Annuities : You Say Miser, I Say Wiser

Source : The New Paper, September 21, 2007

MY neighbour Belanja King has invited me to his retirement party.

Free food, free beer, of course I said yes.

But if I were him, I wouldn't splurge it all or retire so early.

Yes, he can enjoy life now. Yes, he's been working hard and I don't blame him for wanting to enjoy his CPF.

But what if he lives to a ripe old age and doesn't have enough money to live on?

His CPF savings may look like a windfall now but in 20 years, he won't have enough for old age.

I plan for the longer term. I plan in case I live beyond 85.

As the Chinese adage goes, 'xian ku hou tian' (work hard first before enjoying the rewards).

So, when I turn 62, I'm telling my boss I want to keep on working - until I'm 65 or 67. Until I can't work any more.

Never mind, give me a lighter job and less pay. I want a slower pace, but I want to keep my mind active and save more for retirement.

BONUS

No need to touch my CPF minimum sum yet. Got bonus from Government, too, for delaying draw-down age.

I'm 90 per cent sure my boss will re-hire me. In five years, there will be a re-employment law.

The Manpower Ministry, Tripartite committee and the unions are already working hard to educate employers.

But I can't rely on the law alone. What's more important is that I stay healthy and productive, so my boss knows I'm worth keeping.

From next year, I also enjoy higher CPF interest - an extra 1 per cent on the first $60,000 in my CPF accounts, and 4 per cent on my Special, Medisave and Retirement accounts.

Some people ask: 'Why the Government so kiam (stingy)?'

But it will be paying $700 million more in interest each year under the new system.

Trust me, if I, the Kiam Siap King, say the Government is generous enough, you can take my word for it.

Some want higher interest rates, but higher returns come with higher risks.

My philosophy has always been: Better safe than sorry.

And better to have more money in case I live longer. That's why I'll buy an annuity when I turn 55.

Some things I can't be too kiam about.

I know I may not live until 85 to enjoy the payouts, which will last me until I die. But what if?

Maybe once upon a time, we could depend on our CPF savings to last us for life. But now that people are living longer, we need more than just CPF.

So the annuity is a good back-up.

But some ask: 'Why can't the Government support me after my CPF savings run out? Why not fund a national pension from our reserves?'

BURDEN

I don't want to live in a welfare state. It's also a burden on the already-shrinking younger population - and that includes my children, grandchildren and great-grandchildren.

I may be kiam, but I don't want to ask the Government for money. I still believe in self-reliance.

But the Government must help the poor who can't cope even with the new system.

Some grumble about the CPF system. Yes, it needs to be strengthened, but it has helped a lot of Singaporeans.

If not for CPF, I would not have a roof over my head. Even many poor people own homes.

Under the new system, a projected 84 per cent of new workers will meet their minimum-sum requirement, even for low-wage workers and even after they buy their first home.

Only one-third of CPF members who turned 62 last year managed that when they turned 55 in 1999.

With the new system, I'm not afraid to live longer in Singapore any more.

Belanja King can enjoy himself and belanja all he wants now.

I just hope when he runs out of money, he won't borrow from me.

(They don't call me kiam siap for nothing!)

* Manpower Minister Ng Eng Hen's reply to concerns raised by MPs during the CPF debate were weaved in to this article.