Speech at Debate on the President’s Address 2014
Mr Tan Chuan-Jin, Minister for Manpower, Parliament
- Madam Speaker, I rise in support of the motion to thank the President for his address.
- I’d like to briefly address some of the concerns that have been raised within this House, and outside this House, with regard to the CPF, Minimum Sum and so on.
- I would like to just state a couple of points. There are many things on the agenda, and the President has highlighted a range of programmes that the Government has been looking at the past few years, and certainly what we are looking at going forward. We are addressing issues for the immediate term, and importantly, we are also addressing issues for the long term.
- The long-term issues which preoccupy us and many countries today, are many, but of which, I would suggest two are particularly important. One is the issue of healthcare, and the other, in terms of retirement adequacy, via the pensions, pension funds and so on. And the reason is that longevity is setting in. People are living longer. Not just in Singapore, but elsewhere as well. How do you then contend with providing that adequacy in terms of healthcare needs, as well as retirement needs for the long term?
- These issues preoccupy many countries, and I think many countries that we look to today as models, are also beginning to relook their sums because the can that has been kicked down the road has finally come to rest for some of these administrations. The examples have been cited. In Australia as well, many promises had been made previously, but when we need to finance these expenses, suddenly, your balance sheets need to add up. The so-called right pocket and left pocket must balance because otherwise, how does the country fund it? In the same way, these are issues that we are grappling with. It is also important, because it is about providing assurance and peace of mind. These are exactly the areas where we do need to look out for our people.
- Now, what are the things that we need to cater for? I would say there are a couple of things. One, very quickly, is housing. That is important. For us, it is not just about the retirement stage, but at the early stage as well. How do we provide for a roof over people’s heads, so that they can build a home for their families? Not only just at the early stage of their lives, but also towards the end stage of their lives. How do we provide that? So, a range of measures have been put in place. We have been looking at improving the housing system, how do we continue to strengthen that. I raised that here because the CPF plays an important part. There are those who ask whether the CPF should also, apart from providing for retirement adequacy, be looking at housing adequacy. We believe that it is an important component and this forms part of that pillar.
- The other one, with regard to healthcare, we have talked about it in terms of Medisave, Medifund, MediShield and of course, MediShield Life. And this is particularly important. With regard to the Pioneer Generation Package, which is something that we have been working on for a long time, and the details that will be coming out, we wanted to make sure that we can provide that level of assurance for our Pioneer Generation, but at the same time, make sure that it is affordable. It is something that we can sustain, and not burden the next generation with, because we know from demographics, apart from the fact that we are going to live longer, we are also going to have a smaller tax-paying base. And that is our children’s generation. If we do not get it right, promises that are attractive, popular…but when you finally have to pay the bill, the bill will be borne by our children’s generation. So, we need to make sure that healthcare is provided for. Again I raise this because CPF plays a part, as through the CPF system, we are also looking out for the healthcare needs of the people.
- Of course, lastly, in terms of retirement adequacy, we have got a couple of components in terms of how adequate it is. There are three parts: One is wages, and that is important in terms of opportunities, jobs, wages, in terms of ability to upgrade, ability to draw better wages, increasing productivity. And the competitiveness of your country is important, so that not only do you have jobs available, you are also able to command better wages over time. That helps boost the accumulation of funds for retirement. And an important component of that is of course Workfare, which is something we top-up – particularly, for the lower-income groups. Workfare top-ups and other top-ups are added on periodically, especially for the lower income and also for other Singaporeans.
- Along with this is to build a climate where jobs are available and there is also an intensity of jobs where, as PM mentioned, there is the ability to work longer. Now, raising the re-employment age isn’t about forcing people to work longer, if you don’t want to work longer, you can actually stop working any time that you wish to. But the fact of the matter is that we are living longer, we are staying healthier and many people find that working is part of active ageing. And allowing people to work longer – the intensity of work, the length of period of work – is important in helping you accumulate funds for your retirement needs.
- Tied to the intensity of work, is also making sure that jobs are always available. We want to minimise unemployment, so you want to make sure, as often as possible, you do have work available. How do you create an environment where jobs are readily available for people, how do we help keep ourselves relevant through training and retraining, and of course job-matching through some of the efforts that we have put in through e2i and WDA, and so on.
