CPF REFORMS AND OTHER MEASURES FOR A SECURE RETIREMENT

CPF REFORMS AND OTHER MEASURES FOR A SECURE RETIREMENT: Order read for resumption of debate on Question [ 17th September 2007],

"That the CPF Reforms and Other Measures for a Secure Retirement be considered by Parliament.". - [Leader of the House].

Question again proposed.

1.42 pm

Mr Zainudin Nordin (Bishan-Toa Payoh): Mr Speaker, Sir, please allow me this opportunity to give some of my thoughts on the proposed CPF reforms and other measures for a secure retirement.

Since our independence in 1965, we have seen our country grow stronger socially and economically. And while we face many storms along the way, Singaporeans have survived and prospered, thanks to two significant pillars of our governance structures; the Housing and Development Board and the Central Provident Fund.

Sir, as our quality of life improves, Singaporeans, either living in Radin Mas, Kreta Ayer or elsewhere, are living a lot longer today - life expectancy is now at 82 years compared with 66 years in 1970. The ageing of Singapore may be the most important demographic change this country would undergo in this century. It is the Government's and, more

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importantly, also Singaporeans' duty to ensure that we are able to safeguard our security for old age.

Mr Speaker, we can foresee that the challenges will mainly come from rising healthcare and cost of living. Therefore, we need to ensure that our CPF system remains relevant and is robust, so that it will continue to play its role to provide post-retirement security. The CPF must be constantly fine-tuned to anticipate future challenges and be there for its contributors.

Sir, from the feedback sessions that I had attended and discussions that I had with the residents, grassroots leaders and friends; some said that the Government has no right to interfere with the contributors' savings after retirement. And there are also the cynics and others that simply doubt the Government's intentions of making these changes. Here, I would like to urge all Singaporeans to assess the proposed changes in totality and look at the long-term benefits. The proposed changes must be viewed as a package - of different parts working together, to provide a more secure retirement future for Singaporeans.

The first of these parts, and also the most welcomed change, is the change in the CPF interest rates, which would result in an overall increase of the CPF savings of all Singaporeans. I would like to commend the Government for this "investment" in our people. It illustrates that it is serious about tackling this challenge and truly believes in the long-term benefits for all Singaporeans.

Nevertheless, Sir, this would not be sufficient because we also need to stretch our savings as life expectancy increases, and hence the proposed change, which is a rise in the Minimum Sum draw-down age (DDA). We have heard many expressing their concerns about this perceived delay. But this deferment

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should not be assessed in isolation because it works hand-in-hand with the re-employment legislation and the increase of the Workfare Income Supplement for older workers. Furthermore, the proposed draw-down age changes will be made progressively and painlessly to allow contributors to make adjustment to their retirement plans and meanwhile to maximise the benefits of compounding interest. On top of this, there are the D- and V-Bonuses to help CPF account holders to cope with the increase in the draw-down age.

But, Sir, for most workers, the proposed change to the DDA is clearly a non-issue if, and only if, there are jobs, jobs and jobs so that they can continue to earn a decent salary. First, I would say that, fundamentally, the concern is still about job security in their old age. How can we assure our workers that they will still remain employable and relevant at 62 and beyond?

Mr Speaker, Singapore would not be enjoying its current success without the contribution of our workforce in building the nation. This contribution is an ongoing and continuous cycle and as our workforce ages and enters post-retirement, it is our responsibility as a society and not just the Government's, as some had suggested, to take care of our elderly. We all share this responsibility and it is only logical that we pool our resources together. We must abandon the individualistic mindset and embrace the concept of shared responsibility. This is the basis of the compulsory longevity insurance and annuity that will be introduced to help provide income to the elderly beyond 85 years old.

My other concern, Sir, is if this scheme is to be made compulsory, it would be worthwhile for the Minister to elaborate on the enforcement mechanism and the penalty that entails for those who fail to comply, if that happens.

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Similarly, I urge the policy makers to consider favourably exemption from annuity for small - I repeat this again - small pockets of individuals who would clearly not benefit from it. I trust that the ongoing feedback sessions with the public and our stakeholders would help to identify this group of people who should be exempted from compulsory annuity.

I would also like to ask the Minister for Manpower whether any provisions have been made for individuals without sufficient CPF contributions to also tap into the annuity plan. These tend to be generally the low-income and low-skilled workers, such as odd job labourers and contract workers, who are not paid CPF. There could also be people who have fallen into hard times and depleted their CPF savings. I hope that there will also be provisions for people without CPF to come on board the annuity scheme.

In closing, Sir, I would like again to remind all Singaporeans to rationally review and assess the proposed changes in totality, and weigh the risks and long-term benefits. We should be fair to ourselves, our family and our society. Only then, can we see clearly the path ahead towards an active and secure retirement and ageing.

Sir, I support the proposed changes to the CPF scheme.

1.51 pm

Dr Fatimah Lateef (Marine Parade): Mr Speaker, Sir, I rise in support of the announced CPF reforms. For, indeed, we must never under estimate the power of an idea whose time has come, so said Victor Hugo. Mr Low Thia Khiang yesterday wanted a longevity fund to provide handouts for those over the age of 85. Mr Siew Kum Hong as well was wondering if we should, instead of the

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annuity, consider aid and funds for the elderly over the age of 85.

Sir, let me share with them that, firstly, we already have the Public Assistance scheme for those who are in need, whether they are over or below 85 years of age. In fact, MCYS has outlined 39 different aid schemes for the needy, the low-income, the elderly and the destitute and they can tap on these no matter what age. Moreover, the golden generation may not always wish for us to provide them with handouts. They have their pride as well. Let me illustrate this.

About a couple of months ago, I saw a patient in the Emergency Department - a 93-year-old Cantonese-speaking lady, we will call her LCS, she came in with a mild heart failure and, after treatment, she was well enough to speak in full sentences. She was advised on admission and, upon knowing that she had to be admitted, we told her that her children would probably make the choice on the class and also the payment, she straightaway sat up, lifted forward and exclaimed, "No. Don't take their money. I have money for my own care." And she pulled out her cloth purse from underneath her upper garment and inside were several thousands of dollars. I suppose it is her life savings. Indeed, there are elderly people like this. They too may have a mindset of their own.

"It is very difficult to live long and live well, especially when the Japanese society is so stressful. But somehow we manage to live longer than most people because of the nutritional diet, good healthcare system and a willingness to work longer.", so said Hideki Ito, Director of the Tokyo Metropolitan Gerontological Institute. All of us are concerned about how we will fend for ourselves in our golden years. It is a dream of every nation to have its greying generation self-sufficient, independent and, of course, financially independent as well, actively

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participating and, perhaps, still contributing to society in a multitude of ways.

I pause at this juncture to share with you that in my constituency, I have a "Retirement Not Encouraged" policy for my community leaders. For those who wish to step down, they do not retire but they are channelled into a grassroots resource network where they will continue to contribute from their wealth of experience and ideas. With all the recent announcements, the combined effect of the Workfare Income Supplement scheme, people who are working longer and retiring later, the delayed draw-down age and, of course, the higher CPF returns will certainly help our older workers prepare for their retirement. When talking about the delayed draw-down age, this would be done very gradually from 62 to 65 years from 2012 to 2018. In fact, members would have more monies in their accounts, they will have the higher returns, they will have the D- and the V-Bonuses. So does not all that sound very good! Then what is all the discontent about?

It is about the inaccurate perceptions and wanting to have more flexibility in the system. To ensure greater buy-in, we have to correct all the misperceptions going around in the coffeeshops, in the void decks and in the markets. These may be people who do not read the dailies. They may not watch television and they may not come to our dialogues. They may not be computer literate. So they make their decisions based on the impressions that they form based on other's speeches.

Flexibility in the scheme is essential for the disabled and the chronically ill elderly, the low-income and those who have gone into bankruptcy and are facing financial difficulties, the single elderly with no family support, those who are having difficulties getting a job or have been unemployed for reasons not due to

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their own doing. Those with ageing parents, who have chronic disabilities and illnesses, to take care of and those with long-term mental illnesses who are not fit to work at all. You may tell me that this list may be unending. But it is up to the board, the new committee and the Ministry to set up some clear stipulated guidelines to ensure that there is no abuse as well. It may not be easy but this is where we have to strike a balance.

Singapore is very strong in job creation and re-creation. But can we consolidate this a bit further? The numbers that we see receiving rejection letters and negative responses week after week at our meet-the-people sessions and they keep coming back again and again pinning such high hopes on us, calls for this. The NTUC is actively looking into this and doing a lot as well. But, certainly, we need to see many more employers jumping on to the same wagon and speaking the same language. More coordination and sharing of databases

of applicants may also be some useful steps to take. Having a secure job means a lot to the elderly, not just a stable source of income, but an active and healthy state of mind is so essential that the living well part of ageing is taken care of.

A fixed guaranteed stream of income throughout your retirement to cover your basic needs sounds very appealing. Again, why the unhappiness? Well, they want the flexibility as well. Those who already have purchased some form of retirement annuity should be given some exemption. Perhaps, there can be some consideration for a scheme with survivor benefits to make it more palatable. Most annuities that are offered now have relatively low payouts. The current range is from $474 to $599 for males, and $440 to $513 for females. Some may thus prefer to take part of their retirement funds to invest in a portfolio of safe instruments, such as Government bonds and Bills. They should be given this flexibility as well if they can

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afford it, and of course it will also cater to their lifestyle. How about those who cannot make the grade and meet the Minimum Sum requirements, such as the irregular workers, housewives and, now, perhaps even the house-husbands?

Finally, it is a visionary Government that plans for all the sectors of its population. These CPF changes are coupled with issues of empowering the elderly, ensuring employment for all as long as one wishes to have work, handling the widening income gap which is a universal problem, and strengthening our economy.

Sir, I am in favour of the changes and, as Minister Lim Swee Say said yesterday, with the right action, we are half way there. Well, I am going to say that with the right mindset, half the battle is won.

Let me now just say a few words in Malay.

( In Malay ): [For vernacular speech, please refer to Appendix A.] Appropriate measures must be made from now if we want to handle the issue of a growing ageing population. The way to do it is by making preparations in terms of savings and the main form of savings for most Singaporeans is the CPF. So any change to the CPF scheme as a way of preparing ourselves is something that we must support.

There are questions and concerns on this issue, but we have to change our mindsets for the sake of our own future comfort and old age. For the Malay/Muslim community, some of them may already be feeling the heat and impact of the move to delay the CPF draw-down age. This is especially so for those who earn a lower income and are without other savings. They will always be needing money as soon as possible.

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There are also those who may want to use the money to perform their pilgrimage and this is a common thing among the community. There are also others who may want to use the money to take care of financial problems due to debt burden or perhaps to help their children who are facing financial problems.

Another group that may be affected are those who have lost their jobs during the economic crisis and are having difficulties finding a new job. They place high hopes on the withdrawal of their CPF funds.

With regard to annuity, there are many who are concerned that they may not have sufficient money in their Minimum Sum to take part in the scheme. There are others who feel that the scheme may not be necessary because they feel that life and death are a question of fate and it is quite unlikely that they will reach 80 years of age.

These concerns can be understood. Issues like one's hard-earned savings, livelihood, health, life and death are matters of serious concern that affect every one. However, the Malay community has to have a broader and more forward-looking view. They have to be more positive and view these changes as a measure to protect their interest in old age.

If you look at it closely, the changes to the scheme are a call for us to save early and to plan our budget and our family's budget in a better way. One of our responsibilities is to start investing from now, ie, long term investment for our children so that they will have good education. In this way, they will be able to earn a better income and may be able to contribute to our own old age later. If our younger generation is more successful, their parents will be able to use their CPF funds for their own use during retirement.

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For those who are having difficulties finding a job or are earning a low income, they should use this time to upgrade their skills. Moreover, the Government will also be amending the laws to enable us to work to a later age.

For the Government, we have to take into account all these concerns of the Malay/Muslim community. There should be flexibility for them to make their own choices. Among the flexibilities that we can implement are issues such as life annuity or joint annuity which is very popular in countries such as Switzerland. This scheme enables one to receive monthly payouts and when he passes away, the money will be paid to his heirs. This annuity is normally for married men.

At the same time, we also have to consider another group of the population, ie, the housewives and those who do not have permanent jobs to contribute to the CPF. Will they be allowed to take part in certain schemes? How will we assist this group of people?

Finally, the understanding and acceptance of the people are very much needed so that these changes can be implemented more effectively. I would like to see more dialogue with the people to provide further explanation so that there will be no misconceptions on the schemes that will be implemented.

Cols. 1979-1982.

2.07 pm

Ms Irene Ng Phek Hoong (Tampines): Mr Speaker, Sir, the mission of CPF, as stated on its website, is "To enable Singaporeans to save for a secure retirement." We know that some groups do face a very real prospect of insecure retirement and that dire situation cannot be placed entirely at their door. Some Government policies, although introduced with the best of intentions, may have also

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contributed to this situation. If I may, I would like to highlight three policies and discuss some possible measures to mitigate the effects on the vulnerable groups.

First, the policy to cut the CPF contribution rate as soon as a worker touches 50. When a worker reaches 50, the employer's CPF contribution is cut by 4%. When he reaches 55, the employer's CPF contribution is cut another 3%. At age 60, employer's CPF contribution is cut another 2.5%. And this is not including the cut in salary, which can be as high as 10% and, in some cases, even more. The upshot is that while workers are urged to work longer to save for their retirement, the proportion they are able to save is in fact eroded by dint of this CPF cut from the age of 50.

We know that the lower employer's CPF contribution rate for older workers is meant to improve their wage competitiveness to make them more employable. But a better way to do this is to move decisively away from the seniority-based wage system towards one that pays workers according to the value of the job and performance, and not to cut the CPF contributions of older workers, especially from the employers' portion. As workers live longer, they need more CPF contributions, not less. Now that we want workers to work beyond 62, we should review the policy to cut the CPF contribution at the age of 50. We should defer the cut to age 62 when they are re-employed on one-year contracts. This will allow workers to accumulate more CPF up to the age of 62. I realise that the Workfare Income Supplement will help to top up the CPF savings of workers. But this applies only to the lower income, those earning below $1,500 a month. Many in the middle class, especially in the sandwich generation, have their CPF savings tied up in housing. The CPF cut at the early age of 50 has in

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fact compromised their ability to save for a secure retirement.

Another reason we should defer the date of the CPF cut from 50 to 62 is because Singaporeans are marrying later and having children later. Sir, in 2006, grooms with primary or no education were the oldest. The median ages at first marriage were 40 years for non-Muslims and 33 years for Muslims. The same trend can be seen with the brides. What this means is that by the time these late-marrying men are in their 50s or early 60s, their children are probably just entering tertiary education. They have to work longer to support the education of their children. But then this is the exact same group which might find it harder to get a job in the new economy. They will have to compete against low-cost foreign workers. For the low-skilled late brides, it means that if they drop out of the workforce to raise their young children, as many do today, by the time they can rejoin the workforce, say, 10 years later, they would have to join the burgeoning brigade of low-skilled older people looking for jobs in a rapidly changing economy.

