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CPF system shouldn’t be loaded with too many objectives: observers

The CPF system should not be loaded with too many objectives at any one time, said observers in response to the Ministry of Manpower’s (MOM) addenda to President Tony Tan Keng Yam’s address in Parliament.

SINGAPORE: The CPF system should not be loaded with too many objectives at any one time, said observers in response to the Ministry of Manpower’s (MOM) addenda to President Tony Tan Keng Yam’s address in Parliament.

In its addenda, MOM pledged to continue improving the CPF system with retirement adequacy in mind, and also said it would look into the possibility of extending the re-employment age beyond 65.

The number of citizens aged 65 and above will triple to 900,000 by 2030.

The question is how can the country ensure Singaporeans will continue to lead meaningful lives in their twilight years?

One way to do so is to enhance retirement adequacy.

Those Channel NewsAsia spoke with said improvements could be in the form of raising CPF contribution rates as well as the contribution ceiling for all workers.

Another improvement could be apportioning the CPF contributions based on the different needs of Singaporeans at various stages of their lives.

Heng Chee How, NTUC’s deputy secretary general and Senior Minister of State in the Prime Minister’s Office, said: “People at different stages of life do have different priorities. So of course for a person reaching retirement age, his concern would be about him reaching retirement and where he is going to find the money to have a decent living.

“A person starting out in life, say in their 20s, will probably be looking at other things, like forming a family or buying a home and so on and so forth. He knows that eventually he would also need to provide for retirement, but relatively speaking, many more would be concerned about those kinds of things.

“So I think there will always be some balance to be struck between these kind of things, and maybe the rates at which the contributions should go into, let's say the Ordinary Account and the Special Account, and we could also look at whether these can be varied as one ages."

One economist said more can be done to help Singaporeans unlock their assets instead of simply raising the Minimum Sum, to ensure regular income for Singaporeans in their retirement years.

Associate Professor Tan Khee Giap, co-director of Asia Competitiveness Institute at the Lee Kuan Yew School of Public Policy, said: "How do you overcome the situation of asset rich, cash poor?

“So you must set in a mechanism within the CPF system where the assets enhanced over the decades can be unlocked into cash and can partly be kept in the CPF in order to fund the old age in order to help to pay for the insurance, rather than keep increasing the Minimum Sum because no minimum amount is considered enough."

Singaporeans must set aside a Minimum Sum in their CPF upon reaching age 55.

The CPF Board said this ensures that members have some regular income from age 65 to live on when they retire.

The Minimum Sum will be raised to S$155,000 for those who turn 55 between July 1 this year and June 30 next year.

The amount is adjusted yearly for inflation.

If members are unable to set aside their full Minimum Sum in cash, their property, bought with their CPF savings, will be automatically pledged for up to half of the Minimum Sum required.

Observers said a review of the CPF system is timely given Singapore's aging population and changes in the Retirement Age, but they also added that any change should be sustainable, taking into account the needs of not just workers, but businesses.

Kurt Wee, president of the Association of Small and Medium Enterprises, said: “Cost for businesses have been going up. So we do appeal for all segments of the economy to be mindful of that and be concerned about that because business viability is important, and there's a lot of cost pressure coming to businesses from different segments -- rent, labour, compliance.

“We also have to be mindful that businesses are already paying higher wages in the process of competing to recruit and retain workforce.

“So there is already a concerted effort by the business community to work in tandem with policy to boost productivity, to hire older workers and pay more for the workforce. That work is continuing but we also need to consider that we cannot price Singapore businesses out of business."

In line with enhancing retirement adequacy, the government is also considering raising the re-employment age to 67 -- a move that is welcomed by both the union and businesses already grappling with a tight labour market.

Mr Heng said: “Employers are increasingly allowing their workers to stay on with them even beyond 65...so there is clear value in such workers.

“The whole idea is to give people an option. I know there are some out there who have a mistaken view that a higher ceiling for re-employment in a way forces people to work, they are not allowed to stop work, but that is absolutely not the case. Any person can choose to stop work any time.

“At the same time, I think there will be many who want to work for a number of reasons. Some may want to work to maximise their earnings so they can provide for a greater retirement. There will also be some who feel the financial need to work.

“So if we then open up this option, build this road a little further, give people the choice without obliging those who do not want to go down that road, I think it is a fair move.”

Mr Wee added: "In all honesty, businesses, especially SMEs, have been hiring older workers regardless of what age they are -- as long as they are competent, able to work and make a positive contribution, businesses are more than happy to hire them.” 

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