PM Lee announces policy changes to tackle issues of income divide and ageing population SINGAPOREANS will enjoy a higher return on their CPF savings, but will also have to delay drawing down on their minimum sum as more live longer.
This stretching out of the CPF social safety net is part of a massive strategy that Prime Minister Lee Hsien Loong mapped out last night to tackle the issues presented by a growing income divide and an ageing population.
He also announced plans for a fourth university, bigger housing grants for poorer households and a new labour law to help more people work past the retirement age of 62.
The policy changes are designed to provide greatest support to the lower- and middle-income groups, and create more opportunities for them to move up.
Making his fourth National Day Rally speech, Mr Lee exuded confidence and was upbeat about Singapore’s growth prospects.
He was thus moving to ’secure our home base’, he told an audience of 3,000 at the National University of Singapore Cultural Centre that included, for the first time, opposition MPs.
The ambition, he said, was to give every citizen a stake in the country’s success and create a sense of security and hope.
Urging stronger social cohesion, he said the country had to guard against the pulls of race and religion, rich versus poor, or winners and losers.
‘We must never let this happen. If we can stay together, then we make Singapore a home base where we all belong,’ he said.
Key to this is finding solutions to two major challenges arising from the ageing population, many of whom also tended to be from the lower-income: employment for older workers and ensuring enough savings for old age.
Mr Lee unveiled a three-pronged plan to stretch CPF savings so people will have enough for old age, even as life spans go up.
Explaining why the CPF system had to be adjusted and brought up to date, he noted that when the pension fund was set up in 1955, the average life expectancy was 61. Now, it is 80.
The first change covers the CPF interest rate. It will go up by one percentage point for the first $60,000 that each member has in his various CPF accounts.
For funds in the Ordinary Account, only the first $20,000 will attract a return of 3.5 per cent a year, up from 2.5 per cent now. CPF members can still use this first $60,000 for housing and medical costs, but not withdraw any of it to invest on their own.
More than half the CPF members who make regular contributions will, as a result, receive higher returns on their entire balances.
Second, the age at which CPF members can start drawing down from their Minimum Sum will go up progressively from 2012, from the current age of 62, until it reaches 65 in 2018.
Those affected will receive a one-off ‘deferment’ bonus.
This will be done in tandem with a new law which will require employers to offer jobs to workers who have reached the retirement age of 62, but want to keep working.
Both the draw-down age and re-employment age will first be raised to 65, and later to 67.
Lower-income, older workers aged 55 and above will receive an added incentive to stay employed - a higher Workfare Income Supplement of up to 20 per cent of their monthly wage, if it is $1,000 or less.
The third change to the CPF system will be to make some form of annuities compulsory, so members receive a monthly payout for as long as they live. But it will only be for CPF members aged 50 or younger.
‘If we make these changes in good time, then we can assure Singaporeans of peace of mind in your golden years.’
Manpower Minister Ng Eng Hen will announce more details next month.
On education, the second limb in the Government’s plan to tackle the income gap, Mr Lee announced the setting up of a fourth publicly-funded university to meet rising demand.
On housing, Mr Lee announced changes to help lower-income first-time buyers as well as cash-strapped older folk, and new upgrading and estate renewal programmes.
He said Singapore is able to address these difficult challenges because of capable leaders and dedicated workers.
‘A strong Singapore team, each giving his best for the nation, doing things together that none of us could have achieved on our own. This is our greatest asset, this is the secret of our success,’ he said.
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