Lee to Add Funding Options for Singapore Retirees as Nation AgesSharon Chen
Singapore will broaden the options for its citizens to monetize state-subsidized homes and may offer greater flexibility for retirees to draw funds from the mandatory savings program, Prime Minister Lee Hsien Loong said.
A plan that lets elderly citizens sell part of their leases on smaller Housing & Development Board apartments back to the government will be extended to so-called four-room flats, or those that are about 968 square feet in size, Lee said. The homes developed by the government are usually sold with 99-year leases, and buyers typically fund them with the state-run pension plan called Central Provident Fund or CPF.
The home is a “valuable little pot of gold to draw on, if they need to,” Lee said in the televised National Day Rally speech late yesterday. “The CPF and your house go hand in hand to provide for your retirement.”
Lee’s government has come under pressure in recent months to review the CPF, with at least two protests this year about the system. Only one in five Singapore investors is confident their CPF accounts will meet their retirement needs, with 47 percent indicating the savings will be insufficient, according to a survey by Manulife Financial Corp. released this month.
The government will set up an advisory panel to study changes to the CPF, Lee said. While retirees are able to draw from their pension savings at 55, at least S$155,000 ($124,000) must be kept in the account to provide a steady stream of income for their old age. That amount will be raised to S$161,000 next year, said Lee, who doesn’t expect further changes, adding that the current sum is “far from excessive” with part of the funds backed by their properties.
A way to add flexibility could be to allow those 65 and older to withdraw as much as 20 percent of their savings in a lump sum for life-long ambitions, such as taking a vacation or pilgrimage, or if they face circumstances such as a family emergency, Lee said in the speech, about a week after the country celebrated its 49th year of independence.
“It is to some extent listening to what Singaporeans have to say about having a bit more control over their pension,” said Song Seng Wun, an economist at CIMB Research in Singapore. “This is the new political reality. It’s kind of like a father who realizes the kid has grown up and can be trusted with managing his own money now.”
Lee’s administration has increased social spending in recent years as the population ages, after decades of policies that emphasized self-reliance over state-funded welfare. Singaporeans are grappling with rising living costs, infrastructure strains and increased competition for jobs, education and housing.
Singapore will spend S$9 billion on health care and other benefits for the elderly in a so-called Pioneer Generation Package, Finance Minister Tharman Shanmugaratnam said in his budget speech in February. The government will set aside funds for about 450,000 citizens who were at least 16 years old in 1965, when the country gained independence.
Lee, who completed his 10th year as prime minister on Aug. 12, said yesterday the government will introduce a yearly payout for low-income Singaporeans starting from age 65. The number of elderly will triple to 900,000 by 2030, according to the National Population and Talent Division.
Lee encouraged retirees to find ways to monetize their investments in public housing, such as leasing out their properties and moving in with their children, or moving to a smaller and cheaper home. More than 80 percent of Singapore’s resident population live in government-developed apartments, which are sold with subsidies, according to the Housing & Development Board’s website.
The government is also planning to revitalize the city’s western Jurong area by transforming the suburb’s public parks and building a new science center, Lee said yesterday. The area has also been proposed to Malaysia Prime Minister Najib Razak as a possible location for the terminal of a planned high-speed rail connecting Singapore and Kuala Lumpur, he said.