CPF REFORMS AND OTHER MEASURES FOR A SECURE RETIREMENT

CPF REFORMS AND OTHER MEASURES FOR A SECURE RETIREMENT:

Mr Mah Bow Tan: Mr Speaker, Sir, pursuant to Standing Order No. 44, I beg to move,

That the Ministerial Statement on the CPF Reforms and Other Measures for a Secure Retirement be considered by Parliament.

Question proposed.

Dr Ahmad Mohd Magad (Pasir Ris-Punggol): Mr Speaker, Sir, the last few months have seen the nation abuzz with discussions on the CPF and retirement issues. As we grapple with challenges, like widening income gap, greater life expectancy and an ageing society, steps need to be taken to ensure that Singaporeans have enough savings for their retirement needs.

The Malays have a saying, " sebelum hujan sediakan payung ", which literally translates to "getting an umbrella ready before it rains". Sir, the measures just announced by the Minister in his Statement form part of that umbrella that Singaporeans need to see them through retirement. On sunny days, one may grumble that carrying an umbrella is a hassle. But in a tropical climate like Singapore's, rain can come at any time of the day, all year round. The sooner we

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start planning and preparing for it, the better. It is critical that we each have a big and sturdy "umbrella" because, if not, Singaporeans may be caught at a time when they are at their most vulnerable, ie, in old age. Some of these changes may not be popular but I wholeheartedly agree that they are necessary.

I would therefore like to congratulate the Minister and his team for a sterling job in coming out with the three pillars to support Singaporeans' retirement needs. The Government is also clearly generous in dishing out the D- and V-Bonuses which together amount to a whopping $2.3 billion. This is no mean feat as there are not many countries out there that could do or deliver this. The changes to the CPF system is a recurring $1.1 billion each year. To this, I would like to ask the Minister whether this is really sustainable in the longer term or will there be cut-backs in difficult years.

Sir, I have some concerns to raise.

The first pillar involves increasing the retirement age for workers. Currently, only 53.7% of Singaporeans aged 55 to 64 are working. As announced, the Government will make it mandatory for all employers to offer re-employment to their workers after they reach 62 in 2012. Sir, to accomplish this smoothly, mindset changes - both on the part of the employers and employees - must be addressed from now. Employers must feel that they benefit or at least do not lose out by retaining the older workers. They must understand that older workers may generally bring with them strong work ethics but they, ie, the employees, for example, may prefer face-to-face communication as compared to jobs which require electronic modes of communication. Perhaps, training courses could be held for employers on job redesigning for older workers so that they can come up with a job matching exercise that takes into consideration the needs of

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the company and also the ability and interest of the older worker in the new post. Workers too must be pragmatic in being prepared to take up a lower salary or take on a different role.

The guidelines by the Tripartite Committee on Employability of Older Workers should be such that they are fair to both parties and that they feel motivated to extend the relationship they have built over the years. It should also consider a way out for employers whose business may be genuinely affected from a downturn by allowing them to turn to a third party for placement in another company. In other words, the onus of responsibility should lie on the employer to seek a suitable job match for an employee who is still willing to continue employment past the age of 62.

While I support the initiatives announced under the second pillar - on increasing CPF returns - I feel that the needs of some sectors of the community, such as the under-employed, are not sufficiently addressed. One sizeable group would be housewives or women who are involved in informal or ad-hoc jobs. They might have very little or no CPF to take care of their needs in old age. If their husbands are holding low income jobs, there would not be enough in his CPF to cover for his wife's retirement needs. I would like to urge the Government to look at this issue seriously and explore ways and means to assist housewives. One measure that could be considered is to extend an "M" (or Mother) bonus in the CPF accounts of mothers who are working part-time. This will also encourage more women to join the workforce and pave the way for contributions to be made to their CPF savings but still leaving them with sufficient time to tend to their children and household chores.

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Another group of concern is low-income Singaporeans who do not have sufficient savings in their CPF accounts to meet the Minimum Sum requirements. Sir, while the 1% increase in the OA and SMRA CPF interest rates will quite substantially, as the Minister explained, contribute to the increase in Singaporeans' retirement savings, this may still be inadequate for low-income families to build on their retirement savings. I would like to propose that the Government consider lowering the HDB's concessionary loan interest rate, specifically for three-room flat buyers, as such applicants are likely to be low-income families. The savings that they earn from the lower interest rate should then be transferred to their Special Account, which will in turn help them accumulate for retirement use.

The topic on annuities or longevity insurance has generated quite a bit of debate on the ground. A key point of contention with the majority is the fact that, if made compulsory, they would rather have their principal contributions protected and the balance returned to their beneficiaries should they not live beyond 85 years old. It is still a question of the premium to be paid and special riders could be considered for those keen in protecting their capital. Another possibility is to consider extending the CPF monthly withdrawal period to beyond 20 years, recognising that the monthly payouts will be smaller. There are also suggestions of having the longevity insurance as an opt-in scheme. However, I feel this puts us in a catch-22 situation. If not many people take up annuities, the pool will be smaller and the returns correspondingly lower.

Sir, some residents have told me that the prospect of having to work till they are 65 or 67 is a sombering reality. The figures given by the Department of Statistics support this need for people to

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work longer, but there is a grey cloud hanging over the workers' heads as they feel that they are in a society where one has to work to the grave. We have to educate Singaporeans on the harsh reality they may face that if they retire at 62 and do not have enough savings, they will face great difficulties. Apart from financial considerations, keeping the elderly in the workforce beyond the age of 62 can bring other benefits. When a healthy elderly person works or is constantly engaged in activity, he is kept physically and mentally active and this can prevent elderly ageing ills. Some retirees I have met told me that they only enjoyed the first few years of not working after retirement, and after that they became restless and felt that they were wasting away and, hence, needed to engage themselves in part-time jobs or community work. This reminds me of a quote by a poet, Richard Armour who said, and I quote, "Retired is being tired twice, I've thought: first tired of working, and then, tired of not". I feel that the Government should provide more education and statistics to the public so that they understand the issues surrounding retirement, and the needs and challenges longevity brings.

While all these measures are deliberated, Sir, I would like to take a step back and look at what needs to be done to prepare the younger generation of Singaporeans for such challenges, which may be even tougher when the time comes for them to retire.

I worry that they are already starting to become a part of a "plastic money" generation where the culture of spending is ingrained in them even before they start working. The $500 credit cards offered to students by banks is one example of this. This is in stark contrast to the savings campaign in the 1980s where POSB's squirrel mascot was often seen encouraging children to save for a rainy day. I would say, bring back the squirrel

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to educate students and youths on the importance of starting to save for old age at a very early stage of their lives.

We have to stress to Singaporeans that CPF savings alone may not be enough to see them through their old age. Beyond the measures taken by the Government, every individual has to practise financial prudence from the early years of his working life, and ensures that he leads a healthy lifestyle so that he is able to work and support himself for as long as it is possible and necessary to do so.

Sir, allow me to now say a few words in Malay.

( In Malay ): [For vernacular speech, please refer to Appendix A.] Mr Speaker, I hope that the local Malay community has followed the discussion and the changes that have been announced with regard to retirement needs. These changes are very crucial and have to be understood by every adult, especially those who are approaching their sunset years. It involves important changes in their way of thinking with regard to retirement. In the past, retirement was deemed as a time when one could stop working - rest, stay at home and shake legs, look after grandchildren, etc.

*Cols. 1657-1660.

Now, the meaning of retirement has changed. Due to increasing cost of living, the increasing number of older citizens and advancement in medical science, as well as the quality of life which enables one to live longer, someone who retires at the age of 62 years old might not be able to enjoy a comfortable life after retirement, especially those with little savings.

This trend does not only occur in Singapore but it is happening all over the world. The difference is whether or not the government of a country is quick to react before something terrible happens. The Singapore Government chose to react early by introducing several changes to

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ensure that the people's interests during retirement are being taken care of.

Statistics show that 53.7% of Singaporeans between the age of 55 and 64 years old are still working. I am not sure what is the statistic for the Malay community. Maybe, the Ministry of Manpower can provide this statistic and if it is very much lower than the national average, something has to be done immediately. Nonetheless, the society has to realise the importance of continuing to work after the age of 62. The virtue of working hard to support oneself is an act of fulfilling the religious order which is also encouraged in Islam. Therefore, even if one is being offered a different role or a lower pay after retirement, such opportunities must be seized because it will help one to be self-reliant during his old age. The same goes with lifelong learning. If an employer organises self-improvement courses or courses to gain knowledge in other fields, an employee has to seize this opportunity as this will boost his self-confidence and enhance his working abilities. Employees have to ensure that the skills that they have are in line with the needs of the economy, even during their sunset years.

However, the bigger concern is on the lower income earners who are unable to accumulate sufficient Minimum Sum in their CPF accounts. What should be done? The move made by Government to increase the interest rate for a portion of the CPF savings will increase the amount of savings that they have, but this is insufficient. Lower income earners should be prudent when using their CPF savings for housing so that they do not overspend. They should be taught to manage finances, spend thriftily and effectively and they should try to have their own personal savings, because this will also help them in the long run.