The same situation will face those who divorce their first spouse and remarry and start a second family later in life. As we know, there is an increasing trend of divorces and remarriages. Even today, it is not uncommon to see residents in their late 50s or early 60s coming to the meet-the-people sessions to ask for help for their children's education needs. I had one case recently. He was almost 60 and wanted help to withdraw money from his Retirement Account for his son's diploma course. As usual, the CPF Board said no. But what could he do, he asked. He could not find a job or a job that pays well enough for him to see through his children's education.

This leads me to the second policy that I would like to see refined, and that is

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the foreign workers policy. I applaud the Government for its ability to create so many jobs in Singapore. The Minister for Manpower mentioned that in the first six months of this year, 140,000 jobs were created. This is outstanding and not something that many governments can deliver. But how to make sure that most of these jobs go to Singaporeans, especially our older workers, and not to foreign workers? Some employers still prefer to hire foreigners over Singaporeans for various reasons. They include lower wages as well as the long hours that foreign workers can put in compared to Singaporeans with homes to return to. For instance, last year, they enjoyed a bumper crop of 173,000 jobs with about half going to Singaporeans and Permanent Residents. The rest went to foreigners. If we remove the PRs from the equation, the percentage of jobs going to Singaporeans will fall to less than half.

Let me make clear that I am not against the foreign workers policy which has allowed the economy to grow beyond the limits of our own indigenous workforce and to enlarge our economic pie. But we must make sure that as many jobs as possible go to Singaporeans, especially our older workers. We have re-created and redesigned jobs so that Singaporeans can do them, and the NTUC has worked very hard to make sure that many jobs are re-created, especially for older workers. But we still see employers preferring foreign workers over citizens for these jobs. We need to take bolder measures to make sure that employers will give these jobs to older Singaporeans who need the jobs and not take what is now the easier route and employ foreign workers.

One way is to review the foreign worker dependency ratios in certain industries which have undergone job re-creation and to peg that to the number of older Singaporeans hired. Another way is to open up more part-time work options

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for Singaporeans. Many workers above 62 and women with responsibilities tell us they would prefer part-time work. But employers find this a tedious arrangement, compared to hiring foreign workers who will work for them for as many hours as they want, on as many shifts as they want, and at a lower cost to boot. As an incentive to hire Singaporean part-timers, why not consider giving employers a foreign worker levy relief for companies which employ Singaporean part-timers in place of using up their quotas of foreign workers? This will open up more employment opportunities for both mature workers as well as women.

The third policy which may have contributed to lower CPF savings for some groups is the pro-family policy which encourages women to have more children. I fully support this policy, but we must recognise that there are certain trade-offs and, for women, one of the trade-offs is often lower CPF savings. This is because, in Singapore, women still play the primary role in caring for their children and elderly family members. The CPF disparity between men and women is stark. The female per capita CPF balance is less than half of that of the males at the age of 60 and above. Yet, out of that lower balance, they have to pay higher premiums for the proposed longevity insurance because they live longer. The key reasons for the CPF disparity are the loss of income incurred when the women leave their jobs to raise their family, as well as their generally low educational levels.

Sir, this should not be viewed as a gender issue. It is an economic and a social issue because of the way our society and reward system are structured. It is also biological and not quite within the power of women to change. Presently, the life expectancy for men is 78. For women, it is 82. Chances are that there will be more women than men living past 85 and more will be widows. In the year

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2000, there were 106,000 widows in Singapore compared to only 82,000 in 1980, and the numbers will only rise. Yet, the women have lower CPF balances than men to sustain them through their longer life.

Sir, it is fine to preach the message of self-reliance, but women need more help to get there. Their problem becomes more acute in later life. This is because their husbands tend to be older, they will spend most of their time and savings on their husband's medical condition, resulting in their own savings being depleted. I have seen in my MPS an increasing number of older women coming for financial assistance, after their husbands have passed away. How to help them save up for their own old age, without eroding the husbands' sense of responsibility towards their wives?

Sir, in a recent dialogue with 200 women grassroots leaders, chaired by the Minister of State, Mrs Lim Hwee Hua, one of them argued that husbands should contribute a small percentage of their CPF to their non-working wife's CPF account. She suggested making this compulsory. In another session with union leaders recently, a unionist, and this time, a man, also suggested the same thing. The unionist felt strongly that men should be compelled to top up the CPF of their housewives regularly as the women have sacrificed their jobs to take care of the family.

I hesitate to argue for compulsory CPF contributions from husbands to wives. I am not sure if it will lead to a drop in marriage rates or a rise in divorce rates. But I would ask for the Government to provide some incentive for husbands to buy an annuity plan for their wives with low CPF balances. Perhaps, a co-payment scheme. I must make it clear - not for all wives, as we know many women are doing quite well for themselves in the

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workforce, but for those wives whose CPF balances fall below a certain threshold. I hope the committee set up by the Minister will look into this seriously.

Of course, the best option is to get women back to work. The employment rate of women in Singapore lags far behind developed countries. It must be pointed out, however, that countries with the highest employment rate for women - Sweden, Denmark and Norway - are welfare states with generous support to mothers. The lower employment rate in Singapore is particularly stark for women aged between 55 and 64 years. Only 36% of them are employed, compared to 71% for the men. I know this issue is being examined by a tripartite committee, chaired by Halimah Yacob, and I am involved as a member. However, it is a complex issue and it will take some time to work out the multi-faceted solutions and implement them, such as better child care support and flexible work arrangements. In the meantime, women need greater help to top up their CPF savings to prepare for a secure retirement.

In conclusion, Singaporeans want to be able to look forward not only to a secure retirement but a good life. Some mutter that this Government wants them to work till they die, or that they would not be able to enjoy their hard-earned money until they are decrepit. Sir, we should recognise that the CPF is, in the end, the people's money. Hence, I would urge the Government to consult the people widely before making drastic changes on its use and to give them flexible options to choose from.

All of us know people have very unpredictable lives. We know people who have worked very hard in stressful jobs and die suddenly of a heart attack in their 50s or 60s, or of cancer or other illnesses. Every time that happens, we

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pause and think: we may be the next one, so let us live each day as if it were the last. Sir, we have to balance these legitimate human sentiments with the practical need to make sure that there is enough put aside if half of us did live past 85.

Let us look at this issue not so much as retirement planning, something for the unpredictable end stage of life, but as life planning, something to help us live a good and productive life, with peace of mind.

2.15 pm

Ms Eunice Elizabeth Olsen (Nominated Member): Mr Speaker, Sir, thank you for allowing me to participate in this debate.

Sir, worldwide, the population aged 60 and over is growing faster than any other age group. The 60-plus population, at 605 million today, would almost double by 2025 to 1.2 billion. By 2050, it will reach two billion - marking the first time in history when people aged 60 and over outnumber children aged 14 and under.

We have recognised that everyone has to, and may want to, work longer well beyond the stipulated retirement age. In this regard, Singapore is following a trend, seen in industralised countries around the world of citizens having to work longer because people are living longer. In Singapore, as the Minister mentioned in his speech, of those aged 62 in 2006, one in two will live beyond 85.

In preparing Singaporeans for a longer lifespan, the Government is introducing a slew of measures to help Singaporeans work longer so that they can save more to prepare for their retirement needs if they ever retire at all. One of the measures is to include a later draw-down age to 65 by 2018 and eventually to 67.

As the Government is increasing the DDA to 65, we have to make sure that

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older Singaporeans are able to continue working without being discriminated against and that their right to continue working is protected from errant employers who simply may want to get rid of and force workers out of the door.

I know that from 1st January 2012, employers will be required to offer re-employment to workers when they reach 62. Complementing this legislation, I feel that an amendment to make it illegal to discriminate against someone on the grounds of age in the Employment Act is necessary to protect workers' rights to work, especially our older workers.

Within the European Union, Ireland has an Employment Equality Act that was enacted in 1998 which covers against age discrimination. In Belgium, there is no age set on recruiting personnel. And many countries in the EU, like the Netherlands, Sweden, Greece, Portugal and Spain have anti-age discrimination provisions in their Constitutions. And outside of the EU, there is specific age discrimination legislation in the USA.

As recently as 1st October 2006, the employment equality (age) regulations came into force in the UK which provided protection against discrimination, in terms of employment and education for people of all ages. So what exactly is age discrimination? It is any decision taken against an employee based purely on their age. Simply put, no employer should be able to prevent someone from being employed or promoted simply because they are too old, or fail to offer training opportunities for individuals when they reach a certain age.

Why is it important for Singapore to have such an Act in the future? Singapore cannot afford its citizens to suffer from ageism in employment because it can affect a range of our citizens, from people on low incomes who may struggle to find work after they hit 62 to high earners

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such as senior managers who may face mandatory retirement ages.

Under the current legislation, anyone who experiences age discrimination has absolutely no legal grounds for redress. Therefore, the Singapore Government, to protect and safeguard the interests of its older workers, needs to amend the Employment Act to make it illegal for employers not to recruit, promote or train individuals because of their age. This will, in essence, give our older workers the right to take legal action if they are discriminated against at work because of their age.

The amendment should also look into doing away with mandatory retirement ages of below 62, unless businesses can prove these are legitimate. And people who are made redundant or unfairly dismissed when aged over 62 should have greater rights as well.

While age discrimination does not always receive the attention it deserves, particularly during periods of economic growth, it is a problem that all of us will inevitably face in our careers, even professionals. We need a mechanism whereby employees will gain the right to request working beyond retirement age - 62 or higher - and employers will be obliged to consider their request. We do recognise that it is up to the individuals to make sure that they sustain continuous learning and keep themselves relevant to the job market through constant re-training, but it may not be enough.

At the end of the day, any Singaporean who is willing, able and healthy enough to contribute to our economy should be granted the right to do so. Having such an amendment will not only facilitate but, just as importantly, encourage older workers to rejoin the workforce after they reach the retirement age. And in addition to this, provisions need to be set aside to grant workers who

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have hit the retirement age to continue working as long as they are mentally and physically fit to do so.

My point of proposing an anti-discrimination Act is not to increase the number of legal challenges against employers, but to encourage employers to take a fairer stance on older workers. On top of that, it is also to debunk the myth that older people are not dynamic, physically weak, sickly or have difficulty learning and re-training. I know that having age discrimination law is not a panacea to changing the mindset of employers with regard to older workers but, nevertheless, it is still important to put safeguards in place to protect the interests of older Singaporeans who can and want to continue working and to give them the confidence that the system is doing its best to make a place for them in the workforce.

Having said all this, we also need to consider the situation of our older Singaporeans who are physically or mentally unable or are constrained by certain family circumstances to continue to be gainfully employed once they reach 62 or even before the retirement age.

Sir, my question is: what plans or initiatives does the Government have in store for this disadvantaged group of Singaporeans? And, as the Minister has pointed out, there are only eight working Singaporeans today to take care of one elderly person and just four by 2030.

Sir, when it comes to retirement security, there is no such thing as exaggerating the importance of the confidence factor. I hope that the good intentions of the CPF reforms are not dimmed by public perception that the Government is unable to pay out CPF to Singaporeans because of the perception that these funds are tied up in

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investments by Temasek and GIC, and was a factor in deferring the draw-down age and the longevity insurance scheme. This unfortunate perception has to be addressed so that Singaporeans can be confident about the measures being instituted.

Mr Speaker, Sir, the world is changing, populations are ageing and adjustments have to be made. But just as self-reliance is a virtue and a strong quality in this country, it is important not to forget that there are social compacts between the people and the State that should remain unshaken.

We want a country where Singaporeans can grow old, knowing that this country will take care of them, especially if they have no means to take care of themselves or have no one to depend on. Many of them have given so much to Singapore and when they reach a certain age, it is time that this country gave back to them. I hope that the Government will keep its promise of not leaving anyone behind.

2.23 pm

Mdm Ho Geok Choo (West Coast): Mr Speaker, Sir, first, I would like to dwell further on the points brought up by hon. MPs like Amy Khor, Halimah Yacob and Inderjit Singh on the real issues of ordinary men on the street who do not have a job because either they are too old, physically disabled, mentally unsound or just cannot find a job. What more can the Government do besides exempting some of them?

Sir, self-reliance is a discipline, but mutual help, care and compassion are virtues that make a stronger generation of Singaporeans.

Sir, rather than give what the people ask for now, a good government must also plan to give future generations what

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they would need. This would always be a conflicting battle between what is good now and what would be good for the future.

Sir, Singaporeans react differently to the impending CPF changes. To some, the frequent changes and complex nature of the CPF have led them to fear that the CPF has become "cannot provide forever". The rumbling on the ground is that the Government is shirking its responsibility in looking after the under-privileged as well as those who, after they have toiled for the country and who are now in their most vulnerable years, are having to pay a tax on an annuity scheme to take care of themselves.

In the mind of the masses, especially the 20% lower income, their argument has always been that, if there is no economic protection given to them in their wages and where foreign workers are perceived, rightly or wrongly, as competing with them, then they would expect that in their vulnerable years, the Government will look after them when they can no longer look after themselves.

Sir, having been with the aviation industry before for 16 years, I can attest that the international accolades on Changi Airport must be attributed back not only to the foresight of the leaders, but also the elderly cleaners and operators who worked relentlessly round-the-clock to make Changi Airport tick and its arrival and departure halls as well as toilets spotlessly clean. To this group and others like them, the Government has a responsibility to look after them. No doubt the first line of responsibility for looking after the poor and elderly is their immediate family members, but some family members may not be able to do so as they have their own commitment to fulfil. The next hope is to wait upon charity. Yes, there are Government schemes also to help the poor in Singapore but what else can the

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Government do for special groups of the ageing workforce?

We want to be able to include them in the annuity scheme. It is not about old wine in new bottles but what is more for the needy who do not want to be excluded? Just as much as the Government is providing the financial resources for continual learning, skills upgrading and the like, to putting aside millions and billions of dollars in endowment funds, which earnings through interests and other investment returns are used to operationalise the various schemes, would it not be possible to set aside some money into what I would advocate as an endowment elder fund care for the aged? We could use the investment incomes to pay for the annuity premiums for the special group or subsidise the premiums. Minister Tharman has explained that the reserves are not to be touched and there is no disagreement here. We are referring to investment returns that could be set aside.

If the estimation of $4,000-$7,000 is needed for the compulsory annuity, I believe that the eldercare fund could be tapped onto to assist CPF members who have more pressing needs for their Minimum Sum for other purposes such as paying for their medical bills or children's tertiary education especially when Singaporeans are having children so much later in life.

Sir, I am not advocating for freebies but in the spirit of self-reliance and mutual help, to further nurture a caring and compassionate society, perhaps the Government could institute some form of co-payment financed by investment returns from the financial reserves.

