Speech at Opening of the Retirement Ready @ My CPF Roadshow
Dr Ng Eng Hen, Minister for Manpower and Second Minister for Defenc, Marina Square Central Atrium
Mr Koh Yong Guan, Chairman of CPF Board
Ladies and gentlemen
Since the National Day Rally speech by PM, many Singaporeans are now more aware of how much longer they can expect to live. This is a good outcome, because of our high standards of health care. But we must help elderly Singaporeans make provision for their retirement needs, so that they can have peace of mind for their golden years. This is the main purpose of the recently announced CPF changes.
2. When the CPF system was introduced in 1955, Singaporeans could expect to live on average till 61 years. Those who lived beyond 65 could count on 23 residents aged between 15 and 64 to support them. Today, we can expect to live longer - to about 80 years. Of those age 62 years today, half of them will live beyond 85 years. We will also have much fewer younger people to support the elderly. The support ratio is now only 8, compared to 23 in 1960 and will further drop to 4 by 2030. Longer lives, lower fertility, and smaller families will mean that individuals will have to rely on their own savings and for longer to fund their retirement periods. There will be less young people to support older residents.
3. The changes announced by our PM will help address this problem and better prepare us as an ageing population. The re-employment legislation and the increase in Workfare amounts will help older residents work longer. Now that everyone knows that new laws will be introduced, businesses have begun to take more seriously how they will re-employ and deploy their staff. This is good as it shows that they realise the need to prepare early before legislation kicks-in. Better prepared companies for the new law will experience less disruption then.
4. The increase in CPF returns and the later draw-down will make a big difference and increase retirement sums. An additional 1% bonus interest rate on the first $60,000 of CPF members' combined accounts means an increase in 30% of interest payments for this sum. CPF Board is looking into providing online calculators to help members calculate how much interest they would get under the new structure. For those affected by the later draw-down or who voluntarily defer their draw- down, a bonus will be given for each year of deferment. This will further increase retirement sums and for most workers this will translate to many more years of income support after they retire.
5. From feedback received, I am glad that most Singaporeans understand why these changes are necessary. They see themselves and those around them ageing. Foreigners who come into Singapore also notice our greying society. The Government is mindful of the concerns that Singaporeans have shared over the CPF changes. I would like to reassure Singaporeans that these changes will be progressively put into place to allow everyone time to adjust.
6. The re-employment legislation will start at latest on 1 Jan 2012. But the tripartite partners are not waiting till then and many big companies have already voluntarily adopted re-employment legislation. The increased Workfare Income Supplement – increases for those above 55 and the highest increases for those above 60 – will start immediately when the scheme starts next year. As the first increase in drawdown age to 63 will occur in 2012, we have a six-year head start to keep workers working for longer. We will only increase the DDA to 65 years, 11 years later in 2018. We expect that employment rates for older workers would have improved significantly by then.
7. Longevity insurance to make sure that those who live beyond 85 years will get a steady income will only apply to those aged 50 and below today. We have time to study this thoroughly. We will consult widely to understand the concerns of CPF members. We will include industry experts to help us devise efficient ways to stretch the premiums for this longevity insurance. That way, only a small part of the members' minimum sum needs to be set aside, and he can still continue to draw-down most of it from 65 to 85.
8. CPF members can do their part to improve their retirement adequacy by actively planning for their retirement. Your decision to work, the size of the flat that you buy, and the risks that you take on for your investments will affect how much savings you will have when you retire. The launch of Retirement Ready @ my cpf is therefore timely. This interactive, one-stop, online resource is the first of its kind to be made available for Singaporeans to do their retirement planning. Retirement planning is an ongoing process as members' retirement aspirations may change with increase in salary or as their lifestyle improves. Retirement Ready caters for this with features to allow the users to keep track of their retirement plans and even send reminders to them to review their retirement plan regularly.
9. These changes for our CPF system will improve social security for elderly Singaporeans. Let's work together, for longer so that we can approach ageing with confidence and purpose.