If you do not drive, you will have at least $500,000 more in your retirement fund.
GOING by the amount of discourse in cyberspace, very few things get Singaporeans as worked up as food – and the CPF Minimum Sum is one of them.
Google the three words and you get 136,000 results. Not quite the 1.05 million hits when you type “chilli crab”, but comparable to the 139,000 for “Preferential Additional Registration Fee” and the 402,000 for “MRT breakdown”.
It is understandable why the CPF (Central Provident Fund) is an emotive topic. After all, Singaporeans feel, rightly so, that it is their retirement savings. And as such, they have a right to access as much of it as they wish when they retire.
That the Minimum Sum has been rising almost continuously over the years – from about $30,000 in the late 1980s to $161,000 this year – must add to the raging controversy in Singapore.
Arguments by the Government that the policy is necessary to safeguard against retirees blowing it all at one go , and that people are living longer and longer, hold little water. No matter how logical these arguments may be, they hold no sway to the person of average means. He or she will have to contend with measly monthly payouts instead of a tidy lump sum after working for 30 long years.
Funnily, though, most people fail to see that owning a car is like putting aside another “Minimum Sum”. In fact, it is quite likely to be a far bigger “Minimum Sum” than stipulated by the CPF board. Let’s make the following assumptions for a 1.6-litre carused over 10 years:
Cost of car: $100,000
PARF: $10,000
Loan cost (interest charges): $10,000
Parking and ERP: $17,000
Insurance: $10,000
Repairs and maintenance: $7500
Road tax: $6000
Fuel: $35,000
Total: $175,500
IF WE CONSIDER MONETARY VALUE ALONE, MOTORING IS PERHAPS JUST AS UNAPPEALING AS THE CPF MINIMUM SUM.
Let’s also assume that a person buys only three cars in his working life. That would bring his total motoring outlay to $526,500.
Now, we have to subtract the cost of alternative transport. Let’s pick the lowest denominator: public transport. For a family of four making four trips per day each, and if each trip costs $1 on average (taking into account the various concessions), the total transport expenditure would come up to $58,400 over a 10-year period. Or $175,200 over 30 years.
To be simplistic, let’s ignore the value of time in this comparison. Because it can be argued that while a bus ride takes twice as long as a car ride, the person on the bus can use the time to read, play games or catch up on his favourite TV serial.
So if we subtract the total cost of public transport from the cost of motoring over 30 years, we arrive at $351,300.
That is a substantial sum. In fact, it is more than double the current CPF Minimum Sum.
That sum will be larger if the car in question costs more than $100,000. And it would be even larger if a person buys more than three cars over 30 years (a high likelihood).
In fact, the sum will be significantly larger if you assume it is set aside in a fixed deposit or invested in a bond. By conservative estimates, you will have $500,000 to $750,000 more in your retirement fund if you do not drive (that is, based on the above assumptions and calculations).
Of course, it is hard to assign purely a monetary value to having your own car. The freedom of choice you get from having immediate access to personal mobility is priceless (or at least it f eels that way).
You feel like going anywhere, you just hop into your car and go – whatever the weather or time of day. No long walks or waits. And the level of privacy and comfort available to a car owner is inaccessible to a public transport commuter.
Then there is also the joy of driving. You don’t have to be a true-blue petrolhead to enjoy a car that is smooth, powerful and handles and rides well.
With increasing connectivity, a motorist can stay in touch with the outside world if so he wishes.
The downside of motoring would include the occasional accident and fine, encounters with inconsiderate or dim road users, time wasted looking for a parking space, and mechanical problems that are hard to fix (not forgetting the heartache of seeing the first scratch or ding on a new car’s shiny body).
The biggest frustration is, of course, getting caught in traffic jams. On the other hand, a motorist will never have to face MRT delays or breakdowns, unpredictable bus services, jostling with the crowd, poor first/lastmile connections, inclement weather or having to go to places where there are no bus or train services at all. O r the frustration of not being able to get a taxi when he needs one.
But by and large, if things go without a hitch, a bus, train or cab ride in Singapore is not too bad – especially when you compare it with other developed cities where commutes cost more (and cars cost less). The key phrase is “without a hitch”.
At the moment, though, the advantages of having a private car in Singapore far outweigh the disadvantages, if we consider the most important factors that make a trip pleasant: speed, predictability and comfort.
On the other hand, if we consider monetary value alone, it is clear that motoring is rather unappealing. Perhaps just as unappealing as the CPF Minimum Sum. But for the latter, at least you know you (or your children) will eventually see a sum of money.
