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Existing schemes should be tweaked in balanced way: analysts

President Tony Tan on Friday said the government will enhance retirement adequacy to give greater peace of mind to all Singaporeans. Analysts, however, said any tweaking of existing schemes should be done in a balanced way.

SINGAPORE: Opening the second session of Singapore's 12th Parliament on Friday, President Tony Tan Keng Yam said the government will enhance retirement adequacy to give greater peace of mind to all Singaporeans.

In broad strokes, he said the government will improve existing CPF schemes and develop more options for Singaporeans to unlock the value of their homes in their retirement.

Analysts have welcomed the president's address, but they also said any tweaking of existing schemes should be done in a balanced way.

There are currently several ways for elderly Singaporeans to monetise their property without having to sell them.

One way is the Lease Buyback Scheme, which allows flat owners to sell part of their existing lease to the government.

Property analysts said tweaking the scheme presents a challenge.

Nicholas Mak, executive director (Research and Consultancy) at SLP International, said: "On one hand the government is trying to keep the price of public housing quite affordable for young families, but on the other hand, in order for the senior citizens to get more financial returns from the existing HDB flats, one way is to allow the value of the flat to appreciate quite greatly.

“That way, the retirees will be able to get higher monetary reward by monetising that more expensive flat. So this is actually two conflicting goals."

Another way to monetise their property is to let retirees sell their larger HDB flats and move into a smaller unit, which is sold to them at a lower price.

But analysts said the smaller flats would need to be built in mature communities to attract retirees who want to live in the same neighbourhood.

Analysts also said it would be timely to raise the grant given to young couples who are applying for flats near their parents.

This is because the grant amount has stayed the same over the years even as flat prices have increased.

Financial planners said an average person also needs about two-thirds of his last drawn pay to retire comfortably.

Kelvyn Choo, consultant at Great Eastern Financial Advisers, said: "We can suggest that more of the CPF contribution could go into the Special Account, so that as you grow older, more and more will go into the Special Account, which is not able to be used.

“That would actually help you in your retirement figure at the end, rather than having a lot of money in your OA (Ordinary Account), which you would find ways to use. That would affect your retirement fund."

As for tweaks to the employer and employee CPF contributions, analysts said that should be carefully looked into as overdoing it may hurt the employability of workers. 

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