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Tag: retirement

  • Singaporeans Have To Save 9 Years Longer For Retirement Than Previous Generations: HSBC Survey

    Singaporeans Have To Save 9 Years Longer For Retirement Than Previous Generations: HSBC Survey

    Hit by the rising cost of living, workers in Singapore have to save nine years longer for an adequate retirement compared to previous generations, according to an HSBC report released on Wednesday (July 13).

    According to the report, the average Singaporean starts saving for retirement at 32 and continues for another 29 years. This is nine years more than their predecessors, who saved an average of 20 years, starting later at age 39.

    Despite the longer and earlier period of saving, 41 per cent of current working age Singaporeans wish they had started to save earlier – and more than one-third or 38 per cent have stopped saving altogether due to various difficulties.

    Said Mr Matthew Colebrook, head of Retail Banking and Wealth Management, HSBC Bank (Singapore), said: “The unfortunate causality of a rising cost of living is that people nowadays are having to save further and for longer than their predecessors. Unfortunately in many instances, life events are also getting in the way from setting aside money earlier or in a consistent manner.”

    The HSBC Future of Retirement: Generations and Journeys report is based on the views of more than 18,000 people in 17 countries, including a total of 1,008 Singaporeans (both working age and retired).

    The survey also found that Singaporeans are predominantly using cash savings, supplemented by day-to-day salary and a property downsize to fund their retirement.

    The report finds that 21 per cent of Singaporeans – compared to the global average of 6 per cent – expect to downsize or sell a property to help them to fund their retirement.

    According to the report, 60 per cent of working age Singaporeans surveyed expect to draw on cash savings to fund their retirement. A further 40 per cent highlighted that they will continue to work, with 12 per cent saying they rely on government pension schemes.

    Said Mr Colebrook: “The report reveals a degree of tunnel-vision amongst Singaporeans with cash savings and property being the key investments of choice – often at the exclusion of almost any other asset class.

    “But all asset classes’ performance will rise and fall as the current softening of the Singapore property market and low deposit rate environment show us. This speaks volumes for why it is important to seek diversification in a savings plan.”

    Lack of information on retirement may potentially be one of the reasons why working age Singaporeans have not started planning for their retirement, said HSBC.

    According to its survey, 26 per cent of pre-retirees here say they have never received advice or information about retirement. Findings also show that 23 per cent of pre-retirees have not started saving (on par with global average of 24 per cent), including 10 per cent who are aged 60 or over.

    Mr Colebrook added: “While Singaporeans are savvy savers in general, they may not have the relevant knowledge to help them start saving or consider investment options in order to sustain the lifestyle they had before retirement.”

     

    Source: The Straits Times

  • Today’s Young Singaporeans Will Be In Relatively Good Shape To Retire

    Today’s Young Singaporeans Will Be In Relatively Good Shape To Retire

    Singaporeans who work regularly and make prudent housing choices should have no worries in meeting their retirement needs through the mandatory Central Provident Fund (CPF) system, Manpower minister Tan Chuan-Jin has said, as he told the House that the retirement picture for younger Singaporeans was “relatively healthy”.

    He was addressing concerns that Singaporeans might not save up enough in their CPF accounts to meet the Basic Retirement Sum, now that they will be given more flexibility and options to use their CPF savings.

    Citing the example of a 25-year-old polytechnic graduate earning S$2,200 and assuming this CPF member works 32 out of 40 years, the minister estimated that this worker would have a nest egg of about S$55,000 by the age 65. With compounded interest earned in the Special Account, he would have about S$165,000 at age 65 – three times what was put in.

    “This is not magic – it is just basic mathematics and is a very conservative estimate because I did not account for any wage growth at all and whatever savings he has accumulated in his Ordinary Account after paying off his flat. And if you add those, clearly, he would have even more.”

    As he walked the House through a typical CPF member’s stages in life, Mr Tan said that at age 65, the member would have to decide whether to withdraw up to 20 per cent of his Retirement Account savings in a lump sum.

    The minister also announced that from January 2016, members will need to choose from among the three payout streams to subscribe to under CPF Life from age 65 – up from the current 55. They will also have to decide whether they want to start receiving CPF Life payouts at age 65, or between age 65 and 70.

