The first step to raising the retirement and re-employment ages beyond 62 and 67, respectively, has been taken, as the Government, unions and employers have agreed on the need for these changes.

The tripartite consensus is a "significant milestone", Manpower Minister Josephine Teo said yesterday, sharing an update given to her by the Tripartite Workgroup on Older Workers, which has been looking at this issue and others since May last year.

The group will now work towards an agreement on how far and how fast the ages should be raised, she said.

But the age from which Central Provident Fund (CPF) members can receive their payouts will remain unchanged at 65, even when the retirement age and re-employment age are raised, she added.

Mrs Teo told Parliament that the workgroup, to which she is an adviser, believes that a higher retirement age will motivate both workers and employers to invest in skills upgrading and job redesign for older workers, as people enjoy more years of good health.

The re-employment age also remains useful.

This is the age up to which firms must offer eligible workers re-employment, though they have the flexibility to change job scopes and employment terms.

The workgroup said that the increases in the retirement and re-employment ages should be implemented in small steps over time because employers will need to make considerable adjustments.

It is also critical to ensure employment arrangements remain flexible.

"Our economy is diverse, both in terms of business models and operational needs. Workers, too, have different preferences.

"We must therefore avoid being overly prescriptive when setting new rules," Mrs Teo said during the debate on her ministry's budget.

She said that other countries raising their retirement ages typically announce their intentions five to 10 years in advance, and the moves are relatively modest.

For example, Denmark's retirement age is set to go up from 65 to 68 by 2030, over 11 years.

Mrs Teo noted that in many other countries, it has been very hard to move on such issues.

"Deep distrust and division prevent people from focusing on the future... We must try and avoid that and do better," she said.

She added this was why the workgroup consulted workers and unions, as well as employers, to get balanced views.

Although there have been calls for the statutory retirement age to be removed, including one by Non-Constituency MP Daniel Goh during yesterday's debate, Mrs Teo said such a move would be "bad news" for workers.

If the retirement age is removed from the law, employers no longer have any obligation to keep their workers up to a particular age.

The workgroup will continue to look at CPF contribution rates for older workers, balancing the need to help improve retirement adequacy and ensure older workers remain employable, said Mrs Teo.

Responding to MPs Foo Mee Har (West Coast GRC), Png Eng Huat (Hougang) and Sylvia Lim (Aljunied GRC), who asked about retirement adequacy, Mrs Teo said that it is improving, with more than six in 10 active CPF members turning 55 last year being able to meet the Basic Retirement Sum of $85,500.

The issue will be discussed more fully when the workgroup makes recommendations on CPF contributions for older workers later this year, said Mrs Teo.

The ministry is also reviewing the WorkPro scheme to see whether it should be extended beyond June this year, said Mrs Teo.

The scheme covers the Job Redesign Grant and Age Management Grant, which fund efforts by employers to make their workplaces more age-friendly.