A Closer Look at the Recently Announced Policy Change to Increase Retirement and Re-employment Age
During the National Day Rally 2019, Prime Minister Lee Hsien Loong announced that the retirement age and re-employment age will be raised to 65 and 70 respectively by the year 2030. With this change, the CPF (Central Provident Fund) contributions rates will also increase for older workers.
The Policy Change in a Nutshell
This change will be effected progressively in several stages. The current retirement age of 62, will be increased to 63 in 2022, before being raised to 65 by 2030. On the other hand, the current re-employment age of 67, will be raised to 68 in three years time, and to 70 by 2030.
The CPF contribution rates will also be tweaked accordingly to support this policy change. According to the Prime Minister, after the full changes to the CPF contribution rates are made, workers aged 60 and below will enjoy full CPF rates.
Currently, the full CPF contribution rate of 37 per cent (including both employer and employee contributions) is only applicable for workers up to 55 years old. This contribution rate will drop progressively as the age band increases (please refer to the table below).
Source: CPF Website – CPF Contribution Rates
Responses From Critics
However, there are some individuals who are quick to condemn this policy change. One such individual is Singapore blogger Leong Sze Hian, who posted on his Facebook that the hike in CPF rates will ultimately mean less disposable income for older workers.
It is difficult to fathom why Leong Sze Hian, who is supposedly a Harvard alumnus holding multiple professional qualifications and had previously headed several professional bodies, could make such a ludicrous and short-sighted statement.
Similarly, Paul Tambyah of the Singapore Democratic Party (SDP) also condemned the move, refuting the Prime Minister’s statement that older Singaporeans were concerned about difficulties in finding work beyond their retirement years. Surely, a highly paid professional like Paul Tambyah, has no need to seek employment beyond his retirement age. Does Paul really understand what the average Singaporean worker is going through? Or has Paul been living in the ivory tower for far too long?
Aging Population a Global Problem
Many countries today are facing the problem of having an aging population due to increased life expectancies. Inevitably, an aging population brings with it the rising fiscal burden of having to provide adequate healthcare facilities for the aged. Furthermore, with the abolition of the pension system, the livelihood of the aged workers beyond retirement also needs to be considered.
Source: United Nations Website
According to statistics, Singapore’s Old-Age Support Ratio (OASR) has been declining since the 1970s (please refer to the table below). The OASR is a ratio relating to the number of people who are capable of providing economic support to the number of older people who may be dependent on other’s support. The OASR is also a measure of the severity of an aging population.
Source: Singstat – Population Trends
Raising Retirement and Re-employment Ages a Viable Solution
The policy change to raise the retirement and re-employment age, is one such solution to an aging population. This is not a new or radical policy approach, as many other countries including Japan, US, Ireland, Hong Kong, and others, have also suggested or implemented the same policy change. The consensus of these countries is the same, that extending the retirement age not only benefits the aged workers, but also the country’s economy as well.
Source: Financial Times
Source: South China Morning Post
Source: Irish Times
An aged worker could continue producing income while working longer, and retain their productivity. Studies have shown that older workers working full-time or voluntarily employed part time were happier, and that late-life workers (i.e. those working past their retirement age) working full time or voluntarily part-time were happier and more satisfied with their health compared with their retired counterparts (Graham and Nikolova, 2014).
In a tight labour market, these aged workers could also address the short-fall in labour demand, as they already have a wealth of knowledge and experience to contribute to the workforce. In addition, these aged workers could also be retrained to take up roles in other industries which have a short-fall in manpower, thereby alleviating labour crunch issues.
To Round Off
One should not fall prey to individuals wanting to exploit an issue for their own political gain. Judge according to facts, and not based on the opinion of those seeking to further their own interests.
References
- Graham, Carol, and Nikolova Milena, 2014, Why Aging and Working Makes Us Happy in 4 Charts, //www.brookings.edu/blog/up-front/2014/03/28/why-aging-and-working-makes-us-happy-in-4-charts/ (Last accessed 26th Aug 2019).
- Singstat, 2019, Old Age Support Ratio, //www.singstat.gov.sg/modules/infographics/old-age-support-ratio (Last accessed 26th Aug 2019).
If not, why not give us a 'LIKE'
Ping me on WhatsApp