    The Manpower Ministry (MOM) will also restore the contribution rates for workers aged 50 to 55 to the same level as younger workers, as employment rates for this age band have improved and are almost on par with that of younger workers, he said.

    During Monday’s Committee of Supply debate, MP David Ong suggested raising CPF contribution rates for workers above 55 to the same level as younger workers.

    But Mr Tan said the employment rate for those above 55 was still much lower than those who were younger, so it would not be prudent to raise contribution rates of this group too quickly. The higher rates would also put employers off hiring older workers, he said.

    To encourage the employment of older workers, Senior Minister of State Amy Khor said the government has launched an additional Special Employment Credit (SEC); employers who hire Singaporean workers aged 65 and up and who draw up to S$4,000 a month will receive up to 3 per cent of the monthly wage bill under this SEC.

    This is on top of the current 8.5 per cent SEC for hiring Singaporean workers above 50.

    The government is supporting employers in improving workplace practices so as to attract and retain mature workers, said Dr Khor, who added that the government is putting in place legislation to extend re-employment to 67 in two to three years.

    Employers should also tap existing measures available to put in place age-management practices, so that they can be better prepared to hire older workers, she added.

    Mr Tan urged CPF members to be prudent with their housing purchases, especially when buying or upgrading a property later in life.

    “I think it’s important to pay attention to this because older members may have to take on loans with shorter tenures, higher monthly instalments; they should also factor in any decline in CPF contributions as they age, which may mean that they may need to service their monthly housing instalments with cash on top of CPF.”

    In response to calls for more targeted help for non-working women with low CPF balances, MOM’s support for this group is two-fold, noted Mr Tan.

    Firstly, it has encouraged non-working women to rejoin the workforce, which has led to higher Labour Force Participation Rates (LFPR) among women; as a result, the difference in average CPF balances between men and women have started to narrow, he said.

    Secondly, with families remaining a pillar of support for women, the rules have been tweaked to make it easier for CPF members to transfer their CPF savings to their spouse’s CPF.

    He added that the government is providing attractive interest rates to encourage such transfers: from next year, those aged 55 and above can earn an extra 1 percentage point of interest for the first S$30,000 in their combined CPF balances.

    As for Ms Foo’s suggestion that such transfers be made automatic or require spouses’ joint consent before withdrawals from the Retirement Account, Mr Tan replied that those were ‘very personal decisions” and “best left to couples to decide”, as it would be intrusive for the government to intervene.

    MPs Zaqy Mohamed and Seng Han Thong asked how MOM was communicating the various changes to its members.

    The House was told that, under efforts in this direction, a guided one-to-one retirement-planning service to CPF members would be launched so they can get a better understanding of the various CPF options before making their choices.

    The ministry has completed a three-month trial project and will pilot a retirement-planning service in the second half of the year. The plan is to ramp up the service gradually from next year, with priority given to those turning 55, said Mr Tan.

    In his speech, he stressed that the fundamental principles of CPF will not change and that retirement adequacy remained the scheme’s primary objective.

    And while Singapore’s social safety nets for the vulnerable need to be strengthened, the government and the CPF system alone will not be able to solve all problems.

    “There is a role of collective responsibility – individuals, families, employers, social groups. We all need to step in to provide the assistance and support.”

     

    Source: www.businesstimes.com.sg

  • The Workers’ Party Calls For More Flexibility In CPF Draw Down Age, De-Link From Retirement Age

    The Workers’ Party Calls For More Flexibility In CPF Draw Down Age, De-Link From Retirement Age

    By Non-Constituency MP, Gerald Giam
    [Delivered in Parliament on 3 Mar 2015]

    Mdm Speaker,

    The DPM and Finance Minister has laid out the key thrusts for the Government in his Budget statement. My speech will focus on retirement adequacy and the CPF scheme in particular.