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Public education on the annuity scheme should also be carried out for the Malay community. I am sure that the scheme that will be introduced at the national level has not been fully understood by many. The scheme, which is to ensure that senior citizens who are 85 years old and above should at least have some money each month and not be in distress, should be explained in greater depth. It is important as statistics show that more Singaporeans are living beyond 85 years old. In Malaysia, there is Takaful Annuity Scheme which is offered under the Islamic banking system based on the concept of Al-Mudharabah or profit-sharing. Perhaps, now is the time for banks in Singapore which offer Islamic banking to study whether such schemes should be introduced. This annuity scheme is still at the deliberation level and I hope that the community will follow its development in the mass media and direct their enquiries, if any.

Mr Speaker, in conclusion, what is important is that our community should continue to show our spirit of self-reliance and self-worth during our sunset years. This can be achieved by taking care of personal health, being thrifty when spending and cautious when making investments using their savings. These measures will ensure that our community will not live in distress or have to seek charity from others during our sunset years. In facing this challenge and for the interest of the future, the community should act now.

4.45 pm

Mr Seng Han Thong (Yio Chu Kang): ( In Mandarin ): [For vernacular speech, please refer to Appendix A.] Mr Speaker, Sir, with an ageing population, the Government proposes to defer retirement age, to delay the withdrawal of CPF and implement a compulsory annuity scheme. However, a minority of people object to

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that. They say that they do not want the Government to delay their withdrawal age, and they think that the Government does not know how to manage it. I hope that a few years after implementation, we can roll out this programme.

*Cols. 1661-1664.

However, we must be careful about three things. First of all, Singaporeans have a deep mindset, because they think that it is quite rare for the people to live until 70 years old. Secondly, we must tell the people that if they want to work, there are some jobs for them. Thirdly, longevity insurance is a new concept. We have to help them, to make it very simple and easy for them to understand. Let me elaborate further . If we ask them how old will they be, a lot of people think that they cannot live beyond 85. Every morning, my mother reads the obituary column of the newspaper wanting to know whether people have passed away after 85 years old. In fact, some have passed away at 92 years old. So the old people need that kind of guarantee that they can live beyond 90 years old. Therefore, I believe that some people, like my mother, will always read the obituary section of the newspaper every morning to check the age of those who have passed away.

In fact, a lot of people can live beyond 92 years old. Yesterday was the birthday of Minister Mentor Lee. He is already 85 years old, and we wish him long life and good health, and prosperity for the nation. From the example of Minister Mentor Lee, we can see that he always travels to other countries and he gives talks, and he is a very good example. People say, "I am not MM Lee. He is a big shot. We are just insignificant people." And they want some ordinary example to be told. For example, every morning when we start running, in Hokkien, they say, "We know how to walk, how to run. We can plant grass and flowers. Then we can enjoy good health and live to 99 years old." So we add something, and we can live to 99

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years old because we can still play computer games by using the PC. However, a lot of people think that this cannot happen to them. In the Chinese society, we treat it as a taboo subject to mention about death. Therefore, how to transmit this message to all the Singaporeans is important. If a lot of people accept this fact that they can live to an old age, first of all, we have to assure them that they can work until an old age, and there are plenty of jobs for them. Therefore, we have to redesign the jobs for them. We need to redesign and restructure the work for the elderly people. In the past two years, we have worked with NTUC, SNEF and WDA and achieved encouraging results. Over the past 18 months, we have more than 300 companies who responded to our call. Over 3,000 people at 60 years have a job. On what kind of jobs, they say it is simple jobs but there are some elderly people who get good jobs. The elderly people say that they need suitable jobs with a deserving pay. So if they accept this, they will think that the delay in the CPF withdrawal age is feasible. On this, I think we need to work harder to help the elderly workers.

In fact, last week, there was a Zaobao report dated 4th September 2007 which states that in Japan, 70% of the people are worried about their retirement age. 70% of the people feel that the government should restructure the welfare system. More than 50% of the population feel that the government should address the ageing population problem in Japan. So, our Government is making a daring approach to roll out this programme and I believe that we will be able to achieve successful results.

However, our survey is pretty worrisome. Recently, the Straits Times carried out a survey: 7 out of 10 people think that they do not have enough CPF savings for retirement. About half of them think that they can still take care of themselves, but it seems to be contradictory. If they

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do not have money, how can they look after themselves after their retirement age? So we must assure them that people can live a long healthy life, they can have a job to work on and, lastly, they can defer the CPF draw-down age. Government will provide support to everybody to ensure that Singaporeans obtain better returns on their CPF.

( In English ): Sir, on the WIS and higher CPF interest rate, it is a huge sum. May I ask: is this sustainable? Is this guaranteed? I am happy to note that it will benefit more the lower and middle income workers. It will also create a more secure retirement for all Singaporeans.

The Minister, in his speech, also mentioned that workers who choose to work longer will benefit more, and he gave examples. But the concern of many older workers is whether they can find a decent job after 62. Of course, the re-employment of older workers is very important.

NTUC has worked with many companies and there are some early successes with either same job same pay, same job different pay, different job same pay or different job different pay. We need to see a widespread adoption of re-employment. There are statistics but we have to let people understand that they have to accept this reality. We need to see a widespread adoption of re-employment of older workers. There is an expectation on the ground now that re-employment should happen prior to the legislation in year 2012.

On longevity insurance, flexibility should be the key to policy formulation. And for many, 85 is really a long, long way to go. We must appreciate that many just do not believe that they can live that long, and that they can work

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beyond 62. We are an Asian society, talking about death after 85 is a very pantang issue.

The longevity issue is a new concept and it needs time to sell to the people. The feedback from our union leaders is that we need to provide only the basic coverage under the mandatory longevity insurance, so as to keep the premium as low as possible. We should allow for more options, such as 25 years of draw-down period or even longer for those who want to reduce the need for longevity insurance, and CPF is to provide the basic longevity insurance package to minimise cost. Of course, those who are medically certified as terminally ill may be exempted from buying the annuity plan or longevity insurance. I am happy to note that the Minister has promised that it will be quite basic, affordable and flexible.

Sir, on this note, I support the changes.

4.53 pm

Dr Lim Wee Kiak (Sembawang): Sir, I will use Mandarin for the first portion of my speech and followed by English.

( In Mandarin ): [For vernacular speech, please refer to Appendix A.] To describe the different stages of our life, we can use the four seasons as an analogy. The first 20 years of our life is like spring where we grow and learn. The second 20 years is like summer where we work and progress towards our peak. The third stage is like autumn where we have reached our peak, start to slow down but continue to accumulate and collect our harvest to prepare ourselves for the last stage, winter. If we prepare ourselves well and make hay while the sun shines, then we can have a comfortable winter with enough food and warmth. If not, we will starve and face the cold.

*Cols. 1665-1666.

With the longer life expectancy, Singaporeans can expect some changes in

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these four seasons. We should rejoice with the longer life expectancy that we are enjoying, but it also means that many will face a longer winter. We need to accumulate more and earlier to prepare ourselves for the longer winter.

To increase the retirement age, increase CPF returns by increasing the interest and delaying the draw-down age for the CPF Minimum Sum are all necessary, timely and farsighted measures. These measures will help many Singaporeans in their golden years. I support these measures. However, there will be some Singaporeans who may fall between the cracks. As mentioned by PM in his National Day Rally speech, only one-third of male employees, and much less than that for female employees, actually retire at the current retirement age of 62 years. In the near future, when the retirement age is raised to 67 years old, can we be sure that Singaporeans who are healthy and want to work can find employment? I am sure the Government cannot guarantee that especially in times of an economic downturn.

Delaying the Minimum Sum withdrawal age from 62 to 65 may bring hardship to those who are unable to find employment or, for medical reasons, are unable to work. They may be left completely without regular income from 62 to 65 years old.

For this group, I hope the Ministry of Manpower can introduce more flexibility in this policy to allow them to start drawing down at 62 years but at a lower quantum. In this way, they can have some regular income during the interim years and also enjoy payouts till 85 years old.

( In English ):

Increase in CPF OA interest rate and peg CPF SMRA to long-term bonds rate

I welcome the increase of interest rate for the first $60,000 in the CPF to help all

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Singaporeans grow a larger retirement reserve. I hope the Government can continue to keep the minimum 4% interest rate for at least the first $60,000 in the Special, Retirement and Medisave accounts for longer than two years.

The poor and, in fact, most of the middle class will be using most, if not, all of their savings in the Ordinary Account for housing needs. Hence, the move to help them to accumulate more by increasing the interest rate by 1% for the Ordinary Account may be good but, unfortunately, may not work well for them. If the interest rate for the Special, Retirement and Medisave accounts were to decrease due to the decrease in the long-term bond yields to below 3%, the poor and the middle class will suffer as most of their savings will be there. I hope MOM can extend the minimum 4% guarantee base rate for the SMR accounts for a longer period.

Compulsory annuity/longevity insurance

The compulsory longevity insurance represents a paradigm shift in our management of retirement funding. The scheme requires all Singaporeans to pool part of their savings together to mitigate the risk of living beyond their savings. It is like a term insurance whereby if nothing happens, you get nothing from the premium paid. But there will be a large payout in the event of an occurrence.

