Committee will ensure scheme is affordable to all in Singapore
Flexible, basic and cheap — this is what the compulsory annuity will be — promised Prime Minister Lee Hsien Loong.
To ensure this, the Ministry of Manpower (MOM) is setting up a committee comprising unionists, social workers, insurance industry experts and other financial figures.
This was announced by Mr Lee at a dialogue with members of Young National Trades Union Congress at the Ang Mo Kio Hub on Saturday.
Annuities have become the talking point among Singaporeans since the National Day Rally, when PM Lee announced that the Government would introduce a compulsory scheme for those under 50 years old.
Annuities involve a person investing a lump sum with an insurer, who then pays him a monthly sum for life. Here are extracts of what Mr Lee said during the dialogue:
ONE DAY, WE WILL ALL BE 80 YEARS OLD, AND THEN WHAT?
When you are young, it is very hard to imagine that one day you will be 80 years old. In fact it’s quite hard to imagine that one day you will be 50 years old.
But I assure you many, many of you will be 50 years old and quite many of you will one day be 80 years old. I’m worrying now for that day when it comes.
I don’t want you to say: “50 years ago the government just switched off, now I’m left with nothing.”
I don’t want to have anybody who is 85 or 90 years old say: “My CPF is finished, I have no insurance and now I need to live and nobody will look after me, medical care, house, food, everything. Then what happens? That’s the problem. Therefore we have to deal with this.
WHOSE PROBLEM IS IT TO LOOK AFTER THE ELDERLY?
What happens after you reach 85, what happens when you reach 90 or 95? I think you will have a problem.
If it is your problem and you say: “Okay, this is my problem, I sign down here that when I’m 90 years old if I have no money I won’t look for the government, I won’t look for my MP, I won’t do anything, my family will look after me,” then maybe that’s a private problem.
But … if you are 85, 90 years old and you are unable to take care of yourself or to provide for yourself, it’s not just your own problem, it’s also the society’s problem and we have to help to look after you, or rather the society will have to look after us.
WHY NOT TAX THE YOUNG TO CARE FOR THE OLD?
Your CPF has 34.5 per cent now and you got to buy the house, you got to pay for medical care, how can you afford to put aside enough money for retirement?
For that to happen, you will have to pay CPF 50, 55 per cent. Then maybe I can put away enough money for the future. If I don’t use the CPF, if you say: “The Government will pay,” what you mean is your children, your grandchildren when they work, they will pay taxes.
But if I belong to that generation of children or grandchildren and I have to pay taxes for the senior citizens in Singapore, I think I’ll be looking for other places to work where the taxes are less and the burden is less, I will be gone.
HOW CAN WE ENSURE ELDERLY SINGAPOREANS WILL BE OKAY?
There are two ways. One, I can take the CPF minimum sum and take longer to pay it out. Instead of 20 years, 25 or 30 or 35 years, to make sure that it lasts long enough. But the amount will be smaller.
The other way is I take the minimum sum, say 20 years, this is drawn down, the balance I buy insurance. If by chance I live long enough to be 85 years old, after 85, the insurance company will pay me or CPF will pay me every month so many dollars as long as I live.
If I didn’t make it to 85, I don’t need that money, so what I have contributed will go to others, because it’s an insurance pool. Those who live longer will get the money. You don’t know if you will live longer when you join, but if you are the one who lives longer, you will be okay.
That’s the idea of the longevity insurance.
THE SCHEME SHOULD BE FLEXIBLE AND LOW COST
I think we want to allow as much flexibility in the scheme as possible, keep it basic, keep it cheap, low cost.
I don’t want to design the scheme now because I’m not an insurance agent but I think we should study this and then get people to work on this and come to some conclusion. I talked to Ng Eng Hen, the Minister, and he suggested MOM will form a committee to look into this.
We’ll get people involved from the unions, from the industry who do the insurance business, we’ll involve social workers who know what the old folks’ requirements are. We’ll involve financial types, they know how to structure these schemes and come up with some workable proposals, how we can make this idea of longevity insurance or annuity scheme work, with as much flexibility in it as possible.
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