    Th CPF scheme has a long history in Singapore that pre-dates our independence. The Central Provident Fund Bill was introduced by the Singapore Progressive Party in the Legislative Council in 1951, while Singapore was still a British Colony. The CPF scheme provides a mandatory retirement savings plan for local workers. It is a “defined contribution” scheme, whereby every member takes out only what he has contributed. This has helped the Government avoid the heavy burden of Budget-financed pension liabilities that many other countries face.

    While CPF provides a basic payout for retirees, it does not assure full retirement adequacy, particularly for those in the lowest income groups, including home-makers and people with disabilities.

    Minimum Sum

    The Minimum Sum requirement, which has been renamed to “Retirement Sum” by the CPF Advisory Panel, was introduced in 1987. It prevents CPF members from withdrawing their entire CPF savings in one lump sum when they retire. They are only allowed to withdraw amounts in excess of the Minimum Sum, plus another $5,000, at age 55.

    This has been deeply unpopular among many Singaporeans. Many feel that since the money in our CPF accounts belongs to us, why should the Government control when and how much we can withdraw? “We’re not children after all,” some would say. A recent poll by Channel NewsAsia found that the majority of respondents would like a choice to withdraw all of their CPF money at age 55.[1]

    I empathise and identify with these sentiments. I too would like to be able to withdraw all my CPF when I turn 55. Apart from paying off day-to-day expenses, I feel confident of being able to manage my own money well and not squander it. However, the reality for me, and I think many other working Singaporeans, is that if not for the forced savings that CPF has imposed, we would probably have saved much less for retirement.

    As pointed out by Mr Donald Low from the LKY School of Public Policy in a commentary in The Straits Times last week, faced with a choice between an immediate reward and a larger delayed benefit, people often choose the former.

    Also, even if CPF members make an effort to invest their retirement savings after they are withdrawn, not many have investment skills that are good enough to consistently beat the current 4% CPF Retirement Account interest rate in the long term.

    We also have to be on guard against swindlers who will try to find ways to persuade vulnerable elderly folks to part with their CPF money if they withdraw the full amount at one go.

    Therefore, while we understand Singaporeans’ strong sentiments about the Minimum Sum “locking up” our CPF money, for the reasons I just mentioned, the Workers’ Party is not asking for CPF members to be allowed to withdraw all their CPF money in a lump sum, except under special circumstances.

    Flexibility in Draw-Down Age

    Having said that, there is still room for providing CPF members with more flexibility in determining when to start receiving monthly payouts from their CPF. Currently, members can start drawing down their CPF only upon reaching their DrawDown Age, now known as the Payout Eligibility Age, which will be 65 from 2018 onwards.

    Some CPF members may have genuine reasons for needing monthly payouts to start earlier than age 65. For example, they may have been retrenched and, because of a skills mismatch or age discrimination, may not be able to secure another job. Or they may be labourers who are simply be too old to do manual work. When I observed the young men who helped me move the heavy furniture in my home recently, I wondered how long they would be able to continue in that role, and what jobs they would do once they are not strong enough to carry such heavy loads.

    The Workers’ Party therefore proposes lowering the Payout Eligibility Age to 60. This will give CPF members the flexibility to start receiving CPF monthly payouts earlier, if they need to, instead of having to wait until age 65. This was a call made by my colleague, the Member for Hougang, Mr Png Eng Huat, in May 2014.

    I agree with the CPF Advisory Panel’s recommendation to give members flexibility to defer their Payout Start Age to as late as 70, with a permanent 6 to 7% increase in monthly payouts for every year that they defer.[2] In line with this, under the Workers’ Party’s proposal, there would be a permanent 6 to 7%decrease in payouts for every year that members choose to bring forward their Payout Start Age. Members must be made aware that their monthly payouts could be significantly less should they choose this early payout option.

    De-link Payout Eligibility Age from Retirement / Re-employment Age

    Many Singaporeans have expressed frustration about the constantly increasing Payout Eligibility Age. It is was 63 last year, 64 this year and will be 65 in 2018. It seems to be moving up together with the Re-employment Age. Perhaps it is assumed that people are able to work until the Re-employment Age and do not need to draw down their CPF savings before that.