If this scheme, unlike MediShield, is going to be a compulsory scheme, how is the Government going to include those who have little or no CPF to pay for the premium? If the scheme is considered to be so critical and so important to be made compulsory, such as the compulsory primary school education for our children, the Government should consider co-funding the scheme with the people.

There are also many who question who will stand to gain from such a scheme. It

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is intuitive to many that the wealthy who can afford higher standard of care and medical services may have longer life expectancy than the middle and lower socio-economic groups. Will the wealthy stand to gain more if they have a longer lifespan? Or will the middle sandwich class, who may have the highest stress, be the ones to lose out in the long run with a shorter lifespan? Are there any studies to allay the fears of the public to dismiss these assumptions?

Although 50% of those who live to 62 years will live to and beyond 85 years, how many will die at 86, 87, 88, 89 and 90 years? How long must they live to at least equalise the premium paid 23 years ago? 89 or 90? What percentage will stand to take back more than they paid?

How about the group that does not have any CPF or too little CPF to purchase the premium? They are the home-makers, odd job labourers and some self-employed. Will there be schemes to assist them? If not, how can the scheme be compulsory?

I am happy to learn that the Government is prepared to allow for some to opt out. These are those with expected limited life expectancy and those who already have sufficient provisions for their retirement. For the latter group, I hope it will include civil servants who are already on the pension scheme. I hope that the Government can also consider opt-out schemes for those who have too little to spare in their CPF accounts. If a person has a Minimum Sum accumulated of only $12,000, requiring him or her to pay $6,000 for the premium does not make sense at all. They will need all the money upfront, rather than to delay for another 23 years.

Singaporeans should not depend on this scheme as their sole and only retirement funding. But I hope the monthly

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payout should be enough to sustain their basic livelihood, just like our Public Assistance (PA) scheme. Even at our low inflation rate of 1%, in another 35 years, the monthly payout amount will be much less than what it is today. It will be good if the Government can peg the longevity insurance payouts to our PA scheme to ensure basic sustenance.

Last, I like to commend the Government for making bold reforms to our CPF system to be ahead of anticipated changes. My last concern is - what is the actual fiscal impact on the budget of this and subsequent Governments? Will the Government need to raise further taxes, such as GST, in the near future to fund all these changes?

Mr Speaker, Sir, I hope the Minister can answer some of the questions. With that, I support the proposed CPF changes.

5.00 pm

Ms Cham Hui Fong (Nominated Member): Mr Speaker, Sir, since the National Day Rally speech by PM, there have been a lot of discussions on how old are we going to live. Do I belong to the first medium half of the 85 or do I belong to the second? No one knows. But I think what is in the minds of many is that a lot of us are indeed going to live that long.

Ms Cham Hui Fong (Nominated Member): Among some of the key changes mentioned by PM, the re-employment law, the raising of the Minimum Sum draw-down age, the longevity insurance (a lot of them call that as a tax that you have to pay for living so long) were very much discussed among our workers. But the key question that lies in many of us is still: will there be jobs for me? The growth and the employment figures for the first half appear to be good. I think the Manpower Ministry has also estimated that we can expect

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another 90,000 jobs per year over the next five years. But, of course, MTI has also raised the estimate from 3%-5% to 4%-6% over the next five years. So, I think prospects over the next few years appear to be good. Now that more jobs will and have been created, what we should do is to really leverage on our own resources, which are the older workers and the female workforce.

For the last 20 months, NTUC has been working together with the unions and the tripartite partners to see how we can move this re-employment issue. We have knocked on the doors of the employers to explore ways and look at the different practices, what are best practices that will make the scheme work for the different companies and industries. Today, there are probably better buy-ins from the employers. We have about 315 companies committed to work out some form of re-employment together with the unions. Out of these 315 companies, 216 companies are already re-employing close to 3,200 workers today. But there are some employers who still tell us that they do not have to do anything today, and they will probably wait for the guidelines as it will be clearer. Wait for the guidelines, wait for the law to be passed; it will be easier because they do not have to justify to HQ why they are doing this when the retirement age is still 62. So, we asked them: how could it be easier when the period of five years is really for us to look at what more we can do, what are the changes that will take place? Because we probably need to redesign the jobs, look at the structure, whether the structure is competitive, because we do not want the employers to come back to tell us that our older workers are too expensive, and they do not want to re-employ them. And we probably also have to look at whether these people possess the right skills, the right training, and whether there are any skill gaps that we need to adjust. And we have to adjust quickly and not when they reach 62. So

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we have to look at the entire workforce and see what more we have to do to prepare the workers. Our leaders and workers are fully aware that whatever changes that were announced underscore the need that there must be job opportunities for the workers. So the next five years will give us ample time to work out different models.

Sir, I would like to share some of the learning points that we have from working with some of these companies. About 70% of our workforce who are currently re-employed are doing the same job but at a slightly lower pay to adjust for the relatively lower responsibilities. Companies like the Singapore Food Industries, Singapore Airlines Engineering Company, for example, re-employ their workers when they reach 62. Some slight adjustments were made to the pay to better reflect the value of the job.

In the Singapore Food Industries where we visited last week, more than 50% of the workers are above 50 years old and about 29 of them are more than 62 years old. We asked the management and the management told us that even though they have a relatively older workforce, they are very happy with them because they possess the right values in life. Another observation we have in the Singapore Food Industries is the management's emphasis on training and counselling, not just counselling of the workers. They counsel the younger managers and the supervisors to let them understand that these older workers form an integral part of the value chain. You have to respect them, you have to understand their psychology, you have to be able to deal with them, and the workers are well aware of this emphasis, and the older workers feel very good. They feel that there is this sense of pride, dignity and worth, that the management actually places a lot of emphasis on them and ensures that these teams - the young and the old - can work together

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cohesively. As a result of this good understanding that is in this culture of the organisation, about 90% of each cohort reaching 62 were actually re-employed over the last couple of years. Another 20%, or about one in five of our workers, were re-employed, doing the same job and drawing the same pay.

Raffles Hotel re-employed about 14 employees over the last three to four years. They pay them the same because they believe that as long as the person possesses the right and positive attitude, is still fit for the job and is able to perform the same job, the person should be given the opportunity to continue working. They offer them options, like flexible hours, part-time work, if they desire to spend a bit more time with their families. But we were told that a lot of them chose to work as permanent staff and for the normal hours that they were given.

Similarly, our two healthcare clusters (SingHealth and NHG) re-employ more than 250 employees today who are more than 62. What the management values is really very much these intrinsic values that these senior employees have with them. Furthermore, I think what is important to note in these companies is that their wages are very competitive with a minimum-maximum ratio of about 1:5. So they could afford to actually re-employ them, continue at the same rate, on the same job.

In these cases, the management believes that the workers should be paid according to their capability to do the job and not just because they have turned 62. A person does not become more expensive just because he has turned 62. This draws me to the next area of concern which is something that we have been talking about for many years, which is the wage structure.

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Employers are concerned about the wage cost of the older workers. Like it or not, we are still very much seniority-based, even though over the years we have made some improvements over the salary structure. When we visited Japan last year, there was one company Jellco - they call themselves a SME but they have 2,000 workers. They have an interesting philosophy, which is people can grow and improve their skills by continuously working. So, this is one of the very few companies in Japan that opted for one of the three options provided by the law, which is they abolished the retirement age totally. So we asked them: how do you manage to do that? They did a serious and very comprehensive revamp of their wage structure. Job grades were actually reassigned to reflect the value of the job. They look at the amount of competency, the amount of ability that is needed, and then they reassess. It was a very painful and difficult process for the workers to accept. They developed and introduced it in 2001. We understand that as long as your job ability does not change, your wage level remains unchanged. But as far as the company is concerned, it will pay you according to your job. So it does not matter whether you are 35 or 45, they will continue to pay you. So, to the management, working is learning. If you have a retirement age, it will affect both the mindsets of the employers and employees. It is sad to hear that if one knows that when he is retiring, his career is going to end, his attitude will change. So it did away with the retirement age totally so that there is no end point. You just continue learning, continue working.

Similarly, in Singapore, so far, we have heard of two cases - Canon Singapore and Seiko Instruments. They have also taken the initiative to restructure the wages, very similar to the ones in Japan. They did a total revamp, they actually reviewed the salary, and they have new job grades to reflect the value of the job.

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As far as they are concerned, again, it does not matter. It is very much age-neutral, whether you are 35 or 55, they will pay you according to the job.

We thought it is necessary for us to review the salary structure again and again because we have to move away to reduce the anxiety. Today, if we have a more structured wage system in place, reflecting the value of the job, I think we will be able to address a lot of concerns of the workers, which is the anxiety as in how much wage cut am I expected to get when I hit 62. Because, today, a lot of employers, before even looking at what kind of new jobs they are going to offer to you, they are talking about how much cut you can accept. So, we should actually do away with all this and really look at the value of the job, look at what are the new job opportunities there are to be given to the workers. Employability training is also another key element to ensure success in re-employment, and this is what a lot of our leaders have said. They said they need to be assured that they are kept on the job, they are given the right skills and right training to make sure that they can stay on. Because when we talk about re-employment, it need not be the same job or the same pay. Yes, this is something that they can accept. But to be fair to them, they have to be given ample time to be trained and also take on new responsibilities before they can transit smoothly to a new job.

