RETIREMENT FUNDING (Situation)

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RETIREMENT FUNDING:

(Situation): 2.

Miss Penny Low asked the Minister for Manpower (a) what is the retirement funding situation in Singapore; (b) what are the main sources of retirement income an average Singaporean can expect and how much will it be; and (c) will it be sufficient to outlast his or her life expectancy.

The Minister for Manpower (Dr Ng Eng Hen): Mr Speaker, Sir, the main pillar of our retirement funding inSingaporeis the Central Provident Fund. Through the CPF, we emphasise personal responsibility as each member saves into individual accounts to provide for his housing, medical and retirement needs. The CPF system also facilitates financial support from family members who can help to pay for medical expenses or through top-ups into retirement accounts.

Miss Low asked about sources of retirement income. Under the CPF, this is provided for by the Minimum Sum requirement which the member must set aside on reaching the age of 55 in his retirement account, before he is allowed to withdraw excess sums. Only about 40% of active CPF members met the

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Minimum Sum (MS) requirement through cash alone or with the property pledge on reaching the age of 55 in 2004. As the Minimum Sumis designed to finance only a basic standard of living over the average life expectancy of 20 years when members turn 62, most CPF members who retire now supplement their CPF payouts with other sources of income.

And, indeed, this is the case as the National Survey of Senior Citizens showed in 1995. Other sources of income would usually be from family members, personal savings and employment or business income if they are still economically active. According to that Survey in 1995, the median income of senior citizens aged 55 and above from all sources was $518 monthly. 76% of senior citizens aged 55 and above received regular cash contributions from their offspring. 89% of these citizensconsidered what they were receiving as adequate for expenses. This indicates that family support has been a vital pillar for retirement adequacy, especially for those who have not built upsufficient CPF accounts. We will have more detailed information about current trends when the National Survey of Senior Citizens 2005 is published early next year.

To improve retirement adequacy for imminent and future retirees, various measures must be put in place. We must help workers work longer and retire later. This is the focus of the tripartite committee to extend the employability of older workers. Singaporeans must set aside larger sums to provide for longer life expectancy after retirement. This is the reason why we have raised theMinimum Sumto $120,000 (in 2003 dollars) to be reached in 2013. The CPF Boardwill continue to examine ways to protect and enhance members’ retirement adequacy. This may include measures to cover for longevity risk and ways to help older members monetise their properties and improve returns on their savings.

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Miss Penny Low: Sir, the Minister mentioned that family support remains an important pillar for retirement adequacy. With falling fertility rate and families having really small families of just one or two children, what does that imply for the retiree? Has the Ministry also done some studies to ascertain the adequacy of income received by people who have retired for more than 10 years or so, in other words, at age 65 and above?Would that income of $500-odd that he mentioned actually dwindle over time?

Dr Ng Eng Hen: Sir, I agree with the Member that the demographic changes and fertility patterns will impact on retirement adequacy and the ability to draw from your other family members for retirement adequacy. Indeed, this is an issue that we are looking at. How are we going to achieve this will require a number of measures. And after we have thought through it, we will put to the House the various measures possible.

The Member asked about sources of income for those who are aged 60 and above. The specific data that I have, again, is from the 1995 survey. It shows, for example, that if you look at sources of income for those 55-59, for children, it was about 41%. Actually, it rose with increasing age.

So for 60-64, it was 57%; for 60 and above, it was 73%. So I think family members adjusted. In other words, when the retiree became older, more children contributed. I think this is a good sign.