Young Singaporeans ‘will have adequate CPF savings’
SINGAPORE, Sept 20 ― Compared to the previous generation, young Singaporeans today have to work longer as life expectancy increases. Coupled with the rising cost of living, there are concerns that “work till you drop” could become the motto for the working class here.
But the findings of an independent study commissioned by the Singapore Ministry of Manpower could go some way to allay those worries.
However, at the same time, the study highlighted the need for policymakers to “keep our eyes on” the needs of the older generation today ― in the words of Singapore Deputy Prime Minister Tharman Shanmugaratnam ― given that their wages were much lower in the past and they were required to set aside less money in their CPF Retirement Account.
The study, which was conducted by National University of Singapore economics professors Chia Ngee Choon and Albert Tsui, found that young Singaporeans in the workforce today will have adequate savings in their Central Provident Fund (CPF) accounts by the time they retire.
Economists measure retirement adequacy of social security systems by using an Income Replacement Rate (IRR), or the ratio of retirement income to pre-retirement earnings.
The study found that the median male earner who enters the workforce today will be able to achieve an IRR of 71 per cent through his CPF savings.
For the female median earner, the IRR is 63 per cent.
Tharman, who gave a preview of the findings yesterday, said these figures are comparable to those seen in pension systems in many developed countries ― the equivalent IRR in the median Organisation for Economic Co-operation and Development (OECD) country is 66 per cent, while the average among OECD countries is 72 per cent. The full findings will be finalised and released soon.
Speaking at the opening of the Singapore Human Capital Summit, Tharman said the findings were “an important validation of the CPF system”.
He added: “The IRR is even higher in Singapore when we take into account the fact that most Singaporeans would own homes that are fully-paid for by the time they retire. By not having to pay for rent, cash is freed up for other living expenses in their old age.”
However, Tharman pointed out that many of today’s older generation “have low CPF balances and are unable to attain the IRRs estimated in the study”.
Tharman said: “However, most of them, including those with lower and middle income backgrounds, have also experienced substantial appreciation in value of the homes that they own, made possible by government housing subsidies, their earlier withdrawals of CPF savings, and economic growth. Our strategy is to help them monetise the values of their homes in retirement, if they wish to.”
To that end, the government has introduced the Silver Housing Bonus to help older Singaporeans. It is also helping them in other ways such as Medisave top-ups, and higher subsidies for Community Hospitals, nursing homes, day-care and rehabilitation facilities, as well as for home-based care packages.
Tharman stressed: “But no matter how well designed the CPF system is, retirement adequacy is still premised on individuals taking responsibility to work and save, and employers taking the responsibility to provide good jobs, share productivity gains fairly and keep older workers employed.” ― Today