The Melbourne Mercer Global Pension Index (MMGPI) made the following recommendations concerning Singapore’s pension system in a recent report.
One, to raise the Central Provident Fund withdrawal because people are living longer, and, two, to allow non-permanent resident workers to make contributions.
The MMGPI’s 2018 review was released on Monday and showed that Singapore’s pension system is the best in Asia, a distinction the Lion City has occupied every year since 2008.
The index measures 34 pension systems around the globe. The Netherlands and Denmark take the top two spots on the top ten list, boasting good benefits that go along with grade A retirement income systems that show they are ready for a more aging citizenry.
Singapore ranks 7th on the list, receiving an overall grade of B, which is defined as “a system that has a sound structure, with many good features, but has some areas for improvement that differentiates it from an A-grade system”. Norway, Australia, and Finland also scored overall B scores. The B
The Lion City’s score rose from last year due to sustainability improvements. The country got an A for integrity, a B for sustainability and a C+ for adequacy.
Garry Hawker, Mercer’s director of strategic research, growth markets, said, “Having one of the most developed pension schemes in Asia, Singapore has continued to make improvements through the CPF by providing more flexibility to its members.”
The retirement income system of the country depends on the Central Provident Fund, to which all employed Singaporean residents and permanent residents (PRs) contribute.
According to Mr. Hawker, “The overall index value for the Singaporean system could be further increased by reducing the barriers to establishing tax-approved group corporate retirement plans; opening CPF to non-permanent residents; and increasing the age at which CPF members can access their savings that are set aside for retirement, as life expectancies rise.”
Governments around the globe are facing the challenges of aging populations, and policymakers have to walk a fine line between making sure retirees have enough, as well as keeping the pension system sustainable.
The average life expectancy in Singapore is 83.1 years, the third longest in the world. Japan takes the top spot at 83.7 years, while the Swiss are expected to live an average of 83.4 years.
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By June 2018, there were 1,200 Singaporeans from the ages of 100 and older. In 1990, there were only 50 centenarians, an increase of twenty-four fold.
The MMGPI noted that there are 1.37 million non-permanent residents in Singapore’s workforce, while Singaporeans and permanent residents in the workforce number 2.27 million.
Singaporeans take a keen interest in pension reform, which makes the government eager to improve its pensions system, according to DBS Bank group research chief economist Taimur Baig, who says that “Raising the age of first withdrawal from CPF is not a particularly radical concept, and can certainly be considered.”
Around the globe, as life expectancy has grown, the pension age has gone up as well. “In our view,” he added, “key would be to communicate the desirability of such reforms to the public transparently and incorporate Singapore-specific considerations first.”
Mr. Baig also said, regarding non-permanent residents joining the CPF system, that the country gives substantive tax-benefits to them for their retirement savings, via the Supplementary Retirement Scheme.