A Burden On The Poor

Source : TODAY, Friday, September 7, 2007

Annuities: The Rich Should Contribute More Premium

Letter from CHONG LEE MING

IN THE commentary, “Annuities: It’s risk sharing among all” (Aug 31) and the letter, “A lifeline for the less fortunate” (Sept 4), Mr Christopher Tan and Mr Teo Cheng Peow noted that the proposed annuity scheme could benefit the less fortunate. But I wonder if the scheme can achieve what they had hoped for.

I believe that the well-to-do are likely to live longer as they can afford better healthcare, are likely to be better educated. Thus, they are more likely to benefit from the scheme. If every Singaporean is required to contribute the same amount to the scheme, the burden would be much greater on the poor.

If the amount required to be set aside is $5,000, those with half a million dollars in their Central Provident Fund (CPF) balance would probably be sacrificing the cost of a new plasma TV. But to a person with only $50,000 in his CPF balance at retirement, that $5,000 could be equivalent to one or two years’ worth of meals in his retirement years.

I suggest that the contribution amount for the scheme be a fixed percentage of one’s CPF balance at retirement (including those used for housing and other investments), subject to a minimum and maximum amount.

For the rich who contribute more, they will get a higher payout in due course. But if they do not live long enough to fully benefit from the scheme, it is a way for them to contribute to society. For those whose CPF balance is lower than the amount needed to contribute to the minimum amount, the Government might consider topping up the difference.

In this regard, the scheme would better achieve its objective of helping those who need help the most.