Median earners to benefit more from higher CPF contributions to boost retirement funds

(From left) Associate Professor Chia Ngee Choon of the National University of Singapore's Department of Economics, labour chief Ng Chee Meng, Manpower Minister Josephine Teo, Singapore National Employers Federation  (SNEF) president Robert Yap and Th
(From left) Associate Professor Chia Ngee Choon of the National University of Singapore's Department of Economics, labour chief Ng Chee Meng, Manpower Minister Josephine Teo, Singapore National Employers Federation (SNEF) president Robert Yap and The Straits Times News Editor Zakir Hussain during a roundtable on supporting older workers. The roundtable was organised by ST in partnership with the Ministry of Manpower, the National Trades Union Congress and SNEF.ST PHOTO: DESMOND FOO

SINGAPORE - Older Singaporean workers whose incomes are in the middle of their cohort will benefit the most from being able to work longer and have more retirement savings over the next 10 years, based on calculations by an economist.

Associate Professor Chia Ngee Choon, who has studied retirement adequacy, said on Friday (Aug 23) that recent moves to raise the CPF contribution rates for older workers will enhance the CPF Life annuity payout of median-income earners by close to 22 per cent come 2030.

Prof Chia, of the National University of Singapore's Department of Economics, was taking part in a roundtable on supporting older workers at the National Press Centre in Hill Street on Friday.

It was organised by The Straits Times, in partnership with the Ministry of Manpower, the National Trades Union Congress (NTUC) and Singapore National Employers Federation (SNEF).

Also on the panel were Manpower Minister Josephine Teo, labour chief Ng Chee Meng and SNEF president Robert Yap.

Prof Chia said the changes will help median-income earners accumulate enough CPF savings in their Special Accounts for old age.

If they choose to start their CPF Life payouts at age 65, they can technically be drawing down their annuity and continuing to get a pay cheque. And if they are re-employed until age 70, they will have accumulated additional savings.

"A quick calculation shows that they will be better off, and it will augment the original payout by almost 22 per cent," she added, noting this was based on a 4 per cent interest rate.

 
 
 
 

In his National Day Rally speech on Sunday, Prime Minister Lee Hsien Loong announced that the Government had accepted the recommendations of the Tripartite Workgroup on Older Workers to raise the retirement and re-employment ages, as well as CPF contribution rates, to help older workers build up their savings for old age.

The retirement age will go up from 62 to 63 in 2022, and eventually to 65 by 2030. The re-employment age will also rise from 67 to 68 in 2022, and eventually to 70 by 2030. CPF contribution rates will also be raised over the next 10 years or so for workers aged 55 to 70.

Prof Chia noted that lower-income workers will still need support in their silver years.

She said: "There is still an increase but they start off with a smaller base. This group of people still needs attention in terms of the Government helping them to improve their retirement adequacy."

Manpower Minister Josephine Teo acknowledged this point. She added that Singapore's social security is not just dependent on the CPF, citing home ownership, the Workfare Income Supplement for older low-wage workers and the Silver Support scheme for the low-wage elderly.

Panelists agreed that besides bolstering retirement adequacy, it is also important for workers to be upskilled and retrained.

The Tripartite Workgroup also recommended that employers engage mature workers in structured career planning sessions, and embark on redesigning jobs and systems as the workforce ages.

SNEF president Robert Yap said: "On an ongoing basis, more should be done in terms of how we... reskill and upskill to make sure our workers remain relevant for companies so companies can get that additional value from them."

NTUC secretary-general Ng Chee Meng added that while technical skills are important, workers should also pick up other skill sets, such as the ability to adapt.

 
 

"Some employers do look at age as a proxy of learning ability, productivity," he said, urging workers to "make sure that we stay healthy, we maintain our adaptiveness no matter what age we may be".

Looking forward to 2030, Prof Chia said she hopes there will be older workers in all industries across the various sectors.

"Right now we see older workers in lower-skilled jobs like cleaning tables in coffeeshops and the uncle who pumps petrol. Come 2030, I'd like to see that when I walk up to a pharmacy, there is an older worker," she said. "When we have more enlightened employers, people go for retraining and workers can adapt."

A fuller report on the roundtable will be published in The Straits Times on Tuesday (Aug 27).