    However, just because the Re-employment Age has been raised does not mean that everyone will be able to work until 65, as I explained earlier. Furthermore, the statutory Retirement Age is now only 62. This leaves a gap of 3 years that a retiree will have to tide over, should his company not offer him re-employment until 65.

    I would like to reiterate the Workers’ Party’s earlier calls for the Payout Eligibility Age to be de-linked from either the Retirement Age or the Re-employment Age. Even if the Retirement Age is increased, the Payout Eligibility Age should remain constant at 60. This will provide members with more assurance of when they are eligible to start drawing from their CPF, regardless of their employment status, instead of wondering when the target will move again.

    Public education on CPF system

    Madam, I would like to touch on the public education aspects of the CPF scheme. The CPF Scheme is not easy to understand, regardless of one’s level of education. The large amount of technical jargon, acronyms, figures and different conditions that apply to people with different birth years, all add to the confusion.

    There is a pressing need to increase and improve public education about the CPF scheme. The CPF Advisory Panel has also recommended that more public education on CPF is needed.

    A recent poll by REACH, the government feedback unit, found that only 13% of respondents under 55 were able to provide the estimated monthly payout amount under CPF LIFE if one met the Minimum Sum requirement. With greater choices provided in the CPF scheme, it is important that CPF members are fully aware of the implications of their choices, including the lower payouts if they choose to start withdrawals earlier or withdraw a lump sum.

    I am aware that there are many ways in which CPF Board tries to get its message out, including pamphlets, public seminars and even advertisements on YouTube. However, none of these ensures that a CPF member is fully aware of the choices he has to make at critical junctures, like at age 55 and 65. A letter is sent to CPF members just 1 to 2 months before they turn 55, to inform them that they can apply to withdraw their CPF. This may not give them enough time and information to consider their choices carefully.

    My observation is that public education on CPF currently focuses a lot on how CPF benefits Singaporeans, or to clarify misunderstandings about CPF. The questions asked in the REACH poll are quite telling. They include questions like “If you do not meet your Minimum Sum requirement, do you need to top up the shortfall in cash?” and “Do you think you will receive a monthly payout from age 65 if you do not meet the full Minimum Sum?”

    Public education on CPF should be more tailored to individual members, focusing on the information and numbers that are directly relevant to them and the choices they have to make. We should not confuse people with numbers that are irrelevant to them, like the different Minimum Sum amounts and Draw-Down Ages for different age groups. While the CPF website has a number of useful calculators, not every retiree is technically-savvy enough to access and use them correctly.

    I would therefore like to suggest that before reaching the age of 55, every CPF member should be invited to meet one-on-one with a CPF Board officer, who should explain the details of the scheme, including how much he has in his account, how much he can withdraw, when he can withdraw, the choices of CPF LIFE plans and what his monthly payouts will be. This should be conducted in a language or dialect that he is comfortable with, and he should be allowed to bring a few family members to the meeting. It should be done at least a 3 months before the member becomes eligible to withdraw his CPF.

    This personalised meeting should be done on top of the public seminars that are available to CPF members. It will provide a channel for important information to be explained personally to the member and to give him an opportunity to seek clarifications from the officer.

    Silver Support Scheme

    The last matter I wish to raise concerns the Silver Support Scheme. While CPF payouts are usually enough to meet the retirement needs of seniors who have the Full Retirement Sum or more at retirement, there is a sizeable number of Singaporeans whose CPF payouts are insufficient to meet basic household expenditure.

    The solution for these individuals cannot be to postpone their CPF withdrawals or place further restrictions on their use of CPF and Medisave. This will only exacerbate their difficult financial situation. I am glad the Government has finally acknowledged that individual responsibility through the CPF system has its limits, and that it is time to provide a form of old age support for needy senior citizens.

    While the details of the Silver Support Scheme are still being worked out, I would like to make some remarks on the scheme based on what the Finance Minister has announced.

    First, the Silver Support quantum seems rather low, ranging from $100 to $250 per month. This is much lower than what even the poorest 20% of households spend each month on basic household necessities, which is $761 per month for all households[3] and $317 per month for retiree households, according to last year’s Household Expenditure Survey.[4]

    Can the DPM share his basis for deriving the Silver Support quantum? Does it look at household expenditure, and does it assume that all retirees receive additional forms of income like children’s contributions?

