The average amount a person on pension draws when he retires is >50% of his last drawn salary in other developed countries. A Singaporean would draw between 8% to 26% of his last draw salary (See report below) according to a research paper by Ng Kok Hoe. The reason for this? 68% of the of annual CPF contribution is spent on housing and 18% on health leaving only 14% for pensions.
Remember in Nov 2009 Mercer reported that the CPF is poorly ranked for inadequacy, and a govt expert came out to defend the CPF? [Link]. The govt expert's defense of the CPF was that home equity can be unlocked to achieve adequacy[Link]. Minister Balakrishnan recycled this argument in yesterday's debate with Ng Kok Hoe. This argument is incorrect because other countries don't require its retirees to lose their home to raised funds for retirement...and the fact that Singaporeans have to mortgage or sell their homes in order to retire properly reinforce the point that many netizens have raised that the cost of housing is too high in Singapore and it will lead problems later on. If home prices become unsustainable due to an ageing population which we will inevitably face, we will see a decline in home equity which will worsen the retirement problem.
Mar 29, 2010
Spirited debate on CPF
By Marissa Lee
THE workings of the Central Provident Fund (CPF) and whether it provided enough for retirement fuelled a spirited debate at Monday's inaugural Ee Peng Liang Seminar on Aged.
The spark came from a paper presented by National University of Singapore (NUS) social work graduate Ng Kok Hoe, which highlighted that a Singaporean would draw between 8 per cent and 26 per cent of his last drawn salary from the CPF at age 65.
Mr Ng, who is pursuing his doctorate in social policy at the London School of Economics, questioned if this was enough, as other countries seemed to hit 50 per cent or more through their pension schemes.
Mr Ng's paper showed that 68 per cent of annual CPF contribution is spent on housing, while health took up 18 per cent and pensions 14 per cent.
Debating it were Minister for Community Development, Youth and Sports Vivian Balakrishnan and Dr Lee Soon Ann, senior fellow at the department of economics at NUS. Dr Balakrishnan took the point there was no perfect balance to how CPF should be spent, but noted that Singaporeans had 'by and large got it right so far'.
As to whether the payout was enough, he said one should not discount the equity tied up in housing. There are schemes which allow Singaporeans to sublet their homes or downsize for cash, letting them 'extract liquidity out of equity', he said.