Manpower Ministry to form committee, including experts, to draft proposals
PRIME Minister Lee Hsien Loong gave his assurance yesterday that the new compulsory annuity scheme will be flexible, basic and cheap.
Responding to concerns that the policy would be forced through, he revealed that the Manpower Ministry is forming a committee to come up with proposals.
The committee will include unionists, social workers, insurance industry experts and other financial figures.
The goal: a longevity insurance or annuity scheme 'with as much flexibility in it as possible'. An annuity works when a person invests a lump sum with an insurer, which then pays him a monthly sum for life.
'I don't want to have anybody who's 85 or 90 years old saying, 'My CPF is finished, I have no insurance, and now I need to live and I have nothing, nobody to look after me, medical care, house, food, everything',' Mr Lee said at a dialogue with about 150 members and guests of the National Trades Union Congress at the Ang Mo Kio Hub.
He announced plans for the compulsory annuity scheme last Sunday in his National Day Rally speech. Questioned about it by anxious unionists yesterday, he said that he would leave insurance experts to work out the details.
However, he outlined the conditions that the ultimate solutions will have to satisfy: 'I think that we want to allow as much flexibility in the scheme as possible, keep it basic, keep it cheap, low cost.'
In his Rally speech, he said that annuities will be made compulsory for Central Provident Fund members aged below 50.
They will buy an annuity at age 55 using a small portion of their CPF Minimum Sum. The annuity will give them a monthly payout of about $250 to $300 once their Minimum Sum runs out at 85. This is meant to cover members' needs when they outlive their CPF savings.
Said PM Lee: 'Normally when people take up insurance, they buy in case 'I die early, I will collect'. This is the opposite - 'I buy, in case I live longer, then I will collect'. And I think that is a fair way to do it in principle.'
The idea has been controversial because it forces CPF members to lock up part of their CPF savings in an annuity that their families will not get back if they do not live to see 85.
Hence, the PM's assurance yesterday that the sum to be invested in the annuity will be small. Manpower Minister Ng Eng Hen made the same promise early last week.
Asked by labour MP Josephine Teo why the scheme has to be compulsory, Mr Lee replied that a large insurance pool will be needed to keep costs low.
He added that most people would not plan for their long-term old age needs if it were left to them.
Bank employee Ng Mei Yen, 32, told Mr Lee that the key was still to educate people on retirement planning.
Mr Lee replied: 'I agree with you. If everybody is like you I don't need a Minimum Sum!'
The insurance, he added, will also help Singapore retain its young people and not place too heavy a burden on them.
Without it, the Government would have to take care of the elderly through heavier taxes on the young.
He said: 'If I were you, belonging to that generation of children or grandchildren, and I had to pay taxes for the senior citizens in Singapore, I think I'd be looking for other places to work where the taxes are less and the burden is less.'
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