    Given the increasing cost of living in Singapore, I urge the Government to ensure that Silver Support is enough to cover retirees’ basic household expenses and that it also increases over time to account for inflation.

    Second, while I agree that the Silver Support Scheme should provide targeted support, the evaluation criteria should take into account the current financial situation of the seniors and should not be so stringent that genuine cases end up being excluded. In particular, the “household support” criteria must not deny Silver Support to seniors whose children are unable to support them or whom they are estranged from. Needy seniors should not have to suffer for their children’s inability or unwillingness to support them.

    My third request on Silver Support is that it should be paid out monthly instead of quarterly. Silver Support recipients are not working and receiving a salary, unlike Workfare recipients, yet they still have monthly household expenses like bills, food, transport and rental. A monthly payout would help seniors in their cash flow management.

    Conclusion

    Madam, in summary, I would like to reiterate the four main proposals in my speech:

    First, more flexibility should be given to CPF members to start receiving CPF payouts as early as age 60, if they need to, so as to help those who are not able to find work at that age. Second, the CPF Payout Eligibility Age should be de-linked from the Retirement or Re-employment Age, to provide more certainty for seniors.

    Third, personalised public education should be conducted for all CPF members, in their preferred language or dialect, well in advance of their 55th birthday, so as to give them more time to consider their options and discuss with family members. And fourth, the basis for calculating the Silver Support quantum should be made public and it should take into account the current financial situation of seniors to ensure that the needy are not excluded. It should also be paid out monthly instead of quarterly.

    Thank you, Madam.

     

    Source: http://wp.sg

  • The Need For Flexibility In The CPF System

    The Need For Flexibility In The CPF System

    SINGAPORE: Singapore’s national savings scheme, the Central Provident Fund (CPF) system, should provide flexibility in areas such as lump sum withdrawals while maintaining its role of providing for retirement.

    The CPF Advisory Panel chair, Professor Tan Chorh Chuan, shared this with the media on Saturday (Jan 10) after the end of the first round of focus group discussions, which sought views on topics related to enhancing the CPF system.

    One of the questions posed during the discussion was how much should CPF members be able to withdraw at age 65. One of the participants of the focus group was Ms Triena Noeline Ong, who is 69 years old and director of etymology at International Book Publishing & Editorial Services. She said: “When I turned 55, which was some time ago, I could withdraw all the CPF that was permissible, which I did. Then it was the economic crisis, so I lost a lot of it. I feel that the lump sum withdrawal is not a good idea but if you have excess of the minimum sum, perhaps you could withdraw that.”

    Another praticipant, social worker Benjamin Ho, was supportive of more flexible lump sum withdrawals. He said: “For legitimate reasons such as unemployment and other medical issues that are not covered at the moment… Would they be allowed to withdraw a certain amount of money? So that at least they are able to foot their debt and are able to start off on a more stable footing and plan towards retirement.”

    About 40 people attended the focus group discussion, with participants from different age groups and diverse backgrounds. This is the tenth focus group discussion by the CPF Advisory Panel. Around 400 people have given their views thus far. During the discussions, participants were consulted on topics such as CPF payouts and lump sum withdrawals at 65 years old. The panel has also received about 150 written submissions.

    “What we have heard is that many people would like the flexibility of a lump sum withdrawal, but yet they also recognise that there has to be some conditions set so that it does not erode into the long-term payouts, which are also very important,” said Prof Tan.

    “Again, we will take this on board to make sure that we can provide some flexibility, but yet at the same time, ensure that we maintain the very important role that CPF has – to ensure some level of adequate support over the much longer lifetime that most Singaporeans now enjoy.”

    Currently, a Minimum Sum of S$155,000 is set aside for CPF members who turn 55 from July 2014 to June 2015. When the member reaches 65, there is a monthly payout of about S$1,200 for life. In July 2015, the Minimum Sum amount will be adjusted to S$161,000.