This will go a long way in reaching out to the needy old and not forgetting also the unsung heroes, like the samsuis and the old guards who had tirelessly and unstintingly built the foundations of modern-day Singapore. These are old men

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and women who respectively have fought the Communists and Barisan Sosialis, risking their lives and toiled the soil to build modern Singapore in the late 1950s and 1960s.

Sir, many of the living ones in their 70s, 80s and 90s are in need of assistance, as some have outlived their family members or caregivers. They will not be made any richer even with the assistance of their longevity insurance, but the gesture from the Government can touch and melt the heart and gain the respect of Singaporeans at large. How many more years can these geriatrics go?

Sir, such a gesture will go down in history for generations to come, to show how compassion must not be forgotten in our strive to instil self-reliance. I am sure the younger Singaporeans will not begrudge such a gesture shown to those who had indeed contributed to Singapore. And we are not advocating giving to all and sundry, and it is not as though we cannot afford it.

Sir, the Prime Minister spoke of Singapore as a city of possibilities. Surely, this must be a signature trade mark of future Singapore, and not just legislation and rules. How to create possibilities, choices, flexibility, care and compassion? That anything is possible must surely be the new brand of future Singapore. For this, Sir, we must seriously consider an eldercare fund and co-payment scheme for the longevity insurance for a select group of deserving Singaporeans in this city of possibilities.

Next, I will touch on my views from a human resource perspective. First, on fair employment deal and a shared destiny to give a sense of security. All the issues raised underline a fundamental point, that sense of security remains a prime consideration and is related to issues of

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reciprocity and fairness. Employees fully understand that "job for life security" is gone, but they expect performance-based security. As long as they perform, contributing to results, they want to feel that they can and will have some form of security, whether it is expressed in terms of continuing employment or financial success sharing.

The message for employers must be not to try to eliminate the notion of security as part of the employment deal, but rather to redefine it in the context of a shared destiny. For some elderly workforce who are beyond training, the fruits of shared destiny will indeed be long-term employment, ie, the notion of from cradle to grave, resurrected once again.

For others, issues such as developmental opportunities and skill building are more important, especially companies dependent on young, highly skilled professionals and technical employees. These young ones do not look for life-time career with the same company. To these young people, employability is more important, and they want sharing in the form of equity ownership, stimulating environment and skill enhancement opportunities.

Employers must be awake to these divergent or manifold expectations and play their part in evolving a secure retirement system for Singaporeans. If we could maintain and uphold this trust and confidence at the workplace, especially for the PMETs in their 40s and 50s, the workforce will have no fear of not being retained or employed.

How can employers and the Government do more in this area, especially for the PMETs? Will the impending re-employment of older workforce legislation be extended to cover this group?

Next, on the national study or survey on ageing workforce. Sir, the ageing

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workforce is the pre-eminent HR issue of the coming decade, unprecedented in management history, and it will impact every conceivable aspect of HR management. All the small scale surveys and their findings on the older workforce to date have been more of the same. To cite a few examples, allow me to share this conversation session. A group of senior managers from a cross section of companies were discussing challenges of an older workforce. They started with a litany of structural barriers and retirement plans, to keeping retirees on the payroll. Then it moved into other areas like talent shortages or hard to fill jobs, rehiring retirees and flexible work time. But the conversation veered off in another direction, raising a number of provocative questions. Who constitutes the mature workforce? What do they want? How to retain the best and ease the exit of those who ought to be rid off without inviting an age discrimination suit? One executive commented, "Older workforce wind up in self-directed careers, becoming project managers on ad hoc basis than as a result of the company's talent management plan."

Another business leader commented, "... something gets out of whack in the employer-employee relationship", especially for the PMETs. Soon I realised that, like players in a game of blind man's bluff, these seasoned executives were groping in the dark for answers about the older workforce who have been around for 30, 40 or even 50 years. As the conversation progressed from domain knowledge to unexplored territory, it revealed a gaping hole in management science as existing management models have never addressed such issues in the past.

Minister Lim Swee Say's speech of yesterday highlighted several important issues at the workplace which to date surveys have not captured. Common questions that have appeared in surveys do not deepen our understanding, root out

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new challenges or generate practical solutions. Following Minister Lim's point, perhaps the Government should commission a national survey to capture issues quantifying the challenges and current practices. For example, how significant are the issues? Which industries or functions are most affected? Who are the ones who have vital work skills who will be most difficult to replace? Until we have answers to these, it is a black box in front of us.

My third proposition is to make a business case for the older workforce. Increasingly, companies want to capture the potential cost and benefits of recruiting, retaining or losing older workers. For a business case to be credible and compelling enough to drive an executive action, the organisation needs company specific workforce and financial data accurately analysed in the light of the company's business strategy. The question is: are the HR departments ready and equipped to perform these strategic roles? A company needs to understand its own workforce and the external talent market it competes in. I urge MOM to set the stage for companies to practise strategic workforce planning. Today, Workforce Planning has been transformed into an analytic, modelling and forecasting tool that enables senior executives to make strategic business decisions with greater accuracy and confidence.

Sir, CPF changes and the other measures aside, instilling a sense of fair employment deal, a national survey and strategic workforce planning are the next three major steps in this journey of evolving a more secure retirement in Singapore.

On this note, I support the motion.

2.38 pm

Mr Ong Kian Min (Tampines): Sir, the difficulty with being slated to speak on

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the third day of the debate is not only to have the points that I wanted to raise being covered by other MPs, but they have also been clarified by other Ministers, such as Minister Tharman and Minister Lim Swee Say who spoke before me. Sir, I would like to beg your indulgence as I press on with the one point I have left - the one thing that I find is missing from this slew of proposed changes.

Mr Speaker, Sir, there is no magic to retirement planning. There are basically two ways to have a larger retirement nest egg. First, is to put aside more money from time to time into your nest egg. Second, is to earn a higher return on what you have put aside.

Since its inception in 1955, CPF has required Singaporeans to save a substantial portion of their income, but with the CPF paying only an annual interest of 2.5% on the Ordinary Account and 4% on the SMRA, we have been relying mainly on savings and interest to build up our nest egg. And even after more than 50 years of forced savings, six out of 10 active CPF members do not have the Minimum Sum when they turn 55. Can the Minister give us the projection, in the next five, 10 and 20 years even with this re-pegged interest rate, how many will still not have their Minimum Sum when they turn 55?

We cannot rely on fixed interest alone. We must also generate higher returns compounded over the long term to make our nest egg grow faster.

It is with this in mind that during the Budget debate earlier this year, I challenged the CPF Board to achieve a return of 8% to 10% a year. This figure was not derived by tikam tikam. I had consulted fund managers and private bankers who manage large sums of

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money for their clients. That is the kind of returns they achieved on a balanced portfolio spread over the major currencies, diversified across different industries and business sectors, and invested in equities, fixed income, cash and other alternative investment products, over a long term with the view to ride over fluctuations, such as the recent financial market turmoil mentioned by Minister Ng.

It is feasible, as otherwise the 2002 Economic Review Committee would not have recommended it. The risks are there but they can be managed.

But the Minister for Manpower said that after studying this proposal thoroughly, the Government concluded that "to get higher returns, members must expose their CPF money to more market risks", and that this would be too risky. After hearing Minister Tharman's explanation yesterday, it is clear to me that it is not too risky per se in absolute terms, but too risky for CPF members. We have to be clear about this fundamental point. It is not too risky for the Government when it borrows from CPF and, in turn, invests the money for higher returns. If the risks are so high and it is so unwise to invest, Temasek and GIC would not be making investments but would perhaps be buying long-term Government bonds instead. Minister Tharman made it clear that with the extra 1% in interest, the Government's "debt servicing cost will increase", and it will "have to meet this through returns on investing the CPF monies". Whatever is said about past returns do not predict future returns, the Government does have some degree of confidence of getting a healthy return. The Government must expect to get a return higher than the interest it pays for this to be fiscally sustainable, as otherwise it would not be able to convince our President that the interest payments to CPF will not cause a draw on past reserves.

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Therefore, let me rephrase the question I posed in March: how about sharing some of these gains from investments so that individual CPF members can have higher returns?

But that is not how the system is supposed to work. Under the present scheme of things, the CPF Board can only lend our CPF money to the Government by purchasing bonds issued by the Government and it is paid the interest. The Government then invests this money borrowed from CPF. When it makes gains on the investments, it decides on the most prudent use of the surpluses. Although there have been CPF top-ups in the past, the surpluses may not be returned to the members proportionately, but it can be redistributed and spent on worthwhile investments and services for our country, such as in public housing, education, healthcare and Workfare, all to be decided by the Government. The Government knows best.

Sir, I fully understand the merits of this system. This is how we have done it so far and it has brought us economic progress and prosperity. It is sound and robust from the fiscal management and national perspectives, and it is for our collective good. But how about the retirement needs of the individual?

What I cannot reconcile is how can the Government say to me, I must be self-reliant, I must work and save for my own needs, including for my own future needs in old age, but I have no choice on how to grow the money I have in my SMRA that I have saved, except to lend it to the Government who will only pay me non-subsidised market interest rate.

I cannot understand how the Government can say it will not be responsible for providing for my retirement but I must lend the Government my retirement savings for investments and any gains earned on my

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money is not my money. It is not the Government's as well, but it is up to the Government to decide how best to use it because the Government knows best.

Sir, in calling for higher CPF returns, what I am basically asking is whether the Government would share a portion of the returns it makes with the individual CPF members from whose money the Government has invested and made money.

Sharing is a very common arrangement in commerce and finance. In hotel management, the hotel owner engages the hotel manager to manage the hotel and pays a basic management fee plus a percentage of the gross operating revenue and/or a percentage of the gross operating profit. In simple operations like food courts, the stallholder pays the food court owner a basic rent plus a percentage of his revenue and/or profit. In the finance industry, there are some financial products that pay a basic interest and if certain investment scenarios occur in future, any extra gains achieved are shared between the bank and the depositor. This provides an incentive for the bank to out-perform.

Put in the CPF context, would CPF pay its members a basic interest plus a share of the surplus the Government makes on investing the CPF money, by way of more regular, more systematic CPF top-ups? I believe such a sharing arrangement

will be sustainable not only for a few years but for generations to come, without the Government running deficits or drawing on past reserves.

Sir, for the average Singaporean working and saving for 40 years and lending his CPF savings to the Government at the market rate of interest is not going to generate enough in his own nest egg for a good retirement to last 20 years. Mathematically, this 40:20 rule - work and save for 40 years, enjoy

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retirement for 20 years - does not work if the returns generated are not higher than a certain threshold rate.

Sir, the Minister may reply that it would be difficult, if not impossible, to work out the exact sharing formula as CPF money is co-mingled with our past reserves and with Temasek and GIC. In turn, I would like to propose that for a start, a simpler, more tangible and easily understood way of doing this would be to set aside $5,000 per CPF member in a newly-created investment account within the member's SMRA, pool this money together into a fund and co-invest this with the Government's other investments to achieve a higher rate of return over the long term. I think my colleagues, like Inderjit Singh, Siew Kum Hong and others, are asking for the same thing in different ways - please let Singaporeans participate directly in some of the investment surpluses the Government is making.

I would like to stress that this would not lead to the Government having less money to invest and generating less surpluses from its investments. If the Government were to issue 10-year SGS, paying the same market interest it pays CPF, I am sure many financial institutions, corporations and individuals would buy these Government bonds using money outside the CPF.

Sir, the difference between a fixed interest of 4% per year and an annual return of 10% over 40 years is huge, even for a small sum of $5,000. At 4% a year, $5,000 will give you $24,000 in 40 years. But at 10%, it will grow to $226,300, almost 10 times more, which would be more than what these proposed CPF changes can give to the retiree.

Sir, I am 47 this year. I would happily put aside $5,000 out of my SMRA for

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such long-term investment so that if I get to enjoy extreme longevity and live for 40 more years, on my 87th birthday, I have a good chance of this $5,000 growing to $200,000 in my own personal retirement savings to enjoy my golden years. To me, that would be the true meaning of self-reliance, as I would not have to rely on the Government's grace to deem I am deserving of help and to decide to pass some of its surpluses my way.

I asked around my contacts of fund managers and private bankers, but none of them is willing to manage this $5,000 of mine. But if a million CPF members pool each of their $5,000 together, there will be a whole lot of very experienced fund managers willing to manage this $5 billion.

Sir, I support the proposed CPF changes which aim to change the "work and save 40 years : retire for 20 years" rule to "work and save 45 years : retire for 35 years and beyond". But the reality is, nobody becomes rich by savings and interests alone. The difference is so significant that we cannot afford not to give investment returns a try. Investment returns are a crucial, but missing, weapon in our armament to combat our ageing problem.

2.45 pm

Ms Sylvia Lim (Non-Constituency Member): Mr Speaker, Sir, in his statement on Monday, Minister for Manpower told the House that we should work towards a retirement funding system which is sustainable for the full lifespan of Singaporeans. As this debate has already thrown up many issues, I wish to concentrate mainly on the proposed delay in the draw-down age and why the Workers' Party is not able to support it.

Delay in draw-down age ("DDA")

Sir, the Government's decision is to phase in a delay in the draw-down age to

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be in sync with the new retirement age of 65, and later 67. We have no objections to raising the retirement age to later, as it gives workers the option of working longer or leaving their jobs earlier. The question is whether it is justified to then delay the draw-down age to match the retirement age.

The Member for Hougang told the House that we do not see any necessary linkage of the retirement age and the draw-down age. Internationally, we have examples where the retirement age and the age of pension entitlement are de-linked. Some countries are working towards having no fixed retirement age while maintaining a pension age. On the other hand, in the USA, one is entitled to draw social security payments at 62, even though the full retirement age is 65 or 67, depending on the year one is born. In Singapore, the de-linking of the retirement age with the draw-down age is more compelling as we are talking about members drawing down on their own savings. Any delay in the draw-down age will affect Singaporeans' lives in profound ways.

First, we should recognise that delaying the draw-down age, in effect, is an economic pressure on workers to continue at the same pace as before. However, as mentioned by the Minister in charge of the civil service during Question Time on Monday, there will be employees who decide that at 62, it is time to slow down. He gave the example of a head of department in a school who might want to be a teacher and relinquish HOD responsibilities. If such a person was not able to concurrently receive his monthly CPF payments at 62, he may not have the luxury of making such a choice. Others, who have slogged in the rat race for more than 40 years, may want to find peace by devoting more time to volunteer work or charitable acts. By indirectly compelling them to continue working into their mid-60s, there would be fewer younger

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retirees to form the current backbone of manpower for social, community and even religious activities. How would that impact the morale and quality of life of our society?

Next, to delay the draw-down age (DDA) to 65 will cause hardship to many, first, due to the highly flexible employment landscape and, secondly, due to changes in CPF policy over the years.

