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My comments in blue on the recent article below.
SINGAPORE: Young Singaporeans in the workforce today will have adequate savings in their Central Provident Fund (CPF) accounts by the time they retire, according to an independent study by the Ministry of Manpower.
Deputy Prime Minister Tharman Shanmugaratnam shared this finding on Wednesday at the opening of the Singapore Human Capital Summit.
The Central Provident Fund is designed to help Singaporeans save enough for their retirement years.
The CPF has enough in it to fund retirement for a singaporean only if they are married (savings on cost resulting from 2 people sharing the household expenses and general economies associated with living together) and if they have no major illness or surgery requiring hospitalization.
It also contributes in making home ownership a key pillar of the country's social security system.
This is an outright lie, Tharm knows this as well. If you own your home, you are not called a tenant, and the HDB is not called your landlord. If you own your home, you can sell it to anyone you want without getting permission from the HDB. If you own your home u do not have to give it back after 99 years, or be forced to move because they want to tear your flat down for a new one.
Mr Tharman said the CPF is a financially sustainable scheme because it is fully funded and operates on defined principles of contributions.
However, Mr Tharman said the challenge is ensuring CPF savings are able to deliver payouts that are enough for retirement.
The challenge is more so for the lower-income earners. The government reviews the CPF scheme from time to time to ensure it can deliver payouts adequately.
A recent study using the Income Replacement Rate or IRR indicates that Singaporeans are adequately covered.
Pension economists measure retirement adequacy by using an IRR, which is the ratio of retirement monthly income to pre-retirement monthly earnings.
The study found that a median male earner who enters the workforce today will be able to achieve an IRR of over 70 per cent through his CPF savings.
For the female median earner, the equivalent IRR is 63 per cent.
These figures are similar to those of countries of the Organisation for Economic Co-operation and Development (OECD).
The IRR for the median OECD economies is 66 per cent. The World Bank recommends a range of between 53 and 78 per cent.
The rate is significantly higher in Singapore when it takes into account the fact that Singaporeans have their own homes when they retire.
Cash is freed for other living expenses as they do not have to pay rental fees.
For lower-income workers, the IRR is higher -- at about 81 per cent.
With Workfare, which supplements the wages of low-income workers, the IRR is even higher -- at 93 per cent.
Details of the study will be released in the near future.
Tharm conveniently fails to mention that most of these OECD countries he quotes from have good senior welfare programs. For example, they have free hospitalization, free medical care, and free medicines for their seniors. They also have free or heavily subsidized transportation passes, monthly pension money, and in some cases subsidized housing. Singapore has non of these, so when an elder singaporean falls ill or needs medical care (which they inadvertibly will), they will have to dip into their savings or sell their homes to pay for these treatments. Hence, they are in a much more vulnerable situation than a citizen of an OECD country.
Economists said many assumptions need to be considered in interpreting the results of the study.
Associate Professor Shandre Thangavelu, from the Economics Department at the National University of Singapore, said: "How much the income is growing over time, and what is the retirement age...It all depends on how the rate of returns when other factors are taken into account. How much extra savings they are going to have from the CPF and paying mortgages and so on... because higher property prices will also absorb more from the CPF itself."
Mr Tharman said the changes made in the CPF scheme over the years have put it on a very firm footing for the future, but employers and employees also have a part to play in ensuring financial stability.
"But no matter how we design the CPF scheme, retirement adequacy is still premised on individual responsibility and good jobs during working lives," said Mr Tharman.
"It requires that we work and save for an adequate retirement nest egg and it requires that employers take responsibility for providing ordinary working people with good jobs."
But how do you get a good job when you are being replaced by 2 million FTs who are willing to work for half your salary or less? And why is it the employer's responsibility to provide ordinary people good jobs? SHould that not be the govt.'s responsibility. e.g Why is an american MNC suddenly now responsible for providing good jobs for singaporeans? Why is the PAP passing this responsibility to the employers?
Mr Tharman said the results of the findings are important and the government will continue to review the CPF scheme.
But it is also important to keep an eye on the needs of the older generation of Singaporeans who may not have enough runway to benefit from the changes made to the CPF system over the years.
Mr Tharman noted that many older Singaporeans have low CPF balances and are unable to achieve the IRR that the study has found. Wages were much lower in the past and these older Singaporeans were required to set aside less in their CPF Retirement Account. They were allowed to use much of their CPF savings for housing.
However, most of them have also experienced substantial appreciation in value of the homes that they own, made possible by government housing subsidies, their earlier withdrawals of CPF savings, and economic growth.
"Our strategy is to help them monetise the values of their homes in retirement, if they wish to," said Mr Tharman.
Yet more lies from Tharm. The appreciation of a HDB flat at retirement age is an illusion. If you buy a HDB flat today at $400K, it might appreciate to $600K in 10 years time, but by the time you retire, it will be worth around $250K. Why? No banks want to finance a flat that is older than 25 years old, and some will not finance a flat if its over 20 years old. How can you sell your flat at a good price when potential buyers cannot get financing to buy it? Only people who have cash will be interested, and those people who have that much cash lying around will not bother to buy a HDB flat, they can afford a landed property. In the end, you end up with some one paying you a couple of hundred thousand $ for your flat. Hardly an appreciation if you ask me. Also, Tharman wants u to monetise your flat for your retirement, which is a fancy way of saying, you have to sell your flat to fund your retirement. In addition to the problem I mentioned with getting financing for older flats, what happens when u want to retire and there is a downturn in the property market? U want to sell it in an up market, so now, u have to take a gamble and continue to postpone retirement until u can get a better price on the flat. So in the end, when you retire may not be in your control.