    Prof Tan said the discussions threw up a “wide diversity of needs” but the panel recognised that if it tried to encompass all concerns, it would make the system complicated. He added: “The CPF is one very important element of retirement adequacy provision, but it cannot also cater for all types of circumstances – otherwise the scheme would just become too difficult to understand and administer. So fundamentally, it requires us to stay very focused on what are the most important roles of CPF and how best can we provide that flexibility so that it can serve Singaporeans better.”

    The panel will submit its first findings to the Government by early February 2015. These will touch on issues such as the Minimum Sum, lump sum withdrawal and payouts.

    There will be further focus group discussions on how to provide more flexibility for members seeking higher returns, be it through private investment plans or annuities. These recommendations should be out by the middle of 2015.

     

    Source: www.channelnewsasia.com

  • More Flexible CPF Minimum Sum System In The Future?

    More Flexible CPF Minimum Sum System In The Future?

    Factoring in one’s income level, gender and marital status in setting the Minimum Sum for different individuals could be one way to inject flexibility into the Central Provident Fund (CPF) system for different members. In addition, contribution rates and ceilings should also be tweaked to ensure retirement adequacy, said experts, in response to the Government’s consideration to move away from the one-size-fits-all format.

    If members are free to choose how much they want to save based on what they think they need in their later years, it may result in the state having to give out more in public assistance for vulnerable groups or make the CPF system even more complex, they added.

    “Giving them too much choice isn’t necessarily good because we can’t ever predict the future for ourselves,” said Institute of Policy Studies research fellow Christopher Gee, who specialises in policy implications on retirement adequacy, housing and healthcare.

    In an interview last week, Manpower Minister Tan Chuan-Jin hinted that the advisory panel set up by the Government to review the CPF is mulling the introduction of varying levels of Minimum Sum and payouts because “actually, people do have different needs and people are looking at different requirements”.

    The panel is expected to submit its preliminary recommendations to the Government in February.

    Yesterday, experts interviewed welcomed the idea of moving away from a common Minimum Sum for all CPF members.

    The Minimum Sum is the amount each member has to meet at age 55 to be able to make withdrawals. It is set at S$155,000 now, but will be increased to S$161,000 next July.

    Pointing out that the Minimum Sum could be set at a “more realistic” level for lower-income groups, Nanyang Technological University economist Walter Theseira said: “It is extremely difficult for them to have any chance of meeting the Minimum Sum. But we have to accept that if we want to give them more flexibility to withdraw their money earlier, we probably have to help them more in retirement.”

    Assistant Professor Theseira suggested that one’s gender and marital status could come into play, noting that other countries have retirement adequacy systems that are conceived on a family basis, unlike Singapore’s CPF system, which is more individualistic.

    “Under the United States’ Social Security system, the state gives additional benefits to married households. You can claim half of your spouse’s benefits (from the state) or all of your own, depending on which is higher,” he said. “It is extra income just for being married. Our system is not like that.”

    Associate Professor Hui Weng Tat from the Lee Kuan Yew School of Public Policy noted that a higher Minimum Sum for the middle-class group would provide a more comfortable retirement. But the “relatively low” contribution ceiling of S$5,000 now would have to go up in tandem, he noted.

    On the minister’s point that the advisory panel is also studying having payouts that increase progressively to mitigate the effects of inflation, Assoc Prof Hui said the change would require the returns on special government bonds (which CPF monies are invested in) to be inflation-indexed or inflation-protected.

    Such a practice is already common in overseas bond markets, Assoc Prof Hui pointed out.

    Asst Prof Theseira also noted that rising payouts means purchasing power is preserved over time and not that one can consume more goods as one ages. “(It means) I can buy the same basket of food today as I can 10 years from now,” he said.

    Meanwhile, Mr Gee suggested that contribution rates and ceilings should also be tweaked to boost retirement adequacy.

    As employer contribution rates decrease with age, “there’s less incentive for employees to continue working and this goes against the idea of encouraging people to work longer”, he said.

    Allowing withdrawals only when an individual retires — instead of from age 55 as is the case now — could be an option. “The reality is that people are living longer. The average Singaporean could retire at 55 years old and live for another 30 years,” Mr Gee said.

     

    Source: www.todayonline.com