CPF Board should change its tagline, says labour economist

Posted on 23 March 2012

“Saving for Retirement” slogan is not very possible for Singaporeans entering the workforce now.

HDB flat prices are too expensive for people to afford these days and this will affect their quality of life after retirement. True story.

The debate regarding Singaporeans’ Central Provident Fund savings rages on.

Recently, labour economist and associate professor, Hui Weng Tat, who teaches at the Lee Kuan Yew School of Public Policy, warned that tertiary-educated Singaporeans of today are going to face hard times as they get older and retire.

How so, you ask?

Well, those with diplomas or university degrees who enter the workforce in 2010 and estimated to earn approximately $2,500 monthly income and who go on to buy a five-room flat at $560,000, will end up piss poor by the time they retire at age 65.

The cause? Purchasing a large, expensive flat now or in the near future that will end up as a black hole into which CPF money flows into and possibly, never to come out again.

Ahem, I mean this isn’t exactly the whole truth, as money can be coaxed back out.

However, this is also the crux of the problem: What’s really screwed up these days is that housing prices are going so high as if you’re on weed and they don’t appear to be coming down any time soon or ever again, for that matter.

Historical data shows this to be accurate: Since 1995, the average selling price of a five-room HDB flat has doubled in non-mature estates.

On the other hand, new flats under HDB’s Design, Build and Sell Scheme (DBSS) was already reaching $800,000 last year in Tampines.

Within a decade and a half, it can be expected to surpass the $1 million mark.

The outcome? Future generations are really screwed as they have to work harder and can no longer afford such flats.

Plus, Professor Hui’s findings are worrying for another few related reasons.

The majority of tertiary-educated people may find it hard to sustain their lifestyles after retirement if they relied solely on monthly CPF payouts only.

Because how much did he say will that monthly payment be exactly?

Well, it’d be 22 percent of their last-drawn salary.

This, in English, basically means it is not even going to be enough to feed the family dog.

The international benchmark for allowing people to retire adequately, for your information, is pegged at 66 percent of the last-drawn salary.

This would provide dignity and grace in living out the final days of your life. That means no more cardboard-picking or putting your children on pay-per-view sites on the Internet to acquire paid viewership to help with the bills.

Plus, the current rules which state that the minimum sum of $131,000 needed to be left in CPF accounts for retirement needs is, in essence, a pipe dream.

More than half of those aged 55 years old and above today are already unable to meet this minimum sum.

And for this group, living in their current homes will then become their biggest problem.

Which is why the government came up with the nifty idea recently of encouraging older folks to downgrade to smaller flats to fund their retirement needs.

But that involves displacing old people from the place they grew old in. Which is evil.

Not only will older folks be displaced from their homes they grew old in, they can only monetise it when they are only reaching their twilight years.

So suddenly, you notice this whole system of public housing looks like shit, doesn’t it?

This is a 60-reduction of the original published in The Straits Times on March 21, 2012.

This post was written by:

- who has written 2685 posts on New Nation.

Wang Pei can be considered a new citizen of Singapore. She has been here all her life, just that her environment's changed beyond recognition.

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  • http://www.facebook.com/candilinlee Lee Candilin

    At least in Singapore, someone is willing to admit that the future is bleak. The truth is every industrialised nation is broke, from America, to Europe to Japan. These governments are under tons of debt even as they dole out pensions, social securities and many other niceties to a growing population of seniors. Our kids are going to be the ones who will get it worst. Let’s face it, in maybe a decade of two, there will be nothing left for them, except more burden and tax. It is time we, and our seniors, learn to demand less so that we can leave something behind for our children.

  • (Un)Affordable HDB

    Well said. We have one short-ass to thank for this. His (not cheap, not expensive) but “affordable” pricing has screwed up several generations of Singaporeans. They will probably  face a poor and miserable retirement if they are lucky. It not so lucky, they will probably have to work till they drop dead

    • James Tan

      To unaffordable: For your info it did not start with MBT . Affordable housing started with LHK. MBT jacked it up further. In 1995 prices were also sky high and the public was calling for control but ignored and new Hdb prices went up by $100k everywhere.In December measures were introduced to control the private market,prices collapsed and in some places,went down by $500k. Genuine home buyers were screwed. In 1997,measures were introduced twice to control the hdb resale market,within a week,prices collapsed by $100k. It only recovered in 2007 but not to the level of 1996. Now the market is running away again thanks to government manipulation. Their idea of $80k studio apartment for 30 years rental for old folks 50 years and above is not really affordable if calculated on 99 years rental. It really cost $264k which is the price of a 3 room hdb resale flat in new estates. Would anyone in his right mind exchange his 3 room hdb resale flat for a shoebox unit and pay the same price even though you get to monetize it? Anyway it’s their idea of affordability and as they say beggars cannot be choosers.

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  • pyng

    Now is not too late to arrest PROBLEMS FOR SINGAPORE if there is any, if Government of the day will diclosed what is the true public debt of SINGAPORE. What we have of Temasek and GIC, will it be able settle the PUBLIC DEBT OF SINGAPORE BY THESE TWO ENTITIES. IS CPF ABLE TO FULFILL ITS CITIZENS IN FULL SHOULD THE DEMAND ARISES. AND AM VERY SURE MOST OF MY FELLOW SINGAPORE CITIZENS WILL BE INTERESTED LIKE ME TO BE ENLIGHTENED OF THE OUTCOME. 

  • Gas

    What if the government has no intention of giving us our CPF monies back? All pension schemes are ponzis since they take new money to pay the old and when the former dwindles because of low population growth, the scheme crashes. I would not put the blame on PAP. They did what they knew best at that moment (60’s and 70’s).

    In the last 20 years, the government pushes property prices up to make a lot of money and kick the CPF can down the road. Now that we know about this, what we do matter more than making someone take the blame. Why buy big when you can do with small for now? Why upgrade now just because others are doing so? No one beats the market. It has a way of coming back at us. I believe in the long term prospect of our property market, but I am talking 30 – 50 years. A long term bull run is not a daily or even yearly one.

  • pyng

    It is so very obvious that Government of the day Have No Intention of paying back all your money in the medisave. Otherwise they would not have implemented into Law that they will only pay to the Children when MEMBERS PASSES AWAY. 
    The saying goes, when I am still alive and still jumping you won’t even want to pay, what would you think you when I am dead. 

  • http://www.facebook.com/alex.har Alex Har

    The capitalist system has over the last 3-4 decades have grown based on asset inflation  vs productivity improvement. With all the advances in technology, people have just goofed off…hence all the money in the world is going to pay for capital and technology and the entrepreneurs that own them with little going to the ordinary people in the labour force. 

  • The Pariah

    “Lagi better” – PAP Govt even have an EN BLOC SALE LAW that empowers 80% of your neighbours to sell your condo family home despite your violent objection.  In fact, the day you collect the keys to the brand new condo (ie, upon TOP date) , you can go en bloc and demolish if 90% of your neighbours think it is profitable!