First, fixing the retirement age at 65 obviously does not mean everyone will be working up to 65. Yesterday, Minister of State for Manpower sought to assure the House of the viability of the plan to re-employ workers after 62. For residents between the age of 55 and 64, the employment rate is currently about 54%. The Minister of State said that the Ministry's target was to raise this to 65% in five years, which was, in his own words, "an ambitious target". Thus, we are not at all certain that 65% is achievable. And even if it was achieved, what about the other 35% who are not working?

Another point to note is that even if we can show increased participation in the labour force, it does not tell us how much they can earn and whether these earnings are sufficient even for subsistence. Under current definitions of employment, a person is, in fact, considered employed so long as they work at least one hour in a week.

Sir, the proposed law to re-employ people after 62 may only reach those who are employed at 62. Even then, what recourse will employees have if employers do not re-employ them? Yesterday, the Minister of State sought to assure the House that the law would be enforceable, but gave few details, except to say that a tripartite committee would be formed to look into the implementation issues and report later. On Monday, Manpower

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Minister said that the tripartite committee will report on the re-employment regime and guidelines within two years from now! If that is so, how can we agree to delay the draw-down age now, when these details are still up in the air? Will the new law become just a piece of paper? Is it a case of putting the cart before the horse?

We should also note the remarks of the President of the Singapore National Employers' Federation (SNEF) that re-employment after 62 must make economic sense or businesses would lose their competitive advantage. Nominated Member Edwin Khew expressed similar sentiments yesterday when talking about the survey of employers by the Singapore Business Federation. SNEF proposed that the criteria for re-employment should include medical fitness and job performance. What will happen to those workers who are, rightly or wrongly, deemed economic liabilities? Even the Minister of State conceded that some companies would not be able to offer re-employment if they were undergoing structural changes or due to other circumstances.

Secondly, those who work beyond 62 are vulnerable to having reduced income. A study was done of unionised employees that re-employed workers beyond 62 in the last 18 months (this was reported in the Straits Times on 25th August 2007). It was revealed that only 20% of the companies retained workers at the same job and pay, while 70% had to work the same job but for a lower pay, and 10% got a different job altogether. As this study only captured those who did re-employ workers who reached 62, it is not known the fate of those who were not re-employed. On Monday, Minister Teo Chee Hean also mentioned the re-employment of retired teachers as adjunct teachers.

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This suggests income reduction in the public sector as well.

Thirdly, Sir, there are many who will suffer a cash crunch in their 50s and 60s due to changes in CPF policy over the years.

First, the Minimum Sum to be left in CPF at 55 years has gone up progressively over a short time. Since 2003, the Minimum Sum has progressively gone up from $80,000 to the current $99,600 within four years, and will continue rising till it reaches $120,000 in six years' time. Apart from this, we are also required to leave a Medisave required amount in the CPF. The Medisave required amount will also go up rapidly from the current $11,500 by $2,500 per year and in six years' time, it will be $25,000. This means that Singaporeans will soon need to have a total of $145,000 kept locked in the CPF when they reach 55. On top of this much larger sum, it also takes longer to accumulate savings due to reductions in employers' contributions. Employers' CPF contributions had in recent memory been cut from 20% to 13%, and only recently restored to 14.5%.

Besides all the above, the rule allowing members to withdraw 50% of their savings is being phased out, starting from January 2009. In six years' time, if members cannot meet the Minimum Sum when they reach 55, they will not be able to withdraw anything, except $5,000.

Indeed, Sir, to sum it all up, it seems to many that a member's CPF money is becoming a bit of a mirage, a virtual pool of water which seems just ahead but, as one approaches, it is, in fact, found to be much further away.

Sir, there is sufficient empirical evidence that workers, even over the age of 40, already have difficulties competing with younger workers and even foreigners for jobs. Even if they find work, there are

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issues of amount of income and job security. Part-time work or contract work is the lot for many. It is reported in the press that last year, about 12% of the resident workforce or 172,000 workers were on contract work, the bulk of whom were older and with less education. There must also be unreported cases in the informal sector as well. It is not uncommon for us to come across sole breadwinners doing odd jobs to feed school-going children.

The Government may well argue that due to our longer life expectancy, the responsible thing to do is to delay the draw-down age so that the CPF Minimum Sum can last till 85 rather than 82. But in the light of the CPF changes over the years and the uncertain re-employment scenarios, is it fair to Singaporeans to do so?

Returns

Further, Sir, there will be no need to delay the draw-down age if the Government works on improving returns on CPF savings, which will then be boosted to last a longer time.

The proposal to increase interest rate on the first $60,000 by 1% is a step in the right direction. But is it really the best endeavour of the Government? The Second Finance Minister said yesterday that it was fair and sustainable. But given that inflation will eat away at the CPF balances, can more be done to boost returns while managing the risks?

Several Members have already spoken at length about this, and I do not intend to belabour the point. However, one cannot help but notice that in other countries, some pension funds are able to consistently generate a rate of return of more than 10% (for example, the pension funds in Canada). Manpower Minister told us on Monday that the Government had evaluated the 2002 Economic Review Committee's recommendations to boost

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returns using private pension plans but was unable to devise an acceptable scheme which shielded members from risk. However, it has been five years since the ERC's report. By now, there would be many more case studies from various countries whose pension reforms have run for some years. Risk management tools have probably also become more sophisticated. Should the Government not regularly re-visit this issue of boosting CPF interest rates?

Finally, Sir, various Ministers sought to remind the public that the Government was spending more than $1 billion to increase interest rates, fund Workfare, etc.

However, it should also be noted that, simultaneously, Government revenues have gone up significantly arising from taxes collected. The Business Times on 8th September reported that IRAS' collections for FY 06 rose 15% from the previous FY, part of a steady increase of five years since FY 02. These comprise corporate and personal income tax, GST, stamp duty and property tax. In dollar terms, the taxes collected rose by more than $6 billion compared to five years ago.

Sir, our approach to ageing population must be a balanced one between fiscal considerations and taking care of our citizens. We, too, believe in self-reliance. But self-reliance, if practised to its extreme, condemns the weak and less able. If we call ourselves a developed nation, one of the indicators should be how benevolently we treat our fellow citizens, particularly, the vulnerable. We should do our utmost to avert a slide towards becoming a country where our elderly live their golden years in anxiety or poverty.

2.58 pm

Mr Sin Boon Ann (Tampines): Sir, the NCMP, Ms Sylvia Lim, touched on one point, which is the Workers' Party's

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position, on the deferred draw-down age and the retirement age for Singaporeans. She made the point that they should not be put together and that we should be allowed to draw down our CPF balances earlier than the retirement age. I think what she has not addressed in her speech is the fundamental question of this whole debate, and that is whether we have enough in our CPF balances to see us through our retirement. The whole point here essentially is that if we allow Singaporeans to draw down earlier, will there be enough in the CPF balances to see through their retirement? Her speech also does not address the question of vulnerability of Singaporeans not wanting to work if there is an ability and opportunity for them to draw down earlier. How can she be sure that if there is an opportunity for Singaporeans to draw down earlier, Singaporeans will continue to want to work to ensure that there is sufficient income to meet their daily needs, despite being able to draw down on their CPF balances earlier?

Sir, I do not think it is such a wise scheme to allow Singaporeans to draw down on their balances earlier while encouraging them to work to a later age. The whole point about delaying the draw down essentially is the recognition that, by and large, Singaporeans are growing older and, therefore, are retiring later, and we need to maintain a sufficient balance in our CPF to see through their old age needs. And this is essentially the point that PM has raised in his National Day Rally. He has raised three points which I would like to touch on in my speech this afternoon. First, he talked about the higher returns of CPF. Second, he talked about stretching the CPF balances and, finally, he talked about Workfare Income Supplement for the workers.

Sir, the subject of a higher interest rate on CPF was also recently raised by

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my parliamentary colleague. Also just now the question was asked whether or not it would be equitable for Government to give a higher return on the CPF balances. Indeed, we are happy to hear from Minister Ng that the Government has agreed from January next year to give an additional one percentage point on CPF balances on the first $60,000. The question that was asked, and is still being asked, is whether or not CPF account members can be entitled to a higher rate of returns on their balances.

With the exception of the earlier years of independence, our Government has been running budget surpluses so that the amounts borrowed are not used so much as to finance infrastructure development. CPF balances are indirectly invested by Government through GIC and other channels in external and real assets. And I believe that these returns on investments over the years have been rather substantial - Mr Inderjit Singh says it is 18% - particularly when one takes into account the cost of funds to the Government and the interest rate on CPF accounts has been relatively low. The question that has been asked is whether or not, in the longer term, it would be equitable for the Government to return some of these gains made over the years back to the account holders. On this point, I entirely support and am in agreement with the sentiments raised by my colleague, Mr Ong Kian Min, earlier. If you have accumulated balances over the years using cheap CPF funds, whether or not these monies that you have accumulated should now be considered for equitable returns to the account holders.

Mr Tharman, in his reply to my colleague, Mr Inderjit Singh, has said that the returns on investments by the Government which are derived from the investment of our CPF monies are resources that have to be prudently applied, particularly with regard to our

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surpluses. These resources have been applied to provide, as we understand, various subsidies either in the form of housing or Workfare, which is evident today. Besides, there are various top-up schemes that are available that are meant to help the poor and needy.

Getting funds on the cheap from CPF and investing these funds wisely to get better returns to supplement our national budget has helped Singapore to build up its infrastructure, fund different social programmes and build up a fairly substantial amount of reserves over the years since independence.

The question that we should ask is whether the time has now come when we should wean the Government of cheap funds and to rely on careful management and harvesting of investment income of our present reserves to meet the future budgetary requirements. Can and should the Government do more than just to peg the returns on our CPF accounts to just long-term bond yields?

As opposed to pegging the CPF returns to bond yields, we should consider whether a portion of our CPF monies should be set aside for the management by established fund management corporations like the GIC to ensure better returns for its members. Again, the sentiments that I have here have been eloquently expressed by my colleague, Mr Ong Kian Min, when he said that we do not have to put the entire sum in our CPF balances for the fund management. But if you can just set aside a certain portion and aggregate this together as a nation, I think the returns on the individual account holders would be much greater than the 2.5% and 4%, even with the increase of 1% that the Government is now offering to its people. Quite obviously, we all understand that such approaches are not without risks. The Government had in fact indicated the other day that they have studied this matter for five years and are

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against increasing the risk profile of pension funds. Sir, I beg to differ. Just because there are risks does not mean that these risks cannot be managed properly.

We have also heard that with advancements in fund management these days, there are techniques and tools that fund managers can employ which will give a reasonable rate of return to the funds that have been managed. Out of the GIC website, I noted that over a period of 25 years to March 2006, the annual rate of return on foreign reserves, managed by GIC, averaged 9.5% in US$ terms and 8.2% in S$ terms and we are talking about over a 25-year period. Of course, the Government has said that because you are able to generate such good returns in the past, there is no guarantee that account holders will be able to enjoy similar returns in the years to come.

But I will just raise an analogy which, I think, is appropriate in this context. Just because the sun has risen for many years, there is no basis for us to be assured that the sun will rise again tomorrow. But the fact that the sun has risen over many years in the past gives us a fair assurance that, going forward, the sun will again rise tomorrow. My point essentially is that with a 25-year record and 9.5% return on Government funds, I think there is a fair amount of assurance given to the people that these funds would be properly managed and, over a longer period with a slightly higher risk profile, the people will get a better return on their CPF balances and therefore have more in their accounts to see through their retirement years. After all, this is essentially the people's money, whether you manage it as part of Government's reserves or you manage it as CPF balances on behalf of the account holders. But the numbers are real. If you can manage and double the returns from 4% to perhaps 8% over a 20-year period, you can imagine the balances in the Minimum Sum and the Retirement

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Account would grow to a substantial figure over a 30-year period. And this sum of money to the poor Singaporean is a very significant sum which will see through a comfortable retirement. I would therefore encourage and urge the Government to seriously reconsider its position about whether or not to put aside a portion of the money for a slightly more risky investment in order to give the account holders a better return on their money than it is presently contemplating based on the long-term bond yield.

My second point relates to stretching of CPF. Under the current system, a sum of money has been set aside for the long-term retirement needs. This sum of money can be withdrawn only when the account holder reaches the deferred draw-down age, currently set at 62 years of age, and eventually would be raised to 67 years of age. The draw down of this Minimum Sum is calculated on a straight line basis over a 20-year period until such time when the sum in the account is exhausted. Even with longevity insurance provided for, it is estimated that with the present Minimum Sum, even with the delayed retirement, the average account holder is expected to take home no more than perhaps $400 a month or even less.

And this figure may seem adequate for the daily needs of the account holder for now. However, it does not appear as if it takes inflation into account which, I am sure, is bound to affect the purchasing power of account holders over a period of time. I am seriously concerned, Sir, and this has been raised many times in this House as to whether in the longer term, this sum of money will be adequate to meet the retirement needs of the account holder. Fifteen years down the road, the sum of money which the retiree draws from his Minimum Sum may not be enough to pay for his meals, let alone his transportation and medical costs. I know

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that the Government has put in place plans to monetise the retiree's assets, such as the buy-back of a certain portion of the leasehold interest in an HDB flat. However, the extent to which Singaporeans can benefit from such a scheme is not clearly known and it may be that, in time to come, the Government may have to supplement the retirement income of Singaporeans.

Thirdly, the deferred retirement. Our Government has put in place schemes such as Workfare to encourage elderly Singaporeans to continue working and to defer retirements as much as possible. Workfare schemes are good incentives to encourage elderly Singaporeans to continue working. However, the schemes only address the supply side of the labour equation and not the demand side.

It is commonly the case that there are many elderly Singaporeans who want to find employment - and I mean meaningful employment here - and are not able to find one on account of age. It is not uncommon for residents to come up to me at the MPS session to say that they want employment and are often turned down simply because, in their applications, the prospective employers found out that they are just too old for the job.

I have in the past in this House advocated that a code be drawn up by which standards and benchmarks can be set as a matter of practice for hiring older workers. I do appreciate that in a free market economy, it would be difficult to legislate and compel employers to hire older workers. But that should not stop us from holding up examples of role models of employers where the employment of older workers is concerned. As we have done with corporate governance, whether or not a company is enlightened will be judged by the standard of its own conduct and will be assessed accordingly. In the case of listed companies, companies are required to set out their corporate

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governance practices in their annual reports so that the market can provide a proper assessment of their performance. In a similar fashion, I would urge the Government to put in place a similar practice, starting out with listed companies, where these companies are compelled to disclose the nature of their practice of hiring elderly workers in their annual reports in order that the public may be able to judge their conduct as employers.

I understand that, presently, there is a guide that is put up by the Ministry of Manpower. But, unfortunately, this guide is not as well publicised and therefore not widely known. I would urge the Government to relook at this practice guide and perhaps define it as a code so that it is better defined and can be easily adopted by the listed companies or corporations. This is all part of a move towards encouraging enlightened practices of hiring older workers. This is no different from encouraging companies to be more transparent in their corporate governance practices.