SINGAPORE: Young Singaporeans in the workforce today will have adequate savings in their Central Provident Fund (CPF) accounts by the time they retire, according to an independent study by the Ministry of Manpower.
Deputy Prime Minister Tharman Shanmugaratnam shared this finding on Wednesday at the opening of the Singapore Human Capital Summit.
The Central Provident Fund is designed to help Singaporeans save enough for their retirement years.
The CPF has enough in it to fund retirement for a singaporean only if they are married (savings on cost resulting from 2 people sharing the household expenses and general economies associated with living together) and if they have no major illness or surgery requiring hospitalization.
It also contributes in making home ownership a key pillar of the country's social security system.
This is an outright lie, Tharm knows this as well. If you own your home, you are not called a tenant, and the HDB is not called your landlord. If you own your home, you can sell it to anyone you want without getting permission from the HDB. If you own your home u do not have to give it back after 99 years, or be forced to move because they want to tear your flat down for a new one.
Mr Tharman said the CPF is a financially sustainable scheme because it is fully funded and operates on defined principles of contributions.
However, Mr Tharman said the challenge is ensuring CPF savings are able to deliver payouts that are enough for retirement.
The challenge is more so for the lower-income earners. The government reviews the CPF scheme from time to time to ensure it can deliver payouts adequately.
A recent study using the Income Replacement Rate or IRR indicates that Singaporeans are adequately covered.
Pension economists measure retirement adequacy by using an IRR, which is the ratio of retirement monthly income to pre-retirement monthly earnings.
The study found that a median male earner who enters the workforce today will be able to achieve an IRR of over 70 per cent through his CPF savings.
For the female median earner, the equivalent IRR is 63 per cent.
These figures are similar to those of countries of the Organisation for Economic Co-operation and Development (OECD).
The IRR for the median OECD economies is 66 per cent. The World Bank recommends a range of between 53 and 78 per cent.
The rate is significantly higher in Singapore when it takes into account the fact that Singaporeans have their own homes when they retire.
Cash is freed for other living expenses as they do not have to pay rental fees.
For lower-income workers, the IRR is higher -- at about 81 per cent.
With Workfare, which supplements the wages of low-income workers, the IRR is even higher -- at 93 per cent.
Details of the study will be released in the near future.
Tharm conveniently fails to mention that most of these OECD countries he quotes from have good senior welfare programs. For example, they have free hospitalization, free medical care, and free medicines for their seniors. They also have free or heavily subsidized transportation passes, monthly pension money, and in some cases subsidized housing. Singapore has non of these, so when an elder singaporean falls ill or needs medical care (which they inadvertibly will), they will have to dip into their savings or sell their homes to pay for these treatments. Hence, they are in a much more vulnerable situation than a citizen of an OECD country.
Economists said many assumptions need to be considered in interpreting the results of the study.
Associate Professor Shandre Thangavelu, from the Economics Department at the National University of Singapore, said: "How much the income is growing over time, and what is the retirement age...It all depends on how the rate of returns when other factors are taken into account. How much extra savings they are going to have from the CPF and paying mortgages and so on... because higher property prices will also absorb more from the CPF itself."
Mr Tharman said the changes made in the CPF scheme over the years have put it on a very firm footing for the future, but employers and employees also have a part to play in ensuring financial stability.
"But no matter how we design the CPF scheme, retirement adequacy is still premised on individual responsibility and good jobs during working lives," said Mr Tharman.
"It requires that we work and save for an adequate retirement nest egg and it requires that employers take responsibility for providing ordinary working people with good jobs."
But how do you get a good job when you are being replaced by 2 million FTs who are willing to work for half your salary or less? And why is it the employer's responsibility to provide ordinary people good jobs? SHould that not be the govt.'s responsibility. e.g Why is an american MNC suddenly now responsible for providing good jobs for singaporeans? Why is the PAP passing this responsibility to the employers?
Mr Tharman said the results of the findings are important and the government will continue to review the CPF scheme.
But it is also important to keep an eye on the needs of the older generation of Singaporeans who may not have enough runway to benefit from the changes made to the CPF system over the years.
Mr Tharman noted that many older Singaporeans have low CPF balances and are unable to achieve the IRR that the study has found. Wages were much lower in the past and these older Singaporeans were required to set aside less in their CPF Retirement Account. They were allowed to use much of their CPF savings for housing.
However, most of them have also experienced substantial appreciation in value of the homes that they own, made possible by government housing subsidies, their earlier withdrawals of CPF savings, and economic growth.
"Our strategy is to help them monetise the values of their homes in retirement, if they wish to," said Mr Tharman.
Yet more lies from Tharm. The appreciation of a HDB flat at retirement age is an illusion. If you buy a HDB flat today at $400K, it might appreciate to $600K in 10 years time, but by the time you retire, it will be worth around $250K. Why? No banks want to finance a flat that is older than 25 years old, and some will not finance a flat if its over 20 years old. How can you sell your flat at a good price when potential buyers cannot get financing to buy it? Only people who have cash will be interested, and those people who have that much cash lying around will not bother to buy a HDB flat, they can afford a landed property. In the end, you end up with some one paying you a couple of hundred thousand $ for your flat. Hardly an appreciation if you ask me. Also, Tharman wants u to monetise your flat for your retirement, which is a fancy way of saying, you have to sell your flat to fund your retirement. In addition to the problem I mentioned with getting financing for older flats, what happens when u want to retire and there is a downturn in the property market? U want to sell it in an up market, so now, u have to take a gamble and continue to postpone retirement until u can get a better price on the flat. So in the end, when you retire may not be in your control.
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