NDR 2019: Labour movement MPs, NMPs give their views on higher CPF contribution rates for older workers
SINGAPORE: Members of Parliament (MPs) from the labour movement welcomed the announcement to increase Central Provident Fund (CPF) contribution rates for some older workers, although they acknowledged that businesses may have concerns over costs.
Some Nominated Members of Parliament (NMPs), on the other hand, called for more to be done, such as extending the higher contribution rates to workers up to 65 years old and having the increase kick in sooner.
On Sunday (Aug 18), Prime Minister Lee Hsien Loong announced in his National Day Rally speech that CPF contribution rates would be raised for workers above 55 from 2021, and that at the end of the changes, those aged 60 and below will enjoy the full CPF rate.
Mr Lee added that CPF rates will begin to taper down after 60, and level off after 70. The complete increment for the intended group will take about 10 years or so, depending on overall economic conditions, he added.
Currently, the total CPF contribution rate is 37 per cent for workers up to 55 years old.
It drops progressively as the age band increases: 26 per cent for workers aged 55 to 60, 16.5 per cent for those aged 60 to 65, and 12.5 per cent for those above 65.
READ: New retirement, re-employment ages of 65 and 70 by 2030; higher CPF contributions for older workers
In response, labour movement MPs Patrick Tay, Zainal Sapari and Heng Chee How said that they welcomed the move to raise CPF rates for workers above 55, but acknowledged that businesses may have concerns over costs and challenges in adopting them.
Mr Heng pointed to two “realities” facing Singapore as reasons for welcoming the changes: The longevity of Singaporeans and labour constraints.
Because Singaporeans are living longer, there is a need to help older workers, give them the choice to work longer, and provide better for their retirement, he said.
READ: PM Lee outlines ambitious plans on education, retirement age and climate change concerns in NDR 2019 speech
Mr Tay, who is also the chairman of the Government Parliamentary Committee (GPC) for Manpower, acknowledged that businesses would have concerns.
“There’s always a sense of concern that the older workers may be less productive. I think businesses have to leave it to technology. We have seen companies that have succeeded in using technology to redesign their jobs,” he said.
He also said that the businesses will have time to prepare, and said there are several schemes like SkillsFuture that employers can use if they need support in retraining their workers to make them employable as they grow older.
Echoing this sentiment, Mr Sapari, who is the Manpower GPC’s vice-chairman, said: “We in the labour movement understand what some of the concerns are and that is the reason we do not have a very fixed schedule (for the changes).”
However, while the labour movement will encourage businesses and help them, Mr Zainal urged workers to keep themselves healthy and continuously learn so that they remain employable as they grow older.
"SHOULDN'T YOU BE TREATED THE SAME AS OTHER WORKERS?": WALTER THESEIRA
NMP Walter Theseira said that workers aged up to 65 should receive full CPF contributions of 37 per cent.
"There is no reason why we shouldn't aim to get the CPF contribution rates to be the same all the way up to the eligibility age to withdraw CPF, which is 65," said Associate Professor Theseira, who teaches economics.
He proposed that the Government consider extending the change to the wider group of older workers.
"The fact is, if you are not required to retire yet, then shouldn't you be treated the same as other workers?" he said.
Joining Assoc Prof Theseira in asking for a change to the proposed plan was fellow NMP Anthea Ong, who asked for the increase in contribution rates to be faster.
It would, she said, encourage older workers, an important pool of workers for the economy, to work longer.
Referring to raise in the retirement age in gradual phases from 62 to 65 and re-employment age from 67 to 70 by 2030, Ms Ong said: "We want them to work longer, we should also provide for them more in terms of the CPF contributions."
The first age limit increments from 62 to 63 for retirement and 67 to 68 for re-employment will happen in 2022, although the Public Service will implement it one year earlier.
The changes follow the Government accepting all of the recommendations put forward by a tripartite workgroup studying the country’s ageing workforce.
WAGE STRUCTURE AN UNDERLYING PROBLEM
Although the proposed changes received a warm welcome from both the labour movement and his fellow NMPs, Assoc Prof Theseira pointed to the existing wage structure as an issue in getting employers to adopt the increase in age cut-offs and higher CPF contributions for older workers.
Existing salary structures mean that many workers get increments over the years, attaining their peak salary when they are older. This becomes a problem when these older workers are less productive.
"The employer will think: 'I've committed to paying this guy more and more money every year, but he's getting less productive, so I'm looking at a black hole'," Assoc Prof Theseira said.
Workers should attain their highest wages earlier in their lives and these wages should be gradually decreased as their productivity dips, he said.
"If you look at many people, if you ask them, when do you really need your wages to be high? When do you need your income to come in? They will say it is when they are in their late 30s, early 40s, early 50s, when they have a young kid, when they are paying for (their children’s) education," he said.
Hopefully, by the time they reach their 60s and beyond, they would already have discharged most of their family responsibilities, he added.
He suggested a more flexible wage structure to account for these varying needs in different life stages.
This would in turn make it more attractive for companies to employ older workers, he said.