Hopefully, with such a practice to encourage companies to list their practices on hiring older workers, a whole culture may change. The climate may well change to encourage companies to hire older workers and the companies' conduct may be judged according to what their present employment practices are. And in time to come, it would be a good thing if the companies are able to say proudly in their annual reports that they are enlightened employers who have no qualms about hiring older workers. And if we can all do that, I am sure the prospect of late retirement is not such a scary one and that older workers would continue to be encouraged to remain in the labour force and live their retirement age meaningfully.

On that note, I support the Statement of the Minister.

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Mr Low Thia Khiang (Hougang): Sir, may I seek a clarification from the Member?

Mr Speaker: Yes.

Mr Low Thia Khiang: Thank you, Sir. I refer to the Member's speech in which he referred to the Workers' Party's suggestion pertaining to the CPF draw-down age and the retirement age. He went further to say that Singaporeans would not work if they started to draw on CPF.

I would like to ask him whether he is saying that Singaporeans are lazy, would not work, if they are allowed to withdraw their CPF, hence the Government has to continue to hold the CPF money for as long as it could.

Mr Sin Boon Ann: Sir, the Member has misheard me and I think it is disingenuous for him to put words into my mouth to suggest that Singaporeans are lazy and that they would not work if they are able to draw down on their CPF balances earlier. All I said was that allowing Singaporeans to draw down on their CPF balances may well act as a disincentive for them to want to work actively and that this may well be counter-productive, and it would be better if they were to draw down on their CPF balances later. The fundamental question will still have to be addressed, ie, how are they going to live out through the balance of their years if they were to live to a ripe old age and they do not have enough balances in their CPF to see to their retirement needs? I think the Workers' Party must answer that question.

3.16 pm

Dr Muhammad Faishal Ibrahim (Marine Parade): Mr Speaker, Sir, I will first speak in Malay, followed by English.

( In Malay ): [For vernacular speech, please refer to Appendix A.] Mr Speaker,

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Sir, I support the move to reform the CPF policy in order to provide sufficient funds to support our senior citizens during their sunset years.

I have met many senior citizens in my ward who are very excited about the CPF reforms. But many of them do not really understand the scheme and issues related to this move to strengthen the social safety net, including the CPF reforms. Therefore, it is essential to reach out and explain to them at every opportunity, which will be the focus of my speech.

On the CPF reforms, among the key reasons for this move is that more Singaporeans are living longer. Statistics show that Singaporeans are living longer. Thus, the assumption of many senior citizens that they will not live beyond the age of 60s or 70s is contrary to the reality today. Therefore, whether we accept the statistics or otherwise, and whether or not we have sufficient funds, the fact is that it is likely that more Singaporeans will live longer. Based on this fact, we need to act quickly, that is now, and not to wait until the challenges of an ageing population becomes unmanageable or uncontrollable. As the Malay saying goes, "Prepare the umbrella before it rains."

In reforming the CPF, Singaporeans must be convinced that the Government's actions are for everyone's benefit. This does not mean that the Government does not trust its people to make their own decision on financial planning for their old age. Although some may find it to be less popular, unsuitable, etc, the Government has an important responsibility to think of measures that are necessary for the good of Singaporeans in the long run.

In this aspect, I urge the Government to work hard in reaching out to every level of the community to explain the rationale

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and the need for the latest CPF reform. The Government should develop a holistic process in reaching out to the community. In particular, we should look into how all levels of the community can work hand in hand to increase awareness and understanding of this CPF reform. For example, I would like to suggest that our senior citizens share their life experience, especially with regard to living in their old age. This includes the ups and downs, by having sufficient funds or otherwise, after they retire. This will help the younger generation and their families to better understand life during the sunset years and the importance of financial planning when young. In this way, the young will better understand the scenario related to the accumulation and better usage of the CPF retirement funds and, at the same time, help them make wiser decisions.

The public education campaign to be designed must be for the long term. Every effort, time and opportunity should be utilised to ensure that as many Singaporeans as possible understand the CPF reforms. I believe that with continuous explanations, more Singaporeans will be aware of the need for the CPF reforms.

The second issue that I would like to touch on is the need for Singaporeans to have sufficient funds to meet their needs during their sunset years. It is important for us to know that the measures to set aside the funds for old age from the CPF reform can only fulfil one's basic needs. Therefore, Singaporeans must build up their own savings as early as possible, year by year. Like the Malay saying goes, "Bit by bit, eventually it will become a hill". If we can save a portion of our income, eventually our savings will reach a substantial amount. This amount will provide us with some comfort when we retire. With the payouts from the CPF Minimum Sum, and together with our own savings, we will be able to enjoy a more comfortable life during retirement. In short, CPF savings and annuity should not

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be our only savings when we reach old age.

In respect of the CPF reforms, we should also ask ourselves some questions. Among them are:

(1) What would happen if we live longer than expected?

(2) Will our savings be enough?

(3) What is the risk if our CPF savings run dry?

This is a good starting point to stir us into getting the answers. Most of the answers lie in the CPF reforms done by the Government.

Now, allow me to continue my speech in English.

*Cols. 1983-1986.

( In English ): Mr Speaker, Sir, as highlighted by Prime Minister Lee Hsien Loong during the National Day Rally, the ageing population issue is correlated to the widening income gap problem. As such, there is a need for us to improve and change the CPF structure now to meet the challenges of the times. We will still face many challenges, notably security and globalisation. It is imperative to develop and maximise the potential of our people to meet these challenges, and the most pressing is the reality of the ageing issue. The key is to prepare our people early before reality bites.

In addition to the issue which I have covered in my Malay speech, I would like to cover two issues in this English speech:

(1) With regard to a holistic approach in supporting the ageing process and the elderly; and

(2) With regard to encouraging CPF members to voluntarily contribute a portion of their positive sales proceeds

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from the sale of their property to their CPF accounts, in particular, the Special and Retirement Accounts.

I urge that the efforts to support the elderly and an ageing society should be seen as a holistic process involving all Singaporeans and our nation's resources. The CPF changes should not be seen as a lone effort but as a package along with the other aid schemes that support and develop the Singapore society. The challenge is to align them with the current initiatives as a whole package to address the needs of Singaporeans, especially the elderly, in the long run and leave no one behind.

Publicising the current schemes through communicating messages, such as "Start early, think early for your future", could be cultivated as a habit that will keep Singaporeans away from the welfare-dependency attitude. There is great potential in the elderly and we should continue to motivate those who can work to do so.

Lastly, I would like to touch on the issue of encouraging CPF members to voluntarily contribute a portion of their positive sales proceeds in the sale of their property into their CPF accounts, in particular, the Special and Retirement Accounts.

Sir, we have heard many calls from Members of Parliament and Singaporeans for more flexibility in the management of the CPF fund. While most of these feedback and calls relate to using CPF monies for other forms of investment and consumption, I would like to urge the Government to provide more options to enable CPF members to voluntarily contribute their funds into their CPF accounts, in particular, to the Special and Retirement Accounts.

I have met a number of my constituents who shared with me that

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they wished they had saved a portion of the positive sales proceeds that they gained in the sale of their HDB flats. Some even mentioned that they were overwhelmed by the huge capital gains and could not manage the sales proceeds efficiently and effectively. A few of them shared with me that they were surprised at the rate the sales proceeds were used up in a couple of months or years. While we need to continuously educate Singaporeans to be prudent in managing their finances, I would like to suggest that the Government provide an option for CPF members to voluntarily contribute or save a portion of their positive sales proceeds from the sale of their properties into their CPF accounts. In addition, just as we have the D- and V-Bonuses, I would like to suggest a VR (short for Voluntary Requirement) or R (short for Retirement) Bonus to be given to CPF members who voluntarily contribute a portion of their positive sales proceeds from the sale of their properties into their Special or Retirement Accounts. In this way, while CPF members are able to enjoy the current benefits of their asset enhancement, they are also able to save for the future as well as to obtain a reasonable rate of return within a safe environment.

Sir, it is important that Singaporeans understand that although certain changes to the CPF policy may be a bitter pill to swallow, if done with a right attitude and sincerity, we will be a resilient nation that could face all challenges. Our changing demographics have shown that there is a need for changes and flexibility in our policies to meet the different needs and aspirations of the people. There is a need to engage our people as they are our most important resource. In the recent National Day Rally, our Prime Minister shared the vision for the landscape and features of the new housing estate and lifestyle of Singaporeans through the lenses of

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Punggol 21-plus in the future. I believe that all these would not have occurred if not for the visionary leadership of our people and the hard work of Singaporeans who made what we are today and what we are going to be in the future. Although much has been said about the challenges faced by other nations in addressing the ageing issue, I strongly believe that in the true spirit of being Singaporeans, nothing is impossible in this city of possibilities.

On that note, Sir, I support the motion.

3.28 pm

Ms Ellen Lee (Sembawang): Mr Speaker, Sir, I join my parliamentary colleagues to applaud the Government for introducing significant changes to the CPF system to support us in our old age. Our uniquely Singapore Government has again taken the bull by its horns to introduce timely changes to help Singaporeans to grow old gracefully with pride, dignity and money. After the Minister for Manpower's revelation of how the Government will maximise the returns on our CPF savings, and the Second Minister for Finance's explanation of where the funds for these returns will originate, all rumours of the Government's sinister schemes to delay the release of people's hard-earned money are now put to rest as we see the nest eggs growing bigger and bigger when placed in the Government's incubator.

With the raising of the draw-down age, older, frail or disabled senior citizens without financial support will find it harder to survive. As such, I urge the Government to consider the plight of these individuals who may be adversely affected by this policy and manage such cases compassionately, especially when they approach the Government to settle their arrears of housing loans, Town Council charges, water and electricity bills, taxes or other summonses.

For those able, ready and willing to work, I hope the introduction of the re-employment law will

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be brought forward much earlier than 1st January 2012 despite all that Minister Lim Swee Say has said about his reservations to bring it up much earlier, so that all workers, particularly the elderly, can be assured of staying longer in their jobs.

I hope Singaporeans will realise by now that with all the safety nets in place as we grow old, we also need a major mindset change and that is, to avoid relying on the Government for help. We must take steps now to be self-reliant and self-sufficient and stay employed for as long as possible. It takes a lot of discipline and hard work to "delay gratification" and save up for rainy days, but these two key elements are vital for survival. And on this, I disagree with what Ms Sylvia Lim has said that people should be entitled to enjoy their CPF savings once they reach 55. We should embrace the notion of "workfare" and work for our own "welfare" for as long as we could. We should learn from the negative experiences of developed countries in letting welfare rule the day. Notwithstanding these changes for the better, Sir, and to move away from talking about money, money and more money, as one of my key grassroots leaders put it, I would like to reiterate the other aspects of support for the elderly and the ageing population.

Family support for the elderly

We cannot understate the importance of the family nucleus amidst a social fabric of an ageing population and care for the elderly. By and large, families should be the first line of support for the seniors. I am aware that many of us do our level best to ensure the elderly in our families live a happy and healthy life. But there are those who may not be so fortunate for one reason or another, including failed relationships. Government intervention and assistance may have to come in to

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assist these cases along with volunteer welfare groups.

More importantly, it is imperative for us to educate our young people about their roles and responsibilities towards their families and build strong family bonds and ties from young. This emotional connect with the family will ensure lasting mutual care and support. I had a discussion with a senior social worker, a friend of mine, and she shared some of the cases she sees and counsels. She highlighted that there are some families for whom there has been an emotional disconnect between parents and children. Some children, because of various dysfunctions in the family, have little or no relationship with their parents and, hence, resist supporting the parents in old age.

On the other extreme are parents who over-indulge their children who end up self-centered and demanding of their parents. These are also the ones that we see at MPS and whom we see at the Family Service Centres. These are the parents who love too much and at the end of the day are ignored by children for whom they have given their entire lives and savings to. It is true to say that all the policies in the world will not be able to address this. It boils down to relationships. And that has to start with what happens in the home. I therefore ask the Government to urge families to focus on building positive relationships with their children when they are young and to seek help early from professionals if they need to, so that we do not end up in a sorry state of forcing families to take care of their elderly, as in our passing of the Maintenance of Parents Act.

I pause here, Sir, to say that my parliamentary colleague, Ms Irene Ng, has made some good suggestions which I hope the committee will consider. But I also want to reassure Ms Ng as well as

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the House that it is better for husbands to contribute some of their CPF savings to their wives' CPF accounts because their wives will love them more for that. It will not result in more divorces because this is a small price to pay compared to having to divide their CPF savings as well as any other matrimonial assets upon divorce and end up paying more. This is free legal advice from a family law practitioner like me.

Also, from a social and communal perspective, besides building relationships, an additional safeguard will be to imbue financial planning knowledge into our youths, our young and seniors so that besides our CPF savings, annuities and re-employment laws, we can be self-reliant and able to survive old age. The first long-term measure will be to inculcate a savings habit in our young. Particularly, I hope the Government would render enhanced assistance to the low-wage and lower educated populace to educate them in this aspect of financial planning which is difficult for even some educated, like myself, to appreciate and understand. We need to ensure they have a sufficient nest-egg for old age and the possibility of living beyond 80 years with pride and dignity as my other parliamentary colleague, Dr Fatimah Lateef, has said earlier.

( In Mandarin ): [For vernacular speech, please refer to Appendix A.] Since when has the bringing up of children no longer served as a protection against one's old age? In our daily lives, we see and hear of the elderly being self-reliant on top of shouldering their responsibility towards their children and grandchildren. What has gone wrong? Different people have different views but the issue should not be neglected as it directly impacts our social values. This morning, I heard the FM 95.8 radio programme where the radio host commented that an elderly person

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used to be treated as a treasure in the family. When we are facing a crisis in life, the elderly person can advise us what to do. So we should, from young, inculcate love and respect for the elderly persons, and a feeling of gratitude for the older people. So that in 2030, those 900,000 people who are above 65 years old can happily enjoy life in their retirement because we have love and warmth in this world.

*Cols. 1987-1988.

( In English ): Sir, with that, I support the changes.

Mr Speaker: Order. I suspend the Sitting and will take the Chair again at 3.55 pm.

_Sitting accordingly suspended
at 3.34 pm until 3.55 pm.
_

Sitting resumed at 3.55 pm

[Mr Speaker in the Chair]:

CPF REFORMS AND OTHER MEASURES FOR A SECURE RETIREMENT: **** Debate resumed.

Mr Lim Biow Chuan: Mr Speaker, Sir, thank you for allowing me to speak in this debate on CPF reforms. I wish to thank the Whip for letting me be the last speaker.

Sir, I agree with the Prime Minister that with longer life expectancy for many Singaporeans, there is a need to address the challenges of a future Singapore with more and more ageing Singaporeans. It is also important to consider the different options available to provide for retirement income to last the rest of our lifetime.

Sir, I compliment the Government for its proposals to provide a three-pillar support for retirement. It is heartening to

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know that our Government has the political courage as well as the foresight to discuss the problem of an ageing population many years ahead, even before the problem becomes critical.