In PUB, the management values the workers. Arrangements were made to counsel, inform and prepare the workers to take on new jobs. We have seen technicians who have been technicians for the past many years and at the age of 58, 59, they talked to them, counselled them and allowed them to take on new challenges because there were actually new opportunities. So these guys went for training and got themselves familiarised with the new jobs, have a fair

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understanding of what these new jobs entail, and they move on to do something else. They are now called water catchment surveillance officers.

In the case of SBS, they have done likewise as well. They talk to their senior operators, those who are going to be retired, offer them new jobs as service mentors. The jobs require them to coach and guide the new operators upon retirement. In both cases, the company works with the workers, explores new grounds, trains them and sees them through the new jobs.

So, we need time to work on that because we cannot create new jobs overnight. Some of these companies - ISK Singapore, the company that produces titanium dioxide (it is a Japanese company), Sanofi-aventis, a pharmaceutical company, Singapore Food Industries - they know that time is needed to actually prepare the workers in the event that there ought to be job switches, even though the workers are not going to switch jobs. I think we need to talk to them to prepare them, to make them financially aware of what are they in for, whether they should continue working. So they have worked with the unions over the years to introduce pre-retirement counselling and discussions with workers before they reach retirement age. In the case of Sanofi-aventis where technology changes very quickly - it is a pharmaceutical company - they set aside five years to prepare the workers and the management for job opportunities after 62. In the case of Sanofi, there is a possibility that the workers may have to take on new jobs even before 62, and that is something we have been conveying to the workers - have this positive mindset that you even need to change your job before 62, to ensure you can continue working beyond that. Because we understand that there have to be sufficient learning and training before opportunities can be given to you.

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So it is also important that we communicate the expectations or the criteria of re-employment early to our workers. In a lot of these cases, we see satisfactory work performance, medically fit for the job, as the common criteria used by the companies. Fair enough. If these are going to be the criteria, let us be clear to the workers and let the workers know what to expect so that the unions and the management can work together during this period to assist them. If there is any performance gap or skills gap, we have ample time to actually look at that early, detect that, put in the corrective measures and ensure that these people can move on because we want to avoid unnecessary conflicts, whether it is now or 2012.

Most of our committed companies share similar concerns and have taken a serious approach to all these. They know fairly well that there will be fewer younger people to employ relative to the older ones and they do not want to lose the skills, values and knowledge of the older workers that have actually accumulated with them over the years.

Next, we have to look at the workplace environment. Some works that require a lot of physical mobility and strength may not be too suitable for the older workers. In the case of Bukit Timah Saddle Club - it is a big organisation with a small workforce - workers are expected to remove bulky soiled sawdust, hays and feeds to and from the stable, storage area and dumping grounds. Their work area is as big as 4.5 hectares of land, which previously they were doing manually, by removing all this and they used push carts and trolleys. It is something very tiring for the workers. They have a total of 32 workers, one out of five is more than 55 years old and, today, there are about four who are 62 years and above. The management is keen to keep

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the workers. So they have worked with the unions to review the entire work processes and to see how they could make it easier for the older workers to cope, if they were to work longer. They have recently got the approval of ADVANTAGE! funding to purchase tractors. It is a simple technology - they buy tractors; they also buy 25 dump bins. The dump bins can be attached to the tractors so that when they move around to collect the hays and feeds, they can also dump whatever waste into the dump bins and actually bring them back to the dump sites - but workers have to be trained with the process. And in this case, it not only helps the workers by making it easier for them, but also improves the productivity of the workers. So it is a clear case of approach that is pro-business and also pro-worker, and it helps in both cases.

We have been talking to our companies that job redesign need not be a very complicated one because a lot of time when we talk about job redesign, there is always this anxiety. How difficult is it? How much time have I got to devote to actually look into all this? If you have the commitment and conviction to it, all forms of job redesign can make it. And I think a lot of time, you still have to go through a lot of trial-and-error. No one knows what is the best scheme. But we must be prepared to put in some efforts to actually try it out.

We believe that there will continue to be many challenges ahead. We have set a national target of 65% employment rate for those who are 55 to 64 in the next five to eight years. We honestly do not think it is good enough to set the target in five to eight years' time. What we need to see is that we have to set check points every year. I think every year, we should have some indicators whether our re-employment is working. Because if re-employment is not going to work, then whatever draw-down age we are going to

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have is not going to make it very well because the people do not even have sufficient money during the period and having a draw-down age much later is going to be even more painful to the workers. If it is not progressing, then new strategies must be put in place earlier when we review the targets. Those who are 58 and 59 today would also like to be gainfully employed beyond 62 as well. So it is crucial for us to see more results in the next few years, in fact, the next two years. As far as possible, even before the tripartite guideline is ready in two years' time, we have to ensure that we have more companies that come on board to put on re-employment practices.

So the Manpower Ministry's support will certainly be crucial to take on and counsel employers who find ways not to re-employ the older workers today. There must be enough models, practices and structures for the companies to learn from one another before 2012. We believe that the models will keep evolving. 70% today are doing the same job but with lower pay. But we suspect more may be on the same pay, if we are able to move to a rate for the job. We do not expect a company to have only one model. There could be a company because certain grades are more competitive. They could be paying the same rate for the same job. But certain jobs which are not so competitive in the grades, they could be offering them re-employment but at different rates. So there will not be a fixed model to apply to all.

I think what we have to do is we will have more cases of re-employment to actually offer to more companies and let them have a view of how this is being done. We do not know how this is going to be like. But I think what we know is that we do have a responsibility to our workers and we have a responsibility to the businesses to make sure that whatever system will work here and be sustainable.

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I think underlying all these changes is the good labour-management relationship that we have with the company, because there was mutual trust, understanding and shared values on the subject. We will continue to build on that.

Moving forward, the 319 companies committed will work with us to develop the skills employability of workers, provide suitable working conditions as well as employment opportunities for the workforce that is ageing and to maintain and promote the health and working capability of the workers. It is not too late to build up the nest egg today. Working longer will certainly help. Of course, the enhanced WIS and the additional 1% CPF interest rate should help to enhance the retirement savings. What we have is also some debate on the compulsory annuity. If only four in 10 CPF members have met this Minimum Sum when they reach 55, many of them wonder what this annuity value that they can draw down at the age of 85 will be like because we are talking about $400 in 30 years' time. What will be the worth of $400 in 2042 or, maybe, 2050? There were suggestions that, since this is a pooling of resources, Government should, during budget surpluses, consider the top-up accounts of this pool so that we have more to enjoy with higher value. I think this would be a good demonstration of shared responsibilities since CPF comes from employers and workers. So Government could probably consider some topping up.

The statistics also show on the average that women have lower CPF savings than the men. We all know that many women leave the workforce after they have started their families. So they have not accumulated enough. Yet, we expect the premiums for the women to be higher because of the longer life expectancy. So how would they be able to pay for the premiums? Earlier, MOS Gan mentioned about the employment

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opportunities for more women to come back to work, they are probably working on some employment opportunities. But I would also suggest that we make it mandatory for the husband to top up the wife's CPF, at least to pay for the basic longevity insurance, if the husband has met his Minimum Sum scheme. I do not think it is too much. If he has met the Minimum Sum scheme, probably he can consider topping up just the annuity amount.

My last point is the group of contract and casual workers. These are workers whom we are most concerned with their CPF savings. Most do not have much. Yet, they will certainly have to adjust to the draw-down age and the compulsory annuity. So when the withdrawal of the 50% eventually kicks in in 2012 or 2013, we doubt many would have any balance to withdraw at 55. The workers have asked to let them withdraw a small part, say, $2,000 to $3,000 when they reach 62. While it is not much money, that is something that they will look forward to at the age of 55, hopefully, they have a little bit. At the age of 62, probably just $2,000 to $3,000, half of the $5,000, I think that will certainly make them very happy and they will certainly work much harder. But, of course, the important issue for this group of contract workers is that we need to ramp up our efforts to ensure that they be paid CPF so that they can build up their retirement savings like any other formal workers. In NTUC, through our unit for contract and casual workers and help through our unions, we manage to get some 5,000 workers converted to the CPF scheme over the last one year. While it is not a big number, I think we are quite encouraged with that. Of course, this is done through a lot of persuasion, a lot of education and a little bit of enforcement. We understand that some 160,000 applied for the

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Workfare Bonus, previously through their own declaration, and we believe a large group of them would not have CPF contributions. We also understand, when we talked to our people, that a lot of them should be entitled to this WIS or even the previous Workfare, but they were not aware of the scheme and, as a result, they did not apply for it. So we would like to urge the Government to conduct probably more road shows at some centralised industrial areas, where they are densely populated with such contract workers, heartland shopping malls and bus interchanges to create more awareness of the scheme and the rights of the workers, because we have to bring more of these workers onto the CPF scheme.

Overall, I believe that the changes announced are necessary and we certainly support the changes. But there are many issues that we have to continue to tackle. We need to listen, we need to apply our hearts and our minds, try whatever is possible and work together. I think at the end of the day, we must succeed and we need to succeed in our uniquely Singapore way.

