CPF returns to be increased, retirement pushed back, flats monetised for older owners as govt widens security net
AS the forces of globalisation widen the income gaps worldwide, Prime Minister Lee Hsien Loong unveiled a comprehensive strategy to make sure that the poor in Singapore - who are also likely to be elderly - have enough savings to fall back on.
The most eye-catching of these moves involves a hike of one percentage point on the first $20,000 in the Ordinary Account of the Central Provident Fund - and on up to $60,000 in the combined CPF accounts - as the government seeks to provide a bigger nest-egg for old age.
But no less significant are moves that will ensure that Singaporeans, who are living longer, also retire later and that HDB flats provide not just shelter but also a stream of income as citizens age.
Another key area that will underpin the government's strategy is education. A fourth publicly-funded university will be built as Singapore tries to raise the qualifications and earning power of the next generation of workers.
'Somebody did a study in Singapore and we found that for every year longer you go to school, you can expect your wages to go up by 14 per cent,' said Mr Lee in his National Day Rally speech last night.
His point: The payoff on education is going up and it is the best way to level up the society and reduce income gap.
Currently, 23 per cent of each cohort goes to a publicly-funded university. 'We aim to raise this now to 30 per cent of the cohort ... by 2015,' said Mr Lee. This would mean an additional 2,400 university places for students as well as a new university, with its own unique character and strengths, to take its place alongside NUS, NTU and SMU.
But while waiting for these payoffs down the road, Mr Lee addressed the most pressing issue facing Singapore today - its rapidly ageing population.
Not only are Singaporeans making fewer babies, they are also living longer, with the risk that they will run out of money in their later years. Mr Lee recounted the case of a 72-year-old who retired at 55 and then ruefully told labour chief Lim Swee Say: 'I didn't know I was going to live so long.'
The government will pass a law under which, from 2012, workers reaching the retirement age of 62 will be offered re-employment till 65 and eventually till 67.
The revision in CPF returns is also significant. It means that more than half of the CPF active members - those still contributing to the fund - and mostly those in the lower and middle income group will enjoy the higher return on all their CPF balances.
CPF members can still use the $60,000 - on which they will get higher returns - for housing and medical care but not for investments because, as Mr Lee said: 'This is long-term money and you leave it with us and we will treat it like retirement funds and we will give you the highest interest rate'.
Beyond $60,000, the status quo stays. 'If you have more than 60k, you should be able to look after yourself,' Mr Lee said.
As retirement is pushed back, the drawdown age (DDA) of the CPF Minimum Sum will be delayed until 65 from the current mark of 62.
But the DDA will be raised progressively over a number of years, starting in 2012 when the re-employment legislation is introduced.
To encourage the re-employment of older workers, Mr Lee said the government will double the grant - to $200 monthly or 20 per cent of salary - to workers aged 60 under the Workfare Income Supplement.
Upgrading and renewing housing estates is another major front the government is working on for a more even distribution in income. Mr Lee said it will raise the CPF housing grant introduced last year for the lower income group, from $20,000 to $30,000. This will cover about half of all Singapore households.
To make it easier for the lower income group to monetise their flats, HDB will buy back from older owners - those aged 62 and above - their 2-3 room flats at the tail end of the lease and leave them with a shorter lease of 30 years on the same flat.
Improvements will be continued to be made to new and old housing estates, but the upgrading programme itself will be fine-tuned to combine more precincts for upgrading and to home in more on practical improvements within individual flats.
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