- The third component is with regard to returns. Several members have talked about this, and I think this is a very fair concern – whether our returns are adequate – obviously, all of us here would like more than 2.5%, 4% and the plus 1% for the $60,000. All of us would prefer that. But where would it come from? How do we fund it? Several members have raised this, for example, Mr Zaqy, Ms Tin Pei Ling, Ms Tan Su Shan, Mr Eugene Tan, Mr Png Eng Huat. Many members of public from outside the house have also raised the issues of CPF interest rates and returns. Some have asked if the CPF interest rates should be higher in order to withstand inflation. It is a fair consideration. Meanwhile, others have advocated for higher returns, perhaps taking more risks with CPF money. But is that something that we want to do? We all know that with higher returns come higher risks. If we have funds, and there is a downturn in the market at the point of withdrawal, would it affect your returns? You can always smoothen it out, but that would always affect returns ultimately. But, the long and short of it is that what we are providing today, the 2.5%, 4% and the plus 1% extra interest on the first $60,000 in every member’s account, these are rates that are far higher than the equivalent rates provided by similar products out in the market today.
- But be that as it may, as the Prime Minister had mentioned and as the President has highlighted in his address, this is an area that we are looking at in terms of making sure that we enhance CPF Life. So, CPF Life is a system where you can provide payouts for the rest of your life. So you do not have to worry about your payouts running out. But how do you enhance that? I think that is important and that is something we’re looking at. We’ve been working on that together with the Pioneer Generation Package for some time and when the details are ready, as the Prime Minister had mentioned, it will be closer to the National Day Rally period - that is the kind of timeframe we are looking at in terms of announcing some of the details in terms of how we are going to enhance this.
- I would add that Mr Png Eng Huat highlighted this point – he cited an example about his father looking forward with excitement in the eyes upon turning 55 in the past. And I can understand that, but I think that excitement in the eyes would turn into a look of horror if we didn’t make adjustments because life expectancy is increasing. If we kept to what it had been, and we are going to live longer, it is not easy to plan for the long term and make sure that whatever savings we have can sustain for the long term. It would turn into a look of horror when you begin to realise that your money is beginning to run out. We think it is important, from a dignity perspective, individuals are able to provide for themselves as best as they can, which is why it is important for us to make sure that as you work longer, as you accumulate more, as you further enhance your return, you are also able to then provide for yourself through your payouts. But the more you draw earlier, what it means is that the payouts would correspondingly reduce. The more we allow spending on housing, it would correspondingly mean the less accumulated CPF in your CPF account and your payouts would correspondingly be smaller, and that would create a strain.
- As acknowledged by many and Mr Png has also acknowledged, in terms of investment, it is not easy. If there are people who can assure us that they can get high returns with low risks, do let me know. I would like to be their friends. I think many of us would like to be their friends. There are many people who believe they can get high returns, but it does not happen in real life. That is the reality we face. The key thing is that we are adapting to the situation because life expectancy is increasing.
- As a point of clarification, Mr Png Eng Huat is correct to say that our current life expectancy is 82.5. But what the actuarial experts are actually looking at is also the cohort life expectancy, that is, life expectancy going forward. This is going to increase. And that is an issue that many people are concerned with. As the cohort life expectancy increases, how do we deal with that? That is why CPF Life kicks in. More importantly, how do we make sure that CPF Life is a viable and attractive option to make sure that we provide that level of adequacy and peace of mind?
- In conclusion, I’d like to add that the CPF system remains a valid system. It is not the perfect system. There are trade-offs. Obviously, for those who believe that you should have full flexibility in using it; the CPF does not afford that, and for good reason. Because ultimately CPF allows us a peace of mind, as you do have a constant, regular stream of income at the point of retirement, and to ensure that that continues on rather than depending on somebody else or the state. But if you allow money to be extracted early and prematurely, there will be concerns. Ultimately, this is not about shifting risk to people, it is about shifting risks to our children’s generation. And I think the responsible thing to do – it may not be the most popular, but the responsible thing to do is to take into consideration these fundamental changes that are facing our society, facing many societies in the world, and grapple with it head on.
- How do we ensure that with longer life expectancy, we can continue to provide that peace of mind and assurance for all Singaporeans as they live longer? And that is the intent of the enhancements we intend to make with CPF Life, but that is also the purpose of why we are strengthening healthcare, and the way we are doing it. It is why we are continuing to ensure that housing remains an option for people, not only in terms of access to housing, but at the later stage of their lives. Should they need, they will have the means to rent out their house or rooms, whether they would want to downgrade, or tap Lease Buy Back, the Silver Housing Bonus or other measures that we are now presently looking at to also enhance, should you need to use that as a means to enhance your retirement adequacy as well. So at the end of it, the focus is about making sure that we provide for the welfare of our people, to provide for their assurance and to ensure that we can live long, but we can live well as well.
- Thank you very much.