5.22 pm

Dr Lam Pin Min (Ang Mo Kio): Mr Deputy Speaker, Sir, having spoken to many of my grassroots leaders, constituents and friends after the National Day Rally, some of the responses and feedback I gathered can be summarised as follows: "Why cannot the Government give us back our hard-earned money earlier?" "The first thing I want to do is to pamper myself and go on a well-deserved long awaited holiday." "Why worry about it? I don't foresee myself living till 80." "As long as I am healthy and able to continue working, it doesn't matter."

Many people must be wondering if we could predict who will reach a ripe old age.

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The short answer is an obvious "No"! However, statistics have shown that the average life expectancy has jumped from 61 years five decades ago to about 80 years today.

Life is a bit of a lottery and there is a certain whimsical element which forbids us from predicting the future. Nevertheless, there are a number of things we, both the responsible Government and the receptive citizens, can do to swing the odds in favour of a long, fulfilling and independent life.

On Boxing Day of 2004 in Phuket, when the sea water suddenly receded far from the usual water marks, leaving many fishes exposed on the beaches, many villagers and tourists had naively run out to catch the rare wonderful sight and to reap the unexpected catch. Many were ignorant and oblivious that this was a sign of impending disaster and were caught off-guard when the gigantic deadly tidal waves swept in shore killing thousands. Had we known then and made the appropriate preparations, many innocent lives would have been saved. Reacting now to the dangers of tsunami after an earthquake, many nations have put in place early warning systems to caution the possibility of an impending tsunami affecting their coastal regions.

On a similar note, Singapore is also facing a tsunami of a different kind, threatening to engulf us if we do not put in place necessary policy changes to respond to it. The Singapore society is beset with several foreboding trends - the falling fertility rate, smaller family size, longer life expectancy and, consequently, a rapidly greying population. To put things in perspective, as what the Minister has alluded to in his statement today, the number of working adults supporting those not working, ie, the support ratio is about 8:1: all things being equal, the support ratio will decrease to 4:1 by year 2030.

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The face of our society is set to change with the increasing proportion of elderly in the very near future. A conscientious and proactive look at the predictors of an ageing population over the next 20-25 years has motivated the Government to seriously rework its policies on retirement and CPF changes.

The changes to the CPF announced by the Prime Minister during the National Day Rally has generated mixed reactions from the public. The proposal to make the buying of an annuity compulsory has stirred emotions among many Singaporeans. Because of its compulsory nature, many Singaporeans have put up a mental resistance to an otherwise sane and rational policy. Many argued the rationale for making it compulsory when it is their own money and such a move further restricts their freedom to use their retirement funds as they see fit. Can the annuity plan be made an opt-out system, just like the ElderShield scheme?

Alternatively, instead of a national longevity insurance scheme to take care of one's longevity needs, can we stretch out the draw-down period from the current 20 years to, say, 25 or even 30 years? This would sufficiently cover a majority of CPF members till they are 90 or 95 years of age respectively. The argument for such a proposal is that by setting aside a certain amount from the Minimum Sum for the annuity plan when members turn 55, the draw-down amount would be reduced and the longevity payout after age 85 would be a mere $200 to $300. Would not stretching out the draw-down period serve almost the same objective?

In addition, can CPF members who have already purchased similar private insurance plan be exempted from this new proposed annuity plan? What about those members with multiple medical illnesses who are often deemed by insurers to be at a higher risk of earlier death? To make

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them subscribe to the compulsory annuity would tantamount to selective underwriting which would be deemed unfair to them. If possible, the annuity plan should be made as flexible as possible with the basic plan being affordable to all. Any additional supplementary requirements can be made optional to cater to the diverse and peculiar needs of individual Singaporeans.

The 1% CPF interest rate hike is a much welcome move by many Singaporeans.

However, this increase is limited to $20,000 in the Ordinary Account, and a ceiling of $60,000 taking all accounts together. What is the rationale for pegging the ceiling at $60,000? Does it not make more sense to peg it to the prevailing Minimum Sum since this is the amount assessed to be the bare minimum needed for the retirement needs of an average Singaporean?

It has also been announced that the interest rate for the Special, Medisave and Retirement accounts will be pegged to the long-term bond yield. Although it has been revealed that the long-term benefits to members will be enhanced with the expected gains to be more than the current 4%, it is also a fact that it can vary undesirably in times of poor economic performance. Can the Government instead guarantee a minimum 4% interest range, which is what Singaporeans are already enjoying regardless of the market performance? This would give CPF members, especially the low-income and middle-income Singaporeans, peace of mind and that they do not lose out excessively.

Having mentioned some of the concerns of CPF members, what about those Singaporeans who do not contribute to CPF, namely the homemakers, self-employed and contract workers? How

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then can their needs be looked after in this often-neglected group?

The Government's effort to ensure Singaporeans' retirement adequacy is laudable. Not many governments in the world would make such a long-term, bold strategic planning and policy change to ensure that their citizens are self-sufficient in their old age. However, the initiative to raise the minimum draw-down age from 62 to 65 must be coupled with a robust system of ensuring re-employment of older workers. Legislating re-employment of older workers through the Re-employment Act is a necessary and correct step forward. However, employers' buy-in is absolutely critical for a win-win solution in the preparation for an ageing workforce in the future.

Sir, on that note, I support the motion.

5.29 pm

Ms Jessica Tan Soon Neo (East Coast): Mr Deputy Speaker, Sir, thank you for allowing me to speak on this topic. I support the CPF reforms and the other measures for a secure retirement shared by Minister Ng Eng Hen in his Ministerial Statement.

I would like to still share what I am hearing from my interactions with residents and grassroots on the subject to ensure that these feedbacks are taken into consideration on the execution of the measures. The feedbacks centre around two common threads, ie, the need for retirement planning and the point about whether the planned CPF reforms are the best solution for Singapore in achieving the desired retirement plan. The three thrusts of CPF reforms that Minister Ng had shared were around the later draw-down on CPF savings, covering the risks of those living longer than expected when making CPF savings last for life, hence some form of compulsory annuity for

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those below 50 years of age that they have to contribute, and improving the returns on CPF savings, that 1% increase on the first $60,000 in the CPF account.

Sir, let me touch on the point about the need for retirement planning. I think there is a general sense of disbelief that we are all going to live so long. But at the same time, in the feedback that I have received, there is a recognition by many that our population is ageing and it is timely that the Government has brought up the importance of the need for retirement planning. Although this may not be a popular initiative, I do applaud the Government for being forward-looking and willing to address this issue which will not actually impact us in the near term. But it is important as it has broad implications for the future. If pro-active plans are not made, as Minister Ng has shared on the details of the ageing population, plus the declining support ratio, this does have an adverse impact on the overall economy and the quality of life.

As Abraham Lincoln so nicely put it, "you cannot escape the responsibility of tomorrow by evading it today". So, in terms of the actual support for these policies, there is a general sense that we need them. It is now the "how". So let us go on to the point about whether the proposed CPF changes are the best approach to achieve the desired retirement plan for Singaporeans.

The fundamental principle of the proposed changes assumes a national approach that requires every individual to take responsibility for planning for his retirement. So the general sentiment is: should the Government also not help in the scheme? What is coming across is that individuals are now asked to take accountability for their retirement funds, which I think people can accept. But the fundamental change is also the fact that there is a request now and there is shift to say we should also share the risks by

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pooling our funds together. And that is something that will take some time, in terms of acceptance, because it is a fairly different concept and approach from what we have previously been advocating.

On that note, also on the question of how the Government is supporting the scheme, Minister Ng, in his Statement, did show that the financial aspects will definitely be covered. For example, both in the WIS as well as the higher CPF interest rates, $400 million and $700 million respectively, would be put in yearly. That is not a small amount. So the Government financially is putting in that so-called share in the pie. Also, the one-off D- and V-Bonuses of another $1.2 billion. But I want to actually touch on the point that I do not think the financial aspects are going to be sufficient. It is more than that that needs to be done because the proposed CPF changes on drawing down of CPF savings later, from 62 to 65 years of age, to enable CPF savings to last longer, hinges on the very fact that people must be able to continue to work and to work longer. Hence, the need for the re-employment legislation. That is good.

But delaying the withdrawal of the CPF Minimum Sum payout to age 65, as seen by some, could be also depriving those who do not have work or are unable for whatever reasons to work to actually get the financial support they need when they need it. I am quite sure my fellow colleagues here in their various MPS sessions will tell you, even today, many of our residents come and say, "Why do I need to plan for the future when I cannot even get past today?" So I think those are some of the things that we will really need to look at, those who really need it, how are they going to handle this delay in their withdrawals.

The feedback we have received from residents, grassroots and even our GPC Resource Panels also indicates a concern

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on the actual manifestation of the re-employment of older workers. I know it has been lots of work that are already done with employers. I applaud the efforts and I am glad to see the progress there. But there is a worry that employers may abuse the system by early termination of the services of those who are nearing the retirement age when that legislation actually comes into place. Or that workers will be asked to do the same work for less once they reach the age of 62. This is where the Government can assist. There are specific industries and business segments that actually recognise the value-add of experienced workers. The Government can work with industry associations to promote these businesses as exemplary and this will send a strong signal to both employers and employees. I think the punitive measures are important, but I also think that the ability to showcase and really bring these positive messages up are just as important.