Many of my parliamentary colleagues have already spoken on the re-employment legislation and a better interest rate on CPF funds. I concur with many of the sentiments already expressed.

However, Sir, please allow me to add to the voices of concern regarding the intention of the Government to raise the draw-down age from 62 years to 65 years and, eventually, to 67 years. Like the MPs who have spoken before me, there is concern about the many Singaporeans who for whatever reasons are unable to find work after 62 years. In fact, from my various MPS cases and frequent interaction on the ground, I understand that there are many Singaporeans who have difficulty finding jobs when they are in their late 40s or early 50s.

Some of these people may have lesser education opportunities or are less skilled, and hence have difficulties finding a job. Some may be slightly older or over qualified for the managerial jobs that they are looking for since many companies prefer to look for younger managers. There are also some who have fallen ill and due to some medical or physical inability are unable to work further, and some may even have to stop work to look after their loved ones. In fact, based on MOM statistics, in the year 2006, only 82% of the male labour force aged between 55 and 59 are participating in the labour force. For those aged between 60 and 64, only 63% of the male workforce are still working. The figures for the female workforce is even more disheartening at 45% for those aged between 55 and 59 years and 26% for those aged between 60 and 64 years.

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For the 18% of the male workforce and 55% of the female workforce who are aged between 55 and 59, quite a few of them must be struggling without a regular income. Even with the impending change in the re-employment law, which will kick in by 2012, how much better can these statistics get? Mind you, Sir, these are statistics in 2006 when the economy had improved. What if there is a recession or economic downturn in the next 10-20 years? During an economic downturn, surely the figures of unemployment amongst the older workers would be much higher no matter what we do.

For this category of people who are not working for whatever reasons, they struggle to meet their financial needs on a monthly basis even though they have moneys in their CPF Ordinary Accounts or Retirement Accounts. Some of them have asked me, "Why are they living in such poor conditions now? Why can't they withdraw their CPF moneys now so that they can have an improved quality of life?" They are not concerned about the future. They just want to have a better lot in life now for the present.

And when I say that they want a better quality of life, I do not mean that they are looking for a life of luxury. They just want a life whereby they do not have to worry about their daily expenses, their medical fees and their children's educational costs. Ms Lee Bee Wah had just reminded me that public transport fares have also increased, and this has added a burden to their daily expenses. Some of them have said that they do not wish to be a burden on their relatives for the next eight to 10 years until they can touch their CPF funds. Nor do they wish to be on charity or to seek help from the CDCs. For those who are ill, they are not even sure that they can make it to 62 years to enjoy their CPF moneys.

So, for this particular group of Singaporeans, having a draw-down age at

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age 62 years is already a huge problem for them. If they do not have much money in their CPF, they can only withdraw a limited amount from their CPF accounts at age 55, and the rest of their CPF money, up to 50%, must be set aside in their Retirement Account. To defer the draw-down age to 65 years would pose a greater challenge for them, as it would mean a lower quality of life between 55 and 65 years.

I urge the Government to consider this particular group of Singaporeans when making changes to the draw-down age. Nobody likes to be on charity, seeking help from the CDCs and the many other charitable organisations. With the "many helping hands approach", those who need financial help would have to go from charity to charity, asking for a few hundred dollars from each charity. Many Singaporeans who are in that condition just want to lead their life with dignity when they reach an older age.

For this reason, Sir, I would urge the Government to consider maintaining the draw-down age at 62 years. To make the Minimum Sum last longer, we can encourage CPF members to voluntarily defer their withdrawal of their monthly payments until 65, and we can do so by payment of additional interest on the CPF moneys, much akin to the Government's D-Bonus or V-Bonus. I understand that the V-Bonus costs $570 million at 2% interest. If the cost of paying such additional interest is too high, then perhaps the Government can consider paying higher interest of only 0.5% or even 0.25%, so as to encourage members to delay voluntarily the withdrawal of their monthly payments. For those who do not wish to have the higher interest on their Minimum Sum, they should be allowed to withdraw the instalments from the Minimum Sum but spread over 23 years,

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instead of 20 years. Their monthly instalments shall thus be much lesser.

I believe that it would be much better to persuade Singaporeans on the importance of stretching their CPF savings by providing incentives rather than through legislation.

Next, on compulsory annuities. Many people that I spoke to are skeptical that they will be able to live many years after 85. Hence, they are against the idea of buying compulsory annuity which would only pay them when they reach 85 years old. Many have also voiced their views that longevity insurance is simply not worth it.

To illustrate, Sir, if a CPF member lives to 55 years old, he withdraws his CPF savings and leaves a Minimum Sum of between $100,000 and $120,000 in his Retirement Account. From the Retirement Account, he will be asked to pay a few thousand dollars to buy a compulsory longevity insurance. If he dies any time from 55 to 85, he gets absolutely nothing. If he dies at age 86 years, at least he gets some payout for one year, but it may still not be worth it for him. The longevity insurance will only give him good returns if he lives at least a few years after 85 years.

Even then, many people that I spoke to wonder whether the amount of payouts that they receive after 85 years would be enough for them to live a reasonable life of dignity at that time. Would it not be better for them to make their own retirement planning so that they can decide how much they need on a monthly basis when they are older? They can also decide when they wish to receive the monthly payout from their insurance company. If they pass away before they reach the age for payment of the money due under their annuities, then at least their estate can still receive a lump sum of money which they can then bequeath to

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their loved ones in their family. If they have other savings or bought other forms of insurance for themselves, they may not want to buy any other type of insurance.

Paternalistic approach of the Government

This brings me to my last point, Sir. Why should the Government continue to be so paternalistic in its approach when the general population is much better educated nowadays?

Sir, the CPF Board was set up in July 1955 as a form of compulsory savings scheme, whereby the employer and the employee both contribute to a savings plan so as to enable the worker to save for his future. At that time, many Singaporeans were less educated and hence there was this need for a savings scheme to be made compulsory.

In the context of modern Singapore where nearly 25% of the current population are educated in the three state-funded universities, is there a need for the Government to legislate on matters when better educated Singaporeans can make their own decision on their own financial planning?

The Prime Minister has already said that the target is to have 30% of each cohort in the local universities by 2015. And here we have not included the many others who are studying in overseas universities, those who are studying in our polytechnics, ITEs, upper secondary and secondary schools. Surely, it would be better for the Government to embark on an education plan so that the importance of planning for their retirement is emphasised to these better educated people who should then take responsibility for their own financial future. Thus, is there a need for longevity insurance to be made compulsory when so many more educated Singaporeans can make better financial decisions about their own retirement planning? Should the Govern-

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ment assume that the educated people in our midst are unable to plan for their retirement?

Co-payment of insurance premiums

Sir, for the poorer segment of society and the less educated who earn a lower income and cannot or do not have the ability to plan for their retirement, I call on the Government to consider having a scheme whereby the Government offers an incentive for these people to buy a longevity insurance. The Government co-pays part of the cost for these people. The cost of the co-payment would be limited to only those who fall within the lower income segment of society. In fact, the day before yesterday, Manpower Minister Dr Ng Eng Hen had said that a CPF member with $60,000 in his CPF savings would receive $7,200 more in interest in 10 years, and $17,900 more in 20 years. Could the Government not find some way to channel the additional interest earned towards co-payment of the longevity insurance premium for those who are poorer or those who are needy?

Better still, could the Government not fully pay for the longevity insurance for these poorer or needy people as a gesture of the Government's commitment to look after those people who have fallen through the cracks and who have not enjoyed the fruits of prosperity that Singapore is harvesting?

In this way, those who are better off will not have to buy compulsory longevity insurance when they can provide better for themselves. And for those who really need financial help, the Government could step in to assist if these people agree to also take responsibility for themselves.

Mr Speaker, Sir, I support the Government's proposals to strengthen the retirement support for the ageing population.

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4.12 pm

The Minister for Manpower (Dr Ng Eng Hen): Mr Speaker, Sir, let me first thank the various Members of Parliament who have spoken for their support. Many MPs affirmed with deep conviction that these CPF reforms have to be carried out to better prepare us for an ageing population. Knowing full well the radical demographic shifts that we are now experiencing, that more will grow old with fewer younger people to depend on, it would be irresponsible for this Government not to reset our CPF system to respond adequately.

It is this Government's responsibility to govern well, not only for today but to make sure that we are building a strong Singapore that can withstand the pressures for many more years ahead of us. This is the abiding philosophy of the PAP Government. Yes, it would have been convenient and tempting to pass these challenges to the next generation, since as Members have noted, many of us would not be around to be accused. Politically convenient but still a dereliction of our duty if we had succumbed to that temptation, because it would heap insurmountable problems upon future generations if we do not strengthen our CPF system now.

Therefore, I am proud to stand with Members who have supported these changes. I am gratified by their unflinching support, because I know that their constituents will face some difficulty adjusting to these changes. Some MPs said we need to be better at PR. Ms Denise Phua, Dr Lily Neo, Dr Fatimah and Dr Faishal said that we have to have a knack at selling our policies. Dr Lily Neo said that "these are diamonds but you present them like graphite." They are right. We have to communicate the why, the what and the how of these measures. We have to engage hearts, hold hands and assuage fears. It is not enough to

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have pristine policies, no matter how well-crafted.

So, Members, I do need your help to communicate these changes to your residents. As you have done in this House during this debate, I need you to spout poetic lines to convince your constituents that these measures are meant to help them. Spew forth with passion your Hokkien lyrics and poetic metaphors.

To illustrate, let me recap what some Members said: " lao le hao, kao shu shu dao, kao ren ren pao, kao zi ji zui hao ", ala Mr Yeo Guat Kwang, to illustrate that we are growing older and it is better to depend on yourself.

Mr Ong Ah Heng had a better one. He said past Singaporeans, " bo lui, bo mia " - not enough money, short lives. If you do not change your CPF system, "bo lui, wu mia " - you are living very long, not enough money. But if we change our system, " wu lui, wu mia ". That was his simple way of communicating. I am not sure whether he approves this. I am paraphrasing him. Dr Amy Khor has a slightly different one and I am going to take some liberty with it. Longevity insurance is like a Geylang D24 durian - it looks thorny on the outside but when you open it, it is " pau chiah, pau ho " .

So, in whatever form you are going to communicate these messages, you have to explain to Singaporeans why the Government could not leave the CPF system unchanged. If we could, we would have. But we are changing the CPF system because we are compelled to, by circumstances unimaginable and unanticipated when the CPF system was created 50 years ago. Who then could have predicted that people would live this much longer? A system designed in 1955 for an average life expectancy of 61, left unattended, would falter under the weight of needs as more grow old. The CPF system then was never meant to support 20% of a population above 65 years old, and numbering nearly 900,000 by 2030.

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The CPF system needs to be updated and strengthened. We are not acting irresponsibly, as Mr Low Thia Khiang has accused. Far from it.

Even Mr Chiam recognises the fact that we have little choice but to raise the draw-down age (DDA). After the National Day Rally, he was asked for his response. I saw him on television. In a calm and almost clinical way, this is what he said, and I quote him:

"Well, it's a fact that people are growing older. So the Government will have to delay in the paying out - there's no other way. The lifespan of a person is going to 82 or above 80 - people are living longer. So the CPF is not inexhaustible. I mean if it's too long, people don't save enough money in the CPF, they just don't have enough for their old age, as simple as that."

"There is no other way." When each examines the situation truthfully, the things that have to be done become plainly obvious, as Mr Chiam so honestly put it. The simple truth is, we need to save enough to be able to enjoy our golden years – it is, as he said, "as simple as that". Anything else we promise to Singaporeans would be less than truthful. No one can deliver on false hopes. I wish it is like what some Members have expressed. I think Biow Chuan just recently said, "Why don't you leave it to Singaporeans? Leave it to their better nature and enlightened selves?" I too, like you, would like to believe that. But you and I know the many cases we see in MPS, the stories we hear from our grassroots where they are taking out their money at 55, having a fling here and having a fling there, they get enticed here and enticed there. It is human nature. You get a sum of money, you treat your friends. And then somebody else asks you and you decide to do this thing. You do not consider that at 55, 62 or 65, how much money you need to put aside at 85, in case you live so long. We all know that.

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This is the reality we live in. And I think it is better to plan our system based on reality rather than false hopes. Yes, we have to adjust it. Yes, we have to finetune it. But the core, the structure of that system, must be stable and sustainable. We are not changing because we are running out of money. Nobody who comes to Singapore will believe that we are running out of money. We are changing the CPF system because we want to keep our promise so that Singaporeans can have savings for as long as they live.

But MPs should also comfort and reassure Singaporeans under their care. Yes, each Singaporean must make provision for his own needs. This is right and this is fair, but it is not true that we are leaving them to fend for themselves. No responsible person should accuse the Government of this. We are expending considerable resources to help them. We will spend at least $1.1 billion each year to build up their CPF savings through Workfare and higher CPF. We will provide up to $1.2 billion in Deferment Bonuses. These changes are real, as Ellen Lee says. They are not mirages. CPF members will see their accounts grow, and the reality is if we did not do these changes, the reality is that they will run out of savings. That is the hard reality.

Reassure your residents that we are fully committed to help them work till 65 years. There remains much work to be done but it can be done. Laws will be passed, mindsets and practices changed and we can find jobs for them. We created 180,000 jobs last year. This year, I think we will create about 200,000 jobs. We can absorb 20,000 older workers. It is wonderful to live that long in Singapore. It is a blessing. Would you rather be, say, in Russia, where the life expectancy is 66 years instead of 80? Singaporeans can look forward to a peaceful and fulfilling life here. And with more savings, they can look forward to the future with

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confidence. They can see their children graduate and marry, and even see their grandchildren graduate and even marry, and play with their great grandchildren. This is what we are trying to achieve. We are not trying to make it difficult for older Singaporeans. How can this be? Why go through this whole exercise to inflict pain? Surely, that does not sync with the reality that is presenting itself.

Help me to communicate these messages.

The Members of Parliament have also provided many inputs. We will adopt the suggestions on how to better implement these measures. But, for this rounding-up, I would like to directly address five key points, and I think these are the important points to focus on. And I will phrase them in terms of questions:

(1) Will re-employment work?

(2) Is the new interest rate structure fair?

(3) On Longevity Insurance (LI) or annuities, why must it be compulsory? Have we moved from self-responsibility to shared responsibility?

(4) Why not fund a national pension scheme from reserves?

(5) Has our CPF system delivered economic and social progress for all?

These are not trivial matters. Every one of them is a substantial issue. Let me take the first point.

Will re-employment work? I take your points that re-employment has to work; otherwise, Singaporeans will face hardship with the later draw-down age. It is a given. MOM knows this. NTUC, our partner, is acutely aware of this, which is

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why we had started work much earlier. The Tripartite Committee was formed in March 2005. It has been two-and-a-half years. They completed their report. During these sessions, there was much airing of practical issues. The Minister of State Gan Kim Yong has given a report of the progress of the Tripartite Committee working on this. I need not reiterate except to say that there are positive signs that companies are already adopting re-employment practices.

