secondary Education Accounts (PSEAs) are fully integrated with the infrastructure of the CPF. Unused balances in the CDAs and the Edusave Accounts are rolled-over to the PSEAs, which in turn transfers its unused balances to the CPF. With a portfolio of continuous managed investment, the CPF has become a life-long provision (Aw & Low, 1996).

There is much to be learned from the Singapore and CPF experience. Especially for other countries considering how to organize social policy efforts to support savings, promote asset-based welfare, and design a lifelong and multi-purpose yet coherent system. This paper will present an overview of CPF, describe how distributions from the fund support a range of policy objectives throughout the life course, and then discuss implications of these findings for national policy efforts in other countries, such as the United States.

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