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Oral Answer by Mr Hawazi Daipi, Senior Parliamentary Secretary for Ministry of Education and Manpower, to Parliamentary Question on Retirement Adequacy

Notice Paper No. 158 of 2012 for the Sitting on 14 April 2012
Question No. 417 for Oral Answer

MP: Ms Mary Liew

Question:

To ask the Deputy Prime Minister and Minister for Manpower whether there has been a study to assess the adequacy of CPF savings in meeting the retirement needs of the current cohorts of young workers, particularly for those in the lower and middle income groups, and whether the current CPF savings rate of 36% and its returns are adequate.

Answer:

  1. How well the CPF system provides for Singaporeans’ retirement is an important issue that was extensively addressed in MOM’s Committee of Supply debate in March this year.

    The CPF aims to help Singaporeans save up enough to meet a basic level of needs in retirement. For the lower-middle income group, the Minimum Sum (or MS) is sufficient to meet the typical expenditure needs of retiree households. For middle-income households too, although their spending in retirement is usually higher, the CPF will still form an important part of their retirement savings.
  2. Amongst those starting work today, it is projected that about 70% - 80% should be able to attain the current level set for the MS in cash, adjusted for inflation, by the time they retire. This is after withdrawal of CPF savings to buy a home, which they can continue to own and live in their retirement.
  3. For the minority among the younger generation of Singaporeans who are unable to meet the Minimum Sum in cash when they retire, their CPF balances would have been boosted through the Workfare Income Supplement, and the CPF would still have helped them own a home. They therefore have the option to monetise the value of their homes to supplement their retirement income, if they find their CPF savings and other resources insufficient.
  4. Our CPF system, at its current contribution rates and returns, is therefore broadly appropriate for most of the younger generation of Singaporeans. However, we have to expect that in each cohort, there will be a small segment that will not be able to save up enough for retirement. For this group, we need to help them through other means beyond the CPF.