Many examples were given by Gan Kim Yong, and Cham Hui Fong gave a very sensitive feel of what actually happened on the ground. She gave a good sense that unions know what they are doing and what they are handling, and Josephine Teo and Seng Han Thong gave the examples. Employers are supportive, as shared by Edwin Khew.

But there remains much work to be done. There is no doubt about it. As Cynthia Phua, Geok Choo and Biow Chuan reminded us, none of the tripartite partners under-estimate the practical issues that have to be dealt with. No country has been successful in this yet. Japan has started, but we are at the front edge of the envelope. And because we do not under-estimate this challenge, I think it is a good start. We know the hurdles, and we know what needs to be done.

Some Members suggested that the re-employment law be enacted earlier than 2012. Yesterday, the NTUC Secretary-General Lim Swee Say counselled that laws would not be sufficient to achieve our full targets. I want you to take in the import of what the NTUC Secretary-General said. Here is a man who is dependent on his unionists to vote him back into power. It is the least popular thing to say that laws will not solve the problem. Because it is the easiest thing for him to deliver - to say that the law has been passed. This is a man without guile. This is a man with courage and

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determination. Laws assist but they do not mean short cuts. There are no short cuts. We have to work with companies. We have to wean through the processes, engage employers, convince the unionists, convince the workers, train them, set the framework, and then things will move. So we will work on the guidelines first and gauge the progress. The law will be in effect by 2012, but I will listen to the NTUC Secretary-General.

As Eunice Olsen says, it is not a panacea. She is right. You can create the laws but there are many loopholes, and that includes discrimination against older workers, as we have seen in other jurisdictions. It is very simple to pass a law. I bring a Bill to this House, nobody would oppose it, but does it work?

The best assurance of remaining employable is for the worker to remain healthy and productive. And I think Sin Boon Ann has rightly pointed out that we need to give positive examples, show employers who are models and, indeed, we are doing this. The Tripartite Alliance for Fair Employment Practices headed by Mdm Halimah Yacob and Bob Tan will ramp-up their activities and there is moral suasion. We can do something about egregious offenders. We can both shame as well as praise those who are doing well.

But the best protection for any worker, old or young, is to grow the economy. If we grow the economy, we have the resources to help those who cannot find jobs, and we can find jobs for older workers. That is why when some of you mentioned about what we do for those who cannot find jobs, should we allow them to withdraw their CPF earlier, in case they are unable to be re-employed, we should be cautious. Because with rapid economic restructuring, there will be episodes that they may face periods of unemployment. And if they depend on their CPF savings, other than their

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personal savings, the end result is that they basically bring forward the problem. They run out of their savings when they need it. He would not be able to enjoy the higher interest that the CPF Board pays, had he left this money. So we will have to assist them in other ways, as we did during the economic downturn in 2002.

However, if a worker is unable to work because of his medical condition, the Act already allows members to take out their money. So the system has already the flexibility to cater to their needs. We have already said that in a prolonged recession, it is possible for a systemic response to allow members some use but only in extremis .

Second question: is the new interest rate structure fair? Some MPs asked if this system was sustainable. Others asked if this was fair, why not pay more? Yesterday, my colleague, Second Minister for Finance, Mr Tharman addressed this point comprehensively – from the fiscal perspective and, more importantly, how we must not shift our CPF system to one that takes away the responsibility of self-provision. I will add only a few salient points here.

Some have voiced concerns about the floating SMRA rate, pegged to 10Y SGS plus 1%. The SMRA peg and the extra 1% on the first $60,000 are to be taken as not two separate components but as one essential whole for the new interest rate structure. That was how we conceived it and designed it to be fiscally prudent and sustainable. You cannot say, "Well, I like your 1%, but can you also bring up the other one?" It was designed as a piece. For example, we could have provided a fixed SMRA rate, as some Members asked, but pay the extra 1% on smaller sums. It is a possibility. But we could have paid the extra 1% on larger sums, but reduce the SMRA rate. Instead of plus 1%, we could have given less. But the most important point to remember is

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that under the new interest rate structure, we are paying $700 million more per year. And it will grow more because balances will grow. All CPF members will get more, but it was designed so that those with small and middle-sized balances will benefit the most. Another point which may have been missed, and Minister Tharman mentioned it yesterday, is that 70% of all CPF members will effectively enjoy 3.5% for the Ordinary Account and 5% for the Special, Medisave, Retirement Accounts because they have less than $60,000. So, in effect, they are being paid 3.5% and 5%. Even after the 4% floor is removed after two years, we have projected that the interests paid will be better than the current system.

The 3.5% for Ordinary Account and 5% for SMRA, with the extra 1% here, are more than fair. It is essentially risk-free. Furthermore, interest once paid belongs to the member which means that unless you withdraw, your CPF sums will never decrease. In fact, it will always be increasing every year. Because even if the rate falls, for a short period, the gains which you previously made are already locked in. This is the distinct difference compared to equity and even bond investments where you can suffer capital loss, or only have your principal protected. This is truly risk-free.

Some Members have asked whether we can give a higher interest rate. There were quite a few. I would like to add my voice to that too. All of us want higher interest rates. Why not? It is easy to ask. But higher returns come with higher risks - that is the standard caveat and remains true. You can reduce the cost of distribution and administrative cost. You can diversify your risks, yes, indeed, through a balanced portfolio but no one can insulate you from market risk. It is easy to claim that your investments should do better, but who dares to

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promise you this. And how are they accountable? Under the CPF system, the risks are minimised and the minimum guarantee can stand up to market scrutiny and competition. There is no equivalent product in financial markets that offers such assured rates at no risk. How do I know? Because there are no suitors asking to take over our funds and guaranteeing equivalent returns. No one is willing to underwrite this system simply because it is more than fair. That is the market test, not lugging it to some company or some show of returns at any one point of time. Is anyone else willing to underwrite this system? The CPF Board does not lend to Government. That is the wrong analysis. Government takes over CPF Board's liabilities. And if we have more suitors who are willing to take over our liabilities, we would be happy to. But no one dares. Nobody would guarantee you this. It is not cheap money. It is assured returns.

In fact, we were advised by consultants that there was no approach. Let me explain. When we were studying the many options, we hired consultants, professional ones. We were trying to find a way to insulate members and to smoothen it. And we said, "Look, can you study and do your simulations?" They ran about a thousand simulations of different market conditions, full of parameters, look at the back projections, back tested it, forward tested it, stressed it and, finally, they gave us an answer. They said there was no approach to funding a 2.5% guarantee through members' contributions that would completely eliminate the risk of a shortfall arising. You cannot completely guarantee this system that you are providing now. This was because there is no any 'risk-free' asset that can be certain to achieve the 2.5% per annum minimum return, let alone a 3.5% minimum return. I asked the fund manager as well, "You take our funds and you guarantee it at 4%." He laughed. I said, "Let me try another one, 3%." He said,

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"All right. If you give me 3% of all your funds, I will find an instrument that will guarantee me 3.3%. I don't take any risk. I just cream off and fulfil your liabilities." This is a rational man; this is a person that manages billions of dollars, and not some advertisement or some figure that you pluck out and look at the report and say, "You should give me this."

This is not the way to plan a long-term structure. Take Aviva's "BIG e" fund, for example, which NMP Siew Kum Hong asked about. This guarantees members' returns above CPF-OA rate. When I saw the advertisement, I liked it most, very excited. I said, "If this is a product, perhaps the CPF Board might even put some money with them." I asked my staff to check it out. The reality is that should the "BIG e" returns fall below 2.5%, Aviva will return the money back to you. Aviva does not provide the guarantee in periods of very low interest rates. The Government does not have that option. In other words, if their returns fall below, they say, "I will give you the money back. Thank you very much. You do not sue me. I do not sue you." Can Government do that? Government will have to bear the risk of providing the guarantee that we say - what we promise, we will deliver. We cannot design a long-term structure for our CPF system based on occasional advertisements because we have to read the fine print in these advertisements. For our system, there is no fine print. That is the bottomline, and that is the system that we will deliver.

The sensible thing would be to take full advantage of this system. For example, what a young CPF member should do under this new system is to maximise his returns. He should transfer his OA monies very early to his Special Account. Because if he transfers, for example, $10,000 at age 35, he would have at age 55, 20 years later, $10,000 more in interest compared to if he had left it in the OA Account. That is a big

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difference. For every $10,000, he doubles it basically. Basically, he doubles his money for every 20 years if he transfers his money from OA to SA. So those of you who have children, top up your children's accounts, as I have allowed it, and it would make a big difference to their future retirement.

What about the 30% with balances above $60,000? Members have asked for choice. Mr Seah Kian Peng and Mr Ong Kian Min have asked whether we would consider these investment options. Mr Sin Boon Ann also talked about this. For members with above $60,000, if they think they can do better than the CPF interest rates, they can still invest sums above $20,000 in the OA and SA through the CPFIS. They are allowed to. We have not removed that. We only cap it at $20,000 for both accounts.

Some Members have asked whether CPF Board can help them invest. We have not ruled this out. I think Members may have mistaken that we have ruled this out. We said that we can contemplate this later. Indeed, we should. Ms Sylvia Lim is correct. We should revisit this. But let us put in place this structure first because it assures a high rate of return, a generous rate of return, a fair rate of return to most members - 70% of all our CPF members. I think it is a smart thing to do. The third question is: why must longevity insurance be compulsory? Have we moved from self-responsibility to shared responsibility?

Members have expressed the concerns on the ground the compulsory longevity insurance which Government intends to introduce. Mdm Halimah wondered if we are adopting risk-pooling, whether we are moving away from the core principle. Mr Liang Eng Hwa and Mr Inderjit Singh were concerned that it was compulsory. Mr Liang Eng Hwa and Mr Lim Biow Chuan, who spoke just before me, said, "Give education a chance, educate people instead of making it compulsory."

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Let me make it fundamentally clear. We are not moving from self-provision to shared responsibility at all in introducing compulsory longevity insurance. Indeed, we are strengthening the very principle of self-provision. What is required, and has always been the case, is that each person must save enough to last his lifespan. That is the cardinal principle on which our individual accounts in our CPF is based, that each must save enough to last his lifespan for his own needs. This is indeed the basis for the Minimum Sum, why you have to set aside the Minimum Sum in your account, and it gets drawn down after a certain age. But because the lifespan has stretched, the question is how long then should the members' Minimum Sum in their Retirement Account be drawn down over? We have set for 20 years. But the problem is if we stick to 20 years, we know that 60% at age 62 will outlive 82. In other words, 60% will run out of savings by 82. If at 85, 50% will have run out of savings. We know that half will live beyond 85. We just do not know which half.

So if we wanted to cover everyone, we would have to stretch out the Minimum Sum for 30 years to 95, or 35 years to cover all eventualities. Yes, this will make the savings last much longer, but, of course, the monthly payments will be much reduced. Worse, while doing this may mean that nearly everybody's longevity risk is catered for, it also means that half who die before age 85 will also have to make do with lower monthly payments. In addition, if there is a big jump in life expectancy, our figure shows that life expectancy is increasing by one year for every five years, in 20 years, it may not be 80 or 85, it may be four years more. And Dr Lily Neo talked about this yesterday.

So extending the Minimum Sum for a longer period is a solution and indeed is

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consistent with the principle that you must provide for yourself because you do not know how long you will live. You should provide for every eventuality, stretch out your Minimum Sum to 30 and 35 years. But obviously, that means that you have very little per month. This is why we have introduced longevity insurance, which is a better solution because you need only set aside a small fraction of your retirement savings, and it will guarantee you a monthly income for life, starting from, let us say, age 85. And because it is only a small fraction of your retirement savings, your monthly payments under your Minimum Sum can be more.

Some Members have called for larger payouts, or linking payouts to inflation - I think Prof. Mehta asked for this - or for some amount to be returned back to his dependants if the member dies earlier. Dr Amy Khor and Mr Lim Biow Chuan asked about this. These options are all possible, and could be offered as additional riders on top of the basic product. But, essentially, from the Minimum Sum in the Retirement Account, members can choose which portion of that Minimum Sum is to be earmarked for payments in the first 20 years, and which portion is allocated for the longevity insurance and which portion to be given to additional riders. I do not think it is a good idea to preset the payout amounts for the committee's consideration - whether it is at subsistence, $300, $400 or $500, etc. I do not think we should tie the committee's hands. What the committee should do is to recommend options to cater to different needs and let members choose. Indeed, this is what Mr Heng Chee How has mentioned.

Some have asked if it is possible for earlier annuity payouts. So why wait till 85? Why not 75? Indeed, I think Ms Jessica Tan and Dr Amy Khor asked about this. Others have asked whether we could allow people to start their annuity

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payouts at 95 to reduce their dependence on longevity insurance. They want to stretch out their Retirement Accounts - Dr Lam Pin Min and Mr Ang Mong Seng asked about this. I say, why not? The Committee for the National Longevity Insurance Scheme, led by Prof. Lim, should consider all these options. They will propose the design for the Scheme. Our goal is to provide basic, affordable and flexible options to meet the needs of different CPF members. But so long as you fulfil the cardinal principle, put aside for your own needs, we should be satisfied.

I want to stress that this system will be fair to all. No specific group should feel that they are disadvantaged. We should let professionals determine the risks and the adjusted premiums. The actuarial information will be transparent. How long you need to live, to break even or get more with your premium should be supplied, so that people can choose their plans with full information. I think Mr Zaqy asked about this. The basic tier scheme will be administered by the CPF Board. We want the committee to consider this. And this will allow members to leverage on the CPF system and make longevity insurance premiums affordable. It will also establish longevity insurance as another integral piece of our CPF system. It fills in that missing gap.

Members have asked what is the Government's contribution to this scheme. Could Government fund part of this? In fact, we are indeed doing so. The extra interest that we are paying on the first $60,000 of all CPF members' balances will be more than sufficient to pay for the premium for our basic longevity insurance product.

Some have asked, instead of the extra 1% or Deferment Bonuses, why not take some of that to fund this longevity insurance? These are two distinct

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aspects. We are strengthening our CPF system by putting in place a missing critical piece with longevity insurance for those who live longer than expected, so that their savings do not run out. But this system must be put into place for many generations after us. We should not begin with the philosophy that it should be subsidised from the outset. The CPF system works and is sustainable because it is based on savings, not tax.

Each must save for himself for his own needs. We must not depart from this fundamental strength of our CPF system. This brings me to the next point.

Why not fund a national pension scheme from reserves? Some have asked that the Government start a nationalised pension scheme and bear part of the cost. Mr Inderjit Singh, Mr Chiam See Tong, Mr Low Thia Khiang and Mdm Halimah suggested these things. That would be a fundamental mistake. It would take us many steps backwards and bring upon us the very problems that those with socialised pension schemes are trying to get out of.