As one of the members from our GPC Resource Panel for Trade and Industry puts it very nicely, "People do not magically lose their skills and abilities at some fixed age. These workers should continue to be rewarded accordingly for their contributions despite being a day older when they reach 62." While recognising that there will be those who need to be deployed to alternative positions due to health or personal preferences with appropriate adjustments in salary and other benefits, some have expressed that the implementation of the re-employment legislation should also be, if possible, put in earlier than 2012. That is a consideration, given all the work that has already been done, whether that is also a possibility.

Another feedback is that the Government, being the largest employer, should take the lead in the rehiring of older workers, to set the example for the

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private sector. It was shared earlier in this House that that is already done. But I think that there is more that can be done, as well as more that can be shared, with regard to what is being done in this phase. There will also be a need for programmes around training, to ready older workers for re-employment opportunities.

Sir, making the CPF savings last for life and also the point about compulsory annuity for those below 50 years of age, from the various channels of feedback, the question asked by many is: why make the annuity compulsory? This is a shift from each having the responsibility to plan for his own retirement to one that is asking every one to pool their resources to share the risks. Many see this as unfair, as it would mean that if they do not live past 85 years of age, they would not have benefited from the scheme and that their monies would have been locked in the scheme. So can flexibility be offered in the scheme, in terms of the type of plans? It is heartening to hear from Minister Ng that a committee will be formed to study and recommend the best schemes, taking feedback from various industry experts. Minister Ng also mentioned that flexibility and options will be offered based on risk-sharing and also accommodating the different options, like the stretching out of the payment as well as early opting-in.

I am pleased to note what Minister Ng has also shared, that those with annuities will also be eligible to be considered for the D- and V-Bonuses. The questions I have are: how will this work? Would this also be applicable to those with participating insurance plans as well? Another sentiment that was shared about the annuities was why 85? I have seen all the statistics, that probably that is the age after which people would need help. But could they not start earlier, for example, around 75 or 80? I guess that would also have impact on the actual premiums and the amounts to be paid. So those are

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considerations. Maybe, there will be options given around them when the committee gets together.

Sir, while the annuities provide the regular payout post age 85, I believe there are also complementary programmes in other areas that will need to be taken into consideration, such as health services, transportation, etc, which I would not elaborate. But I think those need to be handled in complementarity.

The other question, of course, is whether the annuity scheme will work. Can all CPF members afford the annuity? What happens if CPF members are unable to meet the Minimum Sum? This is the very group that will need it. In the CPF 2006 Annual Report, it was indicated that approximately 36,000 active CPF members aged 50-55 years of age had total balances of less than the Minimum Sum. The total balances included residential investment amounts as well. Although this is not a large number, the question still needs to be answered.

There is also the question of the inclusion of retirement planning of those who are not in the workforce. For example, earlier in this House, we talked about women who have left the workforce to take care of children and family members. This is an important area to consider, given that the workforce participation rate of women is 54.3% in 2006. Hence, women out of the workforce are not a small proportion. Women, on average, as indicated by many, also live longer. The female workforce participation rate in 2006 was comparable to that of males in the age group 20-29. However, from age group 30-34, it was 77%, and we see a steady decline, whilst that for the men stayed in the high 90% range. Between 40-44 years of age, participation dropped to 67.7%, sharply dropping to 44.7% after 55. It is not just at the later years, but all through from 30, all the way, we are seeing the decline. If

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we believe that retirement planning is important, then this is a sizeable proportion of the population that really needs to be taken care of who cannot participate in the scheme because they are not in the workforce.

Our colleague, Ms Cham Hui Fong, actually shared that maybe we should make it compulsory for husbands, if they are able to meet the Minimum Sum, to contribute to their wives' annuity payment. That may be a good suggestion that we can consider because it would not be too much to ask.

The male participation rate, even though it was declining for those in the later age groups, is still about 81.9%. So the discrepancy is quite huge.

The last point that I would like to mention is what could go wrong. What are the risks in there? Some of my colleagues have already shared whether this scheme is sustainable. A recent example is that of the Japan pension system. I know our system will be different. But the Japan pension system and the US 401k investments show the need for risk management to prevent a scenario where annuity members may not receive the amount of funds as promised when they expect it. That is an area of consideration that we hope will also be shared. For example, will this risk management model be sustainable and be really risk-free? Will the percentages, that floor of 2.5% mentioned earlier, be sustainable?

In conclusion, if I could summarise with an analogy of the umbrella which I used previously in this House and which our colleague, Dr Ahmad Magad, also shared, when we provide an umbrella, some may view it as shelter and be grateful for it; others may otherwise see it as blocking their view. The challenge is how to strike a balance in the approach to retirement planning. Many do accept

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that there is a need for the umbrella, ie, retirement planning and having secure retirement funds. However, some feel that some flexibility should be given to when and how we use the umbrella and, finally, whether we have ownership of that umbrella.

5.44 pm

Mdm Halimah Yacob: Mr Deputy Speaker, Sir, this is an important debate that we are having in this House, as CPF reforms affect all Singaporeans and the outcome of this debate will determine how well prepared we will be for the future.

Adequacy of retirement income

I have a couple of questions to raise on the CPF reforms. First, I would like to ask the Minister whether the current reforms have adequately addressed the issue of adequacy of the retirement income. The Minister has spent some time explaining the new formula but let me explain what I mean. Singapore has long relied on the CPF as the only source of retirement income. Hence, the question that people would naturally ask is whether the change in the formula for computing the interest rate would enhance the returns on our CPF balances. The Minister has explained how the re-pegged SMRA rates will work which, together with the additional 1% interest rate, is meant to benefit CPF members even more. But what I think we need is also information about what kind of replacement rate this new formula will produce compared to the old formula so that we will have a better idea about the adequacy of our retirement income with these reforms, and the impact of the new rate of return on our CPF money.

Generally, we measure the adequacy of our retirement income by looking at the

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replacement rate, which is the ratio of the retirement income to the pre-retirement income. The replacement rate depends on the GDP growth, the rate of growth of wages as well as the impact of inflation on the retirement income. I hope that the Minister could shed more light on this.

The other point that I would like to raise is with regard to the capping of the additional 1% interest rate to $60,000. In my view, it would be more appropriate to cap the additional 1% at the existing Minimum Sum amount, as this is the amount which, by its own calculations, the Government deems to be the minimum amount needed for people to live on after their retirement. It is therefore only appropriate that the entire Minimum Sum should draw a larger interest payment. The Minister had mentioned that the formula will be reviewed after five years. I hope that the Minister would give this point greater consideration.

Higher Minimum Sum draw-down age

Let me now come to the higher draw-down age. One major concern of our unionists, widely reflected already by other speakers, which was again echoed at the recent NTUC pre-delegates conference, is whether there will be jobs for workers after 62. So long as there are jobs, our unionists feel that a later draw-down age is not a major issue, as people will continue to have an income to live on. However, if there are no jobs and the draw-down age is shifted, this would cause tremendous hardship. Workers' concerns are genuine as currently, only four out of 10 Singaporeans aged 60 to 64 are working, and healthcare needs grow with age. Many low-income Singaporeans do not have any other source of income to depend on if they cannot draw down their Minimum Sum at the age of 62 and they are unemployed. The NTUC has been working very closely with our tripartite partners to promote the re-employment of older workers. Through

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these efforts, 3,080 workers above 62 have been re-employed.

I would like, Sir, to quote two excellent examples of older workers who have remained employed and their equally enlightened employers who are worthy of mention. The first is the case of Mdm Chong Bee Neo who is 71 years old and who is employed as a general worker by Nelco Private Limited, an electronics company under the United Workers of Electronics and Electrical Industries which manufactures PCB boards. Mdm Neo has worked in Nelco for 13 years. Prior to that, she had worked in the Kiwi shoe polish factory for 38 years before it closed down. Nelco pays her a total of $1,200 and she enjoys the same benefits as other workers. When I spoke to her, Mdm Neo told me that she enjoys her work and her employer treats her well. I asked her how long she intends to work and she said that she would do so for as long as she is healthy.

The other case that I would like to mention is that of Mr Kumaran Kunjoo, who is also 71 years old and is employed as a consultant in one of our unions, the Singapore Maritime Officers Union, which represents maritime officers. Kumaran has been an employee of the union since 1986, after he was retrenched by Selco, which went bust. He was a seafarer for 21 years before joining SMOU. In 2002, at the age of 67, Kumaran was retired by SMOU, and he was re-employed by the union as a consultant. With his vast experience and positive work attitude, Kumaran is a valued employee of SMOU. He told me that he would work for as long as he is able to as he thinks that he would become lazy and sick if he does not work. These two examples show that age is not a barrier to employment if both the older worker as well as the employer is prepared to make adjustments and, particularly, if employers are prepared to give the older workers a chance.

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_Proposed re-employment law
_
Sir, on the proposed re-employment law, our unionists welcome it but felt that five years is too long and have asked that the Minister consider legislating it much earlier, perhaps in three years' time instead, as after all, the proposed law is not an automatic extension of employment, but merely makes it compulsory for employers to re-offer employment which could be in different jobs and on different terms. Although there has been progress made in our re-employment efforts, there are still some employers who want to adopt a wait-and-see attitude basically to buy themselves some time. I feel that having this law in place before the later draw-down age takes effect in 2012 for those who are 57 now, would do a great deal in helping to generate greater confidence in the reforms.

