Annuity Made Palatable

Source : The Straits Times, Dec 11, 2007

BIT BY bit, the probable final shape of the compulsory annuity scheme for old-age support is emerging. Two features of the proposal which a good many people found objectionable may be modified, according to the principals working on the plan. These are the sequestering from the policyholder's heirs of surplus sums left upon death, and the seemingly ambitious age of 85 at which payouts from the annuity are to begin. Under modifications being studied by a government-appointed panel headed by Professor Lim Pin, the unused portion will revert to the family. This will be welcomed and should remove the one impediment that stands between voluntary and grudging acceptance of the old-age protection idea.

Just as cognisant of public unhappiness expressed is the concession that policyholders could have a choice of starting ages at which they will begin receiving payouts. Manpower Minister Ng Eng Hen, who is steering the annuity scheme, mentioned by way of illustration a range from age 65 up to 90. The base is obviously too low. A credible number could be 75 or 80. Senior Minister Goh Chok Tong has said he favours age 80. The original access age of 85 on the face of it is scaled too high. All that the Government has said of longevity projections is that half of those Singaporeans who attain age 62 will go on to live beyond 85. How many would that be? The incredulity with which this was received by many people was undoubtedly a visceral response, but it was enough to dump controversy on a proposal which by rights should get easy passage, as about half of CPF members simply would not have enough money in their accounts to support themselves if they lived to extreme old age. The Government will now engage private actuaries to verify data on projected life spans. This preferably should have accompanied the announcement of the original proposal, but better late than never.

Two points arising are worth recording. First, the Government has taken on board views and criticisms that clearly are deeply felt, even if these should eventually turn out to be not completely justified. The receptiveness will be welcomed by the people. But they should be prepared to pay higher premiums, and consequently have reduced CPF balances, for the relaxed criteria. Second, it should be remembered reform of old-age pension proposals had begun in the 1980s. Data showed Singaporeans were living longer and outstripping their modest savings. Life expectancy was only 61 years when the CPF was started in 1955. As those who need help most are least able to accumulate enough in voluntary savings, a mandated plan is unavoidable.