Any system where someone else pays for your retirement needs, whether it is a Pay-As-You-Go system or a state-funded pension system, is difficult to sustain. That is the experience over the last 50 years. That is the experience all over. Indeed, other countries which run these systems where someone else pays, are attempting to move away from them now, because their old person support ratio is also declining. Taxes simply cannot support the needs. And, as tempting as Mdm Ho Geok Choo says, look, start small, little bit, sedikit sedikit , ie, small group of people, well, you can start small, but you may certainly end up big. Italy spends 14% of its GDP just to fund state pensions. Think about it. Fourteen percent of GDP is what we use to run our whole Government, and it is one line item for them - state pensions.

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Let me quote to you something that was published today in the Financial Times about France. I quote:

"French President Nikolas Sarkozy yesterday announced the first stage of a far-reaching plan to trim the cushy pension benefits of some 500,000 public sector workers. [They started small, just public sector workers.] Around 1.1 million pensioners are already benefiting. But the regime - introduced at the end of World War II - [surely it is a small thing and for a very small group of people] has become more costly as retirees live longer."

"Our system of social benefits is not financially viable", Mr Sarkozy said. "It discourages work, hiring and the activity of young people and seniors, and it discourages people from working beyond the age of 55 [which is, in effect, a reply to Mr Low Thia Khiang's point that, indeed, pushing back the pension's age or keeping it in front does discourage]." These are the words of the French President. He can choose to argue with the French President, but I am quoting him.

"The President wants to extend the legal retirement age for all French workers, raise taxes on those who retire early and remove legal restraints that now discourage people from working into their 60s."

They quoted him and this is what President Sarkozy said:

"We need a profoundly different social contract, and I want to establish it on the values of work, merit and equal opportunity," vive la France !

Seeing others falter, we should not repeat their mistakes, especially since we are among the fastest ageing societies, and our old person support ratio will fall to 4:1 by 2030. Our CPF system is strong

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and fully funded because individuals save for their own needs and spend what they have saved. Government can top up from time to time, when it has budget surpluses. But that is radically different from saying that Government should now take on the responsibility of providing for the retirement needs of every Singaporean - which was the point made by Minister Tharman yesterday. It will slow us down, deplete our reserves and impoverish us. We would then have little resources to help anyone.

Even longevity insurance is not asking others to shoulder your needs. You have to pay a premium first to share risks, so there is a cost to you that you are providing for yourself. If you do not want to share the risks, we should allow you to pay a higher premium so that part of your money goes to your dependants. Or, you can stretch out the payments so that you cover yourself for 30 years and reduce your dependence on longevity insurance.

There is a Chinese saying, fu bu guo san dai , ie, wealth cannot go beyond the third generation. There is a deeper meaning: that the third generation, not understanding the values of the first and second generations that could accumulate, keep or grow wealth, lost it. The loss of values preceded the loss of money. We must avoid this and maintain personal responsibility.

So why not use our reserves to fund this? Surely, the old have contributed to the reserves, as Mdm Ho Geok Choo says. They have poured blood, sweat and tears. It is a seductive argument, it is a compassionate one, but short-sighted. Every generation would claim that it has built and has a right to the reserves. But our reserves belong to all generations of Singaporeans, including future generations, not only our generation. So taking returns above market from GIC to put into pension funds is the same thing. You are taking from your reserves. It would be

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most unwise to deplete our reserves for only the needs of this generation. So, to guard against that constant temptation of every generation to do so - because I believe every generation would have some reason to use the reserves - is the very reason that the Elected Presidency serves as an impassive gatekeeper for all generations. We should remember, despite our prosperity, that we are still a small island, and our reserves are a strategic store that gives us weight in this world. It may be needed to tide us over calamities, as in a global pandemic, but we should not mortgage our future to serve present needs.

Norway has that system. I visited Norway. "The luckiest people in the world", they are dubbed. They found oil. Every time they think they are running out of it, new technology comes and they have a few more years. But they did something very wise. The generation which found the oil did not claim it. They make a constitutional rule that you can only take x% from all the oil revenue to fund recurrent budget, which is what we are doing now. Some of it comes from Net Investment Income, but you cannot touch the principal sum because it is to last all generations. Like you, I do not know how long Singapore will last, but let us hope that it will last for many generations.

Let me now talk about vulnerable groups. Some Members have appealed for more help to be given to vulnerable groups, eg, housewives, contract workers, odd-job labourers, caregivers of disabled children, and those who are unable to find work or with inadequate or no CPF accounts. Mdm Halimah called for the Government to contribute towards "social pooling". Dr Ahmad Magad called for a M-Bonus. Prof. Mehta called for a H (housewife) Bonus. I am sure the Ministry of Finance is quite glad that there are only 26 alphabets. We will need to help these groups. And we have - through

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ComCare, financial assistance schemes, additional housing grants, CDCs, top-ups during budget surpluses. We do assist them. Indeed, since 2001, including the GST Offset Package, special transfers from the Government have totalled $11.7 billion. This is benevolence. Benevolence is having the right policies to grow your economy and then give to your residents the surpluses. It is not benevolence when you have the wrong policies. Neither is it benevolence to ask somebody to spend more to help others - not your money but someone else's money. We should not, again for these groups - and we need to help them - change the central principle of self-provision that underpins our CPF system. It would weaken it.

The system per se will not solve the problems of the poor. Members are correct. Just because we have a system, it does not mean that it will solve them. Indeed, it may actually heighten the contrast of those who have made provision and those who have not. But it is because of this that we want to ensure that that our CPF system, that those who can afford it must make full provision for their lifespans. Otherwise, precious resources will have to be used to assist too many that have not done so. And I can assure you that our needs will grow. As only 6% or 7% are above 65, our needs for healthcare will grow and our needs for educational care, as more want tertiary education, will grow. So there will be plenty of needs to ask where our Net Investment Income should go, and I do not think that we should just fritter it, use it for just this one purpose.

Lastly, how has our CPF system delivered economic and social progress? Over the last two days, some Members have questioned if the CPF system has delivered. They cite reports from the World Bank and look to other models. I think it is good to keep abreast of developments but, at the end of the day, I would like to ask Members this: what do

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you believe? Has the CPF system been a plus for Singapore and Singaporeans, despite all your quotes? Yes, we have low income households. We will always have them. But even such households own homes which are a substantial store of value which members can cash out on. In a survey in 2003, each HDB household was estimated to have an average housing equity worth about $154,000. But you may say, "Ah, that is average. What about the lower income households?" Even the lowest 20% of households had an average housing equity of $138,000. Can you show me a similar figure anywhere else? While these figures would be higher in today's market, the important point is that each HDB household has significant value in their flat. Singaporeans own an asset - and 90% of Singaporeans, mind you - which they can subsequently monetise, either by rental or by sale, if they need to. Flats are already subsidised and we give Additional Housing Grants because we want the lower income families to have their own homes. In addition, HDB has announced that it will introduce a Lease Buyback Scheme to help the lower income monetise the tail end of the lease for two- or three-room HDB flats, and this will provide a monthly income for the rest of their lives. It is a stored value.

I do house-to-house visits like hon. Members. As I told you, Toa Payoh is an old estate. We see these two- or three-room flats and we ask, "When did you buy it?" and they say, "Oh, this block was built in 1960, 47 years." "How much did you buy it for?" "Oh, $7,700 at that time." "Is it paid up?" "Oh, paid up long ago." "Why are you living alone? Why not you rent out one room?" "No, too much trouble." "Why do you not live with your children?" "No, I want independence." "Do you need the money?" "It is OK. I will get by." But it is very different because

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they have a choice. They can monetise it if they want to, and that value will grow.

Is our 3M (Medisave, MediShield and Medifund) framework working? Collectively, there are $36 billion in our Medisave accounts and this is growing at more than $1 billion a year. The lower income group has good access to relatively affordable healthcare. In 2001, WHO ranked the performance of Singapore's healthcare system as number six in the world. I am quite familiar with hospitals around the world and healthcare systems. I have worked in some of them. Singaporeans can take comfort that we have one of the best healthcare delivery systems in the world, and I say this objectively.

Our aspiration to make sure that all Singaporeans are included in our economic and social progress is a good one. Indeed, we must always strive for this, because we are representing our constituents and we want them to have a better life. But we need not diminish the progress that we have achieved. We need not unfairly malign the CPF system. It has worked well and allowed us to achieve a social compact that few others have. It has provided economic security and equity to the majority of Singaporeans. It needs to be strengthened but it is by no means ineffectual by any yardstick. Some of you have mentioned the CPF cuts. Yes, indeed, we did have to. But the economy turned around and we raised it up again, and we have resources to help those who need it most.

Some Members have asked: does usage from CPF funds need to be tightened? Have we allowed it for too many purposes, or too lax in any one area? I think Mr Inderjit Singh asked this. These are serious questions to be considered. Some have asked for projections - Mr Ong Kian Min and Ms Irene Ng. Our projections show that, under the new system, 84% of new entrants to the workforce would have

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enough to meet the Minimum Sum for retirement, even for low wage workers and even after buying their first home. So you buy a first home, 84% of entrants now will meet the Minimum Sum. The additional housing grant will help further. So our home ownership need not be sacrificed for retirement adequacy. We can have both - high home ownership as well as those achieving Minimum Sum. But some Singaporeans can over-commit in buying bigger and subsequent homes. This was a point that Dr Faishal made. He said his resident was shocked by how much money he got when selling the house and wondered whether he could put it into his CPF. I want to tell him that he can. We have already relaxed the rules. Because this resident of his said, "I have so much money I am spending it too much and I am not really saving it." That is a wise resident.

So these people sell their first homes but plough back gains from the sale of their first home and purchase a bigger home. And I think this is a good thing. It is a good aspiration that Singaporeans can own bigger homes if they can afford it. But perhaps they ought to think about how much funds they have in their Retirement Account when they sell their homes to buy another. Because if he had put that money early into his Special or Retirement Account, which now earns 5% on the first $60,000, compounded over a number of years, it adds up. As Members have advised, we should study how to advise first home sellers about this. I think it is a good idea that we pay some attention to it.

The changes to the CPF system are fundamental and long term. It will better prepare Singapore to support its larger older population. It will help provide security and peace of mind for Singaporeans when they grow old. With higher CPF interest, all CPF members will be better off, especially the lower and middle income groups. Working longer, later draw-down, Deferment Bonuses, and longevity protection will ensure that as

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many as possible will have savings for as long as they live. Singaporeans can look forward to their golden years.

Sir, this has been a high quality debate and one that this Parliament can justifiably be proud of. There was an abundance of sound views, probing questions and well-argued alternatives. But there was no vitriol, less rhetoric and little posturing. One got a sense that we were all trying to find the best system to make sure that all could age well. That all Members in this House, including those from different political parties can sit here, deliberate calmly, rationally and responsibly, is itself a strong affirmation that we have a strong and effective political system.

We could not have imagined 40-odd years ago when this nation was conceived, that we would be here today in 2007 discussing how to deal with the problem of people living much longer. Faced with stark issues of survival then of having to provide basic necessities for an impoverished nation; indeed, not being sure that we could last as a nation, making provision for retirement savings to last till 100 would not even have been a remote possibility on the minds of our leaders and Singaporeans.

What will they say 40 years hence of this House about this debate on 19th September 2007? As they pore through the Hansard , what will they think of us? How will we be judged? It is hard to be completely sure. Some younger Members here will physically be around in 40 years hence. And if technology has allowed you to speak to those who have crossed over, please SMS me. But of this, one thing I can be reasonably sure that they will conclude: that this Government did not shirk its responsibility but lived up to its duty; that this House had the resolve and courage to do what was necessary. That this generation of Singaporeans did what was good and right for future generations to benefit. That, Sir, must mean

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something to each of us here and to Singaporeans everywhere. [ Applause .]

Mr Low Thia Khiang: rose ---

Mr Speaker: Mr Low, you can seek or make clarifications but no speeches.

Mr Low Thia Khiang: Sir, I would like to seek clarifications from the Minister. Does the Government Investment Corporation (GIC) use money derived from CPF to invest? If the answer is yes, then the next question ---

Dr Ng Eng Hen: The answer is no.

Mr Low Thia Khiang: Then no question.

Mdm Halimah Yacob (Jurong): A point of clarification. The Minister misquoted me. I did not suggest the establishment of a Government-funded pension scheme. I work extensively in ILO, do a lot of extensive work, have had unionists sharing a lot of experiences, governments as well on the pension scheme, and I know what are the problems that these pension schemes are experiencing. So I did not, at any time, suggest the establishment of a Government-funded pension scheme. But the Minister quoted me correctly on the second point, and that is the social risk-pooling element, in the context of those without Minimum Sum or very little Minimum Sum to purchase the longevity insurance specifically in relation to women, because only 2.5 women out of 10 are working between the age of 60-64.

Mr Speaker: Mdm Ho, last clarification. Brief one, please.

Mdm Ho Geok Choo: I thank the Minister for his clarifications and sharing on the state pension fund. Just like Mdm Halimah, I did not suggest or advocate for a state pension fund. Rather, I had

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suggested for a co-payment scheme for a very small group of old guards in their 80s and 90s who have missed out on the prosperity of Singapore. I think, to my mind, it is not likely that this pool will increase because when this group expires, the scheme will end.

Also, a second point of clarification, as for the eldercare fund, it is really to help a group of Singaporeans who cannot look after themselves and it will not be a "no limit" scheme but rather a token gesture that will purport the values of compassion alongside self-reliance for the future generation.

Dr Ng Eng Hen: Mr Speaker, Sir, in the course of this debate, I may have misheard certain things and if I misquoted the Members, let me apologise.

Mr Low asked whether the GIC money is derived from CPF money. The relationship is not so simple. Let me give an example. You put money in the bank, and you agree that you put it there and you get 2%. The bank publishes a report and says that of all its earnings, it earned 8%. You go to the bank and say you want 8%, it does not work. MOF has taken on our liabilities. What MOF does with its money is MOF's consideration but the Government takes over the liabilities of CPF Board that promises a risk-free rate to members. That is how it works. As I have said, the market test is, if anybody else thinks he can take on that liability, please line up, but no one will take on that liability because they cannot deliver.

Mr Low Thia Khiang: Sir, further clarifications. I am not sure now whether the GIC does use money derived from CPF to invest given the latest answer by the Minister. If that is the case, then my next question is: does the Government shortchange Singaporeans by giving CPF members 3.5% of the interest rate while the GIC makes 9% and pockets the balance of 5.5%? And the third question

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leading to that is: is the motive of holding payment of CPF, the draw-down age, to enable GIC to have a readily available and cheap source of funds to invest?

Dr Ng Eng Hen: Sir, if it was that cheap, we would have a line of suitors waiting for that money. There is none.

Mr Speaker: Pursuant to Standing Order 44(2), the motion to consider the Ministerial Statement on the CPF Reforms and Other Measures for a Secure Retirement lapses at the conclusion of debate.