Improving women's lot in retirement


Policymakers need to pay closer attention to the plight of women who have significantly lower retirement savings because they stopped work in order to care for family members.

Whether Singaporeans have enough to retire on is a question that has loomed large in the minds of policymakers recently. The Government is helping the nation's ageing pioneers with health-care costs, and is working on a universal health- care plan for Singaporeans.

Central Provident Fund (CPF) contribution rates have been raised for all workers, with special attention to those who are older, earning less or self-employed.

There are also plans to enhance the CPF system's savings and annuity schemes and give Singaporeans more ways to unlock the value of their homes during retirement.

These are all laudable measures, especially amid low interest rates and rising inflation, which make it hard for retirees' savings to keep up with the cost of living.

But one group is still particularly vulnerable in retirement: older women, especially those who stopped work to care for children or other family members.

Yesterday, The Straits Times published a letter from the Association of Women for Action and Research that highlighted the plight of full-time housewives, calling for more help for "economically vulnerable groups".

On average, women here live longer than men, but work for shorter periods and earn less.

From age 25 to 29, nearly nine in 10 men and women are engaged in the workforce. For men, this proportion rises until age 54. In the case of women, however, it declines to the point where only seven in 10 remain in the workforce by age 54.

Women also earn only about three-quarters of what men do, an income gap that has stayed unchanged over the last 10 years.

As a result, the average CPF balance of women has been consistently lower than that of men. As of 2011, women had an average of $56,000, while men had about $10,000 more than that.

To put this in perspective, the CPF Minimum Sum - which must be set aside for monthly retirement payouts - will rise to $155,000 in July, and rise again next year.

There is little data on the number of full-time mothers or caregivers in Singapore. But the Manpower Ministry's 2013 labour force report said two-thirds of all "economically inactive" residents - aged 15 and above but not working and not looking for a job - were women.

Forty-five per cent of the women in the ministry's survey cited family responsibilities as their main reason for not working, up from 43 per cent in 2012. In contrast, just 3 per cent of men stop work for family reasons.

This proportion is particularly high for non-working women between the prime working ages of 25 and 64, of which there are 329,400. Three in four stopped working because of family responsibilities. Those who do so often say they have little choice as hired caregivers provide inadequate service or are expensive. Their sacrifice comes at the expense of building up a nest egg, thus leaving many of them at risk of having insufficient savings for retirement.

Fast(er) fixes

IN GENERAL, stay-at-home mothers and caregivers have three main sources of retirement funds.

The first is their personal savings and insurance policies, which may not amount to much if they stopped work early.

The second is the fairness and generosity - not to mention good health - of their own family members. A Tsao Foundation report in 2011 found that 75 per cent of older women aged 60 and above rely on money from their children and grandchildren, compared with only 43 per cent of older men.

The third source of retirement funds for these non-working women is the CPF system, which uses their CPF savings to pay out annuities in their older years. But the payouts are not large: A Singaporean woman aged 55 this year with $40,000 in her retirement account - the minimum to automatically enrol in the CPF Life annuity scheme - will get at most about $400 in monthly payouts from age 65.

All three channels have scope for improvement. For example, the Government can encourage family members to buy insurance policies for stay-at-home mothers or caregivers by giving them tax relief for the premiums.

Parents who stop work to care for children should also be guaranteed a share of their spouses' CPF savings, rather than rely on their spouses not to withdraw the funds for personal use.

Alternatively, where a wife or husband has stopped working to care for the children, the Government could allow retirement accounts to be combined for couples. Annuity payouts could also be split equally.

As for CPF annuities, family members could be given further incentives to top up the CPF accounts of non-working women, thereby increasing their retirement payouts.

Currently, family members get dollar-for-dollar tax relief if they top up the CPF accounts of their non-working family members with cash, up to a cap of $7,000 a year, under the Minimum Sum Topping-Up Scheme.

But this cap has stayed unchanged for the last six years, while both inflation and the Minimum Sum have risen steadily.

The Government could encourage both more and larger top-ups with a two-tiered system. For example, it could raise the overall cap for tax reliefs to $9,000 to spur larger top-ups; and for the first $3,000 topped up, it could give double the tax relief - for a maximum relief of $6,000 - to spur more small top-ups.

Tax reliefs could also be extended to family members who use their own CPF funds to do the transfer, rather than pay cash.

CPF data shows that the number of children topping up their mothers' CPF accounts has been growing, but more slowly in recent years. It rose by just 6.5 per cent last year to 18,100 people, down from a 10 per cent rise the year before.

Special treatment

ANOTHER way to enhance the CPF system would be to make broad-based adjustments for full-time parents or caregivers.

A number of other countries already give such women (or men) special treatment or credit for their time outside the workforce, bringing them more on a par with full-time workers.

In Japan, pension accounts are tied to household units rather than to individual workers. This means that dependent spouses of full-time employees qualify for a pension without having to pay monthly pension contributions - akin to CPF contributions.

If a worker dies young, leaving a dependent wife and young children behind, the wife will start receiving a basic pension of at least 1.01 million yen (S$12,400) a year until the children are 18.

In Canada, where pension benefits are calculated based on average yearly earnings, women who become full-time mothers can exclude their non-working years from the calculations, leading to higher pension benefits.

Some have called for similar schemes here. In 2012, Non-Constituency MP Lina Chiam suggested studying how pension or caregiver credits were implemented in Sweden and Germany. These credits help women who stop work to care for their families qualify for full retirement or pension benefits.

Britain last year decided to let non-working mothers and caregivers count their years spent taking care of family members towards the 30 years of work needed to qualify for a full basic pension.

It is worth noting that many of these systems adjust pension payouts for inflation, thus protecting retirees against consumer price fluctuations. Of course, these generous systems have drawbacks, including higher taxes. They may also inadvertently discourage women from working. But they do recognise the oft-overlooked economic contributions of full-time caregivers, and underscore the state's focus on family.

Such pension systems also ease pressure on single-income families, which are at greater financial risk of a sudden setback resulting from sickness or unemployment.

Singapore could allocate bigger CPF retirement bonuses or more Medisave top-ups for non-working parents with young children to boost their retirement savings. It could even go so far as to match the cash top-ups paid by family members into the retirement accounts of non-working spouses.

Given the labour crunch, another approach may be to find ways of encouraging women to stay in the workforce. The Government has recently made important progress in this area, including subsidising the cost of childcare and hired caregivers.

It has also introduced WorkPro, a scheme that encourages firms to hire workers who are older or rejoining the workforce after a break. Firms that tap the scheme get grants to design employment policies tailored towards these workers.

Firms also need to do their part by being more flexible in their hiring practices. They could use WorkPro to create back-to-work schemes for women re-entering the workforce after a break, as banks and law firms in the United States are now doing. This would provide an additional source of talent amid the tight labour market.

The responsibility to ensure the financial security of those who become full-time caregivers falls primarily on themselves and their families. But government and corporate assistance would certainly be welcome.

It could also help stem the precipitous decline in Singapore's birth rate - and that would be a good thing for the whole society.