Thursday, 21 August 2014

NDR 2014: Reactions to National Day Rally

Adding a first pillar to old-age income support
By Christopher Gee And Yap Mui Teng, Published The Straits Times, 19 Aug 2014

THE World Bank Report of 1994, titled Averting The Old Age Crisis, introduced the concept of three fundamental pillars of an old-age income security system.

The first is a basic tax-financed, means-tested or flat pension provided by the state to reduce old-age poverty; the second is a fully funded, forced-savings pillar that provides benefits to those who contribute; and a third pillar consists of voluntary occupational or personal savings plans to provide additional protection for people who want more income and security in their old age.

Prime Minister Lee Hsien Loong's announcement of a Silver Support scheme in his National Day Rally speech is a step towards the introduction of a basic, first pillar to complement Singapore's well-established "second pillar" system of the Central Provident Fund (CPF).

While further details of the scheme would be provided in the Budget speech next February, PM Lee did indicate that this scheme would pay an amount yearly to eligible low-income elderly Singaporeans aged from 65 years to help them with their living expenses.

Several participants at the Institute of Policy Studies' Forum on CPF and Retirement Adequacy, held on July 22, raised the issue of specific groups that were not well-served by the CPF system. These were groups with limited, irregular or no income during their lifetimes, in particular non-working women and the disabled.

Hong Kong's Old-Age Living Allowance (OALA, or colloquially "fruit money") was brought up as an example of what could help such groups. This scheme pays a monthly payment of HK$2,285 (about S$367 at today's exchange rates) to elderly Hong Kong residents aged 65 years and older who are in need of financial support. Income and asset tests limit OALA payouts to those households with income less than half the current median household income in Hong Kong.

The National Survey of Senior Citizens 2011 showed that 40 per cent of Singaporean residents aged 65 to 74 had monthly income of less than $1,000, derived mainly from transfers from children and their own personal savings (outside of the CPF).

This is significantly less than the $2,000 post-retirement monthly income that the majority of the audience at Sunday's National Day Rally believed would be required by the hypothetical Mr and Mrs Tan in the PM's financial planning case study in his speech.

It's also lower than the $1,601 average monthly expenditure of households where the main income earner was above 65 years in the Household Expenditure Survey 2007/08.

The Silver Support scheme can, thus, play a role in bridging the gap between income and expenditure for the over-65s.

The scheme should also be well within the country's fiscal means. As an illustration only, if the Silver Support scheme payout was $4,800 a year to each eligible senior, the total cost of such a scheme to an eligible cohort of 162,000 (40 per cent of Singaporean residents aged 65 and above last year) would amount to $778 million annually.

While this number could rise substantially in the future as the population ages, even a quadrupling would still put the cost of providing for the Silver Support scheme at less than half of the cost of this year's Pioneer Generation Package.

Great care should be taken in establishing the appropriate level for the Silver Support payout so as not to increase moral hazard or dissuade family members from assisting in the financial support of their elderly parents.

But the sheer fact that the Government is embarking on this Silver Support plan - which forms the "first pillar" in old-age income support - represents a most welcome strengthening of the country's social safety net.

Mr Christopher Gee is a research fellow and Dr Yap Mui Teng is a senior research fellow at the Institute of Policy Studies, National University of Singapore. Their research focuses on issues related to demography and the family.

'Widen net of support scheme for seniors'
Academics, social workers say many in need still fall through the cracks
By Amelia Tan, The Straits Times, 20 Aug 2014

THE new financial support scheme for the elderly should cover a wider group of Singaporeans and not limit itself to just the poorest of Singaporeans.

This is because many older Singaporeans still fall through the cracks despite the number of social policies around, said social workers and academics.

This group would include low-wage workers, housewives, singles and widows, they said.

On Sunday, in his National Day Rally speech, Prime Minister Lee Hsien Loong introduced a new Silver Support scheme for needy Singaporeans when they turn 65.

He said the money will benefit the 10 per cent to 20 per cent of Singaporeans who have not saved up enough in their Central Provident Fund (CPF) accounts, do not own flats and are without family support.

The annual bonus is meant to supplement the payouts from the needy old folk's CPF accounts.

Mr Lee said details will be revealed in the