Ensure that legislation is enforceable and provide for dispute settlement mechanism

Another concern raised by unionists is over the effectiveness of the proposed re-employment law. One feedback from our Japanese trade union colleagues about their re-employment law, which forms the basis for our current re-employment law, is that it lacks teeth and is not enforceable. We should avoid the same pitfalls and ensure that our re-employment legislation is enforceable against errant employers. Another concern that this proposed legislation should address is bogus or sham offers of re-employment. The legislation should provide for a mediation or dispute resolution mechanism for older workers to refer their grievances to if they are given terms of employment which are not genuine or the terms are so drastically reduced and are not commensurate with their contributions, qualifications or experience to make it impossible for the older worker to accept the offer of re-employment.

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Public sector and GLCs should set the lead

Finally, we would also urge the public sector and Government-linked companies to set the lead in the re-employment of older workers. Again, this is an issue of confidence as the private sector employers always pop this question when we ask them to re-employ older workers. If the public sector and the Government-linked companies do not set a good example, we have less moral authority to start pushing private sector employers to do so. We have heard Minister Teo explaining about the steps being taken by the public sector to promote re-employment of older workers and we certainly hope to see more Government-linked companies, especially the larger ones, announcing such initiatives before the legislation kicks in.

Longevity insurance

Sir, let me now touch on the longevity insurance. I have a few points to make. First, insurance represents a marked shift in our approach towards retirement financing. Since 1957, our policy has been that each Singaporean should work and save for his own retirement. But now, for the first time, we are told to do risk-pooling, where we contribute a portion of our savings to a pool and help to provide for other people's needs as well. This is not an easy change for many to digest, as one major problem is that many people still do not believe that they will live beyond 85. They worry that someone else will benefit at their expense. Worse still, some even feel that the longevity insurance will not benefit the poor and low-income as they believe that it is the rich that will live longer.

Some people are also suspicious of the longevity insurance because they fear that

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the Government is transferring its responsibility of taking care of the poor and needy to Singaporeans. The Government has explained that this longevity insurance is a form of risk-pooling. This is well and good but Singaporeans are asking why is it that they have to carry all the risks themselves. What is the Government's contribution to this risk-pooling? In other words, where is the social risk-pooling element? They feel that it would be more palatable if the Government could contribute something by injecting some funds into the pool. With the additional Government funding, many Singaporeans feel that the payout after 85 could be more meaningful and the premiums could be kept affordable. Singaporeans also feel that the Government should top up for those with no Minimum Sum or whose Minimum Sum is insufficient to pay for the longevity insurance, with housewives being a particular concern as there are many without the Minimum Sum and women, as we know, live longer. On this point, I note that the premium for women will be higher. As women have a lower Minimum Sum, this would cause hardship, and I would therefore like to urge the Government to impose a standard rate of premium, regardless of gender.

Others have argued that the amount of $250 to $300 is too small and insignificant and will be completely eroded by inflation by the time we reach 85 years of age. So, they question the usefulness of the longevity insurance in providing for the financial needs of those who live beyond 85 years of age.

I hope that these concerns would be fully addressed so as to generate greater confidence in the CPF reforms.

Choices - basic tier for everyone

In my view, although the longevity insurance is not the complete answer to retirement financing for those above 85 years, it is a good start and as

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Singaporeans, we should give more thought to it. We should carefully study the proposal, give our feedback and make sure that the scheme really works for us. The feedback from our unionists is that this should not be a one-size-fits-all longevity insurance scheme as there should be choices given to CPF members. They suggest that the Government introduce a scheme akin to the MediShield and ElderShield schemes, which I think Minister Ng had also mentioned, by having a basic tier that covers everyone, but which provides only basic benefits so that the premiums could be kept as low as possible and the amount to be taken out from the Minimum Sum will not be too large. For those who want a bigger payment and for the money to be returned to their family if they die early, they could purchase an additional or enhanced tier and pay higher premiums from their Minimum Sum.

CPF Board should administer the basic tier

Our unionists also suggested that the CPF Board should administer the basic tier to benefit from economies of scale, lower administration costs and, more importantly, a higher rate of return. Currently, annuities are not popular because the average rate of return at about 2.3% is far too low and is worse than the Minimum Sum rate of 4%.

Additional or enhanced tier can be provided by private insurers but limit amount that can be used from the Minimum Sum

The additional or enhanced tier could be provided by private insurance companies but here, I would like to urge the Government to impose a limit on the amount of the Minimum Sum that can be withdrawn for the second tier as we also want to ensure that CPF members continue to have enough savings to live on between the age of 65 and 85 years.

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Give CPF members a choice to have longer draw-down date in place of longevity insurance

A final suggestion is to give CPF members a choice to opt for a longer draw-down period instead of purchasing the longevity insurance. Hence, instead of 85 years, CPF members can opt to stretch their Minimum Sum up to 90 years or 95 years, depending on their needs. This proposal is consistent with the objective of the longevity insurance and there is no reason why it cannot be considered. I think Dr Ng has also alluded to that in his Statement.

I would appreciate the Minister's response and comments on the various points that I have raised. Let me conclude, Sir, by sharing with this House the conversation that I had with Irene who cleans our Parliament's toilets. Irene is a contract worker who earns $700 a month. The first question I asked her, being a trade unionist, is whether she is paid CPF. And Irene immediately retorted, "Of course." She said, "If not, if grow old, how?" Irene most aptly captured the heart of this debate and that is the question of "how". How are we to take care of our old age? How are we to live if our life extends beyond 85 years? We may not be able to answer the "how" questions completely and fully as no country has found a foolproof solution. But, at least, we have started to look at some ways how to do so as the status quo is neither a desirable nor a responsible approach.

5.55 pm

Ms Denise Phua Lay Peng (Jalan Besar): Mr Deputy Speaker, Sir, we should give credit where credit is due. A political leadership that is not responsible would have opted to delay this difficult issue of retirement security for at least a few more election terms. Hence, I salute the

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Government for deciding to tackle this potential time-bomb head-on.

Key thrusts

There are two key thrusts behind the slew of CPF policy changes:

One, to help Singaporeans work longer, and, two, to ensure Singaporeans have enough savings to last their life expectancy.

Realities

Behind these key thrusts are four major realities or restraining forces that Government must address if the desired outcome of financial security in old age is to be achieved.

Sir, there are vulnerable groups of Singaporeans who could be left out in this reform exercise unless policy-makers acknowledge them and take a lead in helping these groups. One vulnerable group comprises Singaporeans especially from the average and low-income families - housewives or single Singaporeans who stay home to look after their children or elderly parents not by choice but by necessity. Another vulnerable group is made up of Singaporeans with mild to severe disabilities who will not be able to find sustained employment and, therefore, no CPF contributions unless more impactful support is given by Government.

A third vulnerable group comprises Singaporeans with adult disabled children or people who not only have problems taking care of their own retirement, but also have to look after their disabled dependants. Even if they wish, these are folks who cannot afford to apply the typical airline advice to "put on their oxygen mask first before they help their disabled dependants."

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The second reality, Sir, is "not all Singaporeans want to work". Sir, there is a big groan out there on the ground by both elderly and younger Singaporeans who want to retire early and stop working. Many have the psychological clock in their minds and want to drop their vocation for the vacation they feel they well deserve,

whether or not they have sufficient funds to retire.

Sir, the third reality is that not all Singaporeans know how much they need to retire for different reasons. Financial security surveys in recent years in Singapore have concluded that the level of financial literacy amongst Singaporeans is appalling, even amongst the educated and English-speaking Singaporeans. Some of them are averse to numbers. Some suffer from what I call the "ostrich syndrome" and prefer not to know the risks the future holds, either due to lethargy, indifference or fear of the big gap between what they have and what they need.

The fourth reality is that not all Singaporeans fully accept the Government's approach, and some of them think that they are being denied access to money that rightfully belongs to them.

Sir, ground feedback has surfaced many key messages that will need to be addressed. The more educated, affluent and financially savvy Singaporeans are grumbling that this is yet another testament of Government's paternalistic style of "I know what's best for you." There are even rumours that the Government is running out of money; that the whole CPF exercise is leaving the people to fend for themselves and Government is bearing no cost, and questions of where the additional GST revenues have gone to. All these questions need to be addressed. Sir, many of these perceptions may be untrue but perceptions are realities and must be addressed and crucial dialogues, not monologues, need to be held.

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Sir, the task of finding the sweet spot for the right final solution without over simplifying the subject matter will require skill and wisdom. Here are a few suggestions I hope the committee will consider.

We all know that there is no one-size-fits-all solution to meet the diverse retirement needs of a few million people. Whilst there is no way any government can provide a boutique solution for each Singaporean, it is necessary for policy-makers to identify key demographic groups and provide at least a simple menu of options in (1) retirement planning; (2) promoting financial literacy; and (3) communicating with Singaporeans on the retirement policy reforms.

For a Singaporean who can work, wants to work and needs to work beyond 62, legislation, employer incentives, job redesign and retraining are indeed the key solutions.

For the more vulnerable Singaporeans who are disabled, I want to challenge job-creation and job-design agencies, such as the NTUC and the Ministry of Manpower. The Disability Office that was recommended under the Enabling Master Plan this year for the disabled has yet to physically meet. I ask that the co-coordinating Ministry to please include the NTUC and MOM in their mission so that younger disabled Singaporeans can look to jobs as a means of ensuring their own financial independence, so that they can look towards paying income tax instead of collecting welfare.

For families who are hit by the double whammy of both low income and disability, I urge the Government to look into measures to help top up their retirement accounts. This top-up can be done by, eg, through potential progress package funds, through proceeds from the IR operations, through encouraging philanthropists and foundations to help some of

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these vulnerable Singaporeans purchase DPS or top up their retirement accounts.

Sir, in promoting financial literacy, we can take reference from the United States Department of Treasury and develop our own "Made in Singapore" blueprint for a National Strategy for Financial Literacy. A coordinating Ministry should take the lead and coordinate agencies, such as the CDC, self-help organisations like the CDAC, MUIS and SINDA, or even private sector firms, to enhance the financial literacy and security of our people. Again, I caution against the one-size-fits-all approach. Do develop a matrix of mix of communication channels to effectively reach the target groups. Portals and interactive web-based financial calculators are only for specific segments of Singaporeans. Many Singaporeans, especially those who are less IT-savvy and less educated, need to be reached differently. Some of the more vulnerable Singaporeans will even need to be hand-held and financial planning done for them sometimes.

Sir, effectively, balancing the tension between over-simplification and over-complexity is one critical success factors behind the reforms. Ex-United States Supreme Court Justice Oliver Wendell Holmes once said that he would give his right arm for "the simplicity on the far side of complexity". This quote has challenged many leaders in both private and public sectors to develop simpler and more elegant solutions to important problems.

Holmes implied there are two types of simplicity. The first is what we can call "counterfeit simplicity" - the result of ignoring hard realities and complexities. Ignoring the realities that not all Singaporeans can and want to work nor interested in financial planning will be over-simplifying things. Another over-simplification could be for planners to forget that beyond the current Minimum Sum and longevity insurance, are other

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input factors towards the retirement planning equation, input factors such as healthcare costs, one's asset portfolio, one's desired lifestyle, the HDB flat buy back, ElderShield, MediShield and the DPS. The retirement equation must take into account all these other factors.

The second type of simplicity, a more desirable one that Holmes implied, is the result from the ability to seeing past the apparent chaos of the complexity to develop an elegantly simpler and more optimal solution. This is what is termed as the "elegance on the far side of complexity" - a challenge I would pose to the longevity insurance committee and to all others who are working on the final details of these reforms.

In conclusion, Sir, I applaud the Government for its moral courage to address and not procrastinate this important aspect of financial security of Singaporeans. I urge that in developing the final details, the people's voices are heard and the needs and concerns of major groups of Singaporeans are addressed, especially the vulnerable Singaporeans, and that as far as possible, no Singaporean is left behind.

Sir, I support the reforms.

6.04 pm

Mr Yeo Guat Kwang (Aljunied): ( In Mandarin ): [For vernacular speech, please refer to Appendix A.] Mr Deputy Speaker, Sir, during his National Day Rally speech, the Prime Minister has raised the phenomena of an ageing population, and many Singaporeans are aware of the daunting challenge that we face. When we are walking on the streets, we hear people asking, "What are we going to do when we get old?" Someone answered in Hokkien saying, "You can cry." Of course, crying will not be able to help one solve

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the problem but, most importantly, we must all work together for a solution. Many Singaporeans, after listening to PM's speech, begin to get worried, because there is an old Chinese saying that goes like this, "靠树树倒，靠人人跑，靠自己最好", meaning it is best to depend on oneself. So the Government seems to be telling us that self-reliance is the best. So you must lock up your CPF savings. That is the best.

*Cols. 1667-1672.

We know the Government's measure. Every year, the Government is going to set aside $700 million to finance the CPF changes in interest rate and it will reduce the people's burden in buying the longevity insurance in future. The Government is not saying that the people must only depend on themselves and that the Government will not care. Some people are worried and they are thinking, "If you want me to plan for myself after 80 years old, I will have to know first what is going to happen to me when I am 60 years old. If I cannot even look after myself now, how am I going to worry about living beyond 80 years old?" So the Government must ensure that those who do not have sufficient savings, we should look after them and think of a better solution to help them, especially the self-employed, contract workers and the low-income workers. We cannot allow them to be worried that they do not know what to do. They will say, "What to do when I am old, I can only cry."

Sir, the changes in the CPF scheme are good. It provides D-Bonus and V-Bonus and encourages them to defer their withdrawals. This progressive package will cost the Government $1.2 billion every year. So this is a very important step.

In his National Day Rally speech, the Prime Minister said that there are so many old people around us. Many Singaporeans, after listening to PM's speech, wonder whether we really have so many old

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people. Now, they know that it is really so. Not only that, there is a Hokkien song - I cannot sing this Hokkien song - but I can read out the words. This is a song about not growing old, or do not feel that you are old. The lyrics go like this. Some people say that 90 is old, 80 is uncommon, and 70 is common. What is 60? 50 is so common. It means that if you look around, there are a lot of people who are 90 years old, so 80 is not uncommon. Life begins at 70. What is 60? At 50 years old, you can be a young man. At 40, you are a lovely lad running around. So the message is that old age is inevitable but we can face it. That is the best way to do so.

Of course, there are many people who worry about annuity insurance. What is it all about? So I hope that the committee will explain it better to the people, because many people do not understand this insurance. Why do I have to put the money there, and only after 30 years we withdraw this money? So how do we effectively explain this point? I think it is very important. Many colleagues say, "Why do I worry about what is going to happen when I am 85. Why not worry about 70 or 75? Can I really live till 80 plus?" So this is an important point.

In our dialogue with union leaders, we realised that many people are worried about this. There is another saying that a doctor cannot heal himself. We are afraid that insurance cannot really insure us. Even the insurance company may collapse. So we all hope that if we have this longevity insurance, the basic package must be maintained by the CPF Board. We can allow certain ancillary packages to the insurance companies, but we cannot transfer the basic protection package to the private companies. We must allow CPF to continue managing this basic package.

Of course, many people are worried about how they are going to encourage

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Singaporeans to accept this scheme. They are also concerned about the group of housewives and what they are going to do. We have received suggestions where the Government can provide matching top-ups for husbands who top up for their wives, so that we can encourage more top-ups for the wives. For those who top up and purchase annuity for their wives, give them additional tax concessions. All these are things which we should consider. For taxi drivers, they are now required to contribute to Medisave, but their Special Accounts do not have much balance left. So we would like to know whether the taxi companies can look into this area and allow better arrangements for the taxi drivers.

People are concerned whether their present CPF is enough or not. Whether we have enough savings is a problem but if we do not save, that is the basic issue. If we do not have the ability to save, that is the basic problem. If we do not even save, then there is no point in discussing about having enough savings. Like what some Members have said about the re-employment of older workers, it is a very important point. In today's newspapers, it is reported that we have 400-plus companies which have started to recruit older workers. So I hope all the employers will not wait any further. They should not just sit there and wait. They should start work now.

I am glad to note that Minister Teo, in his answer to a question, said that the public sector will take the lead and start an example by employing older workers. This is most important. As Minister Ng said earlier, if you are good and old, then you are gold. It means that you must be good when old, and then you are a treasure. If your health is no good, then it is terrible.

A very important point is that we must strengthen our efforts to help the older workers to maintain and improve their health. So I hope every employer will

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respond to NTUC's "Your Health Programme" to improve the health of our workers because there is a Hokkien saying, "You cannot lose out when you are old." What it means is that, "Well, if you do badly, never mind. Well, it is all right if you die, but your face and reputation are important and, most importantly, when you are old, you should not be weak and lose out." That is the most important thing. So our old people are not weak and useless people but they are a productive workforce. In Zaobao yesterday, it was said that Singaporeans lead a hectic life, as they face a longer life expectancy and they pay greater attention to their health condition. The Government tells us that we are facing a longer life expectancy, and thus the need to defer our retirement. But we do not know exactly how many healthy old people are there in the society. Which income group do they belong to? If we have a full grasp of these details, we will know how to look after the middle, lower-income group, provide adequate measures so that they will have a healthy life and live longer because if they are not healthy, then a long life is meaningless. So this is what we need to pay attention to.

Lastly, I would like to point out a few things that we want and things that we do not want when we get old. After I have spoken to some of the grassroots people, I have a better understanding of their sentiments. What are they worried about? They are afraid that when they are old, they will get worried, they are downhearted. They lose heart and when they are old, they do not have a healthy body and mind. So this is what everybody is worried about. What do we hope to have? We hope to be worry-free, to be relaxed, to be happy and joyful, to be old but have a young heart, and the older we get, the younger our outlook. So we must have a multi-channel approach. What I am proud of is that we are really an action

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party for the people - we act for the people. And we are seriously looking into solving this difficult problem.

Thirty years later, all of us who are here in Parliament today, we do not need to be worried about this problem. But today, we bring it upon our shoulders to solve the problem. This is an important point, so I hope that all of us will no longer need to worry about depending on others, or ourselves, because the Government will not run away. Let us work together and make all the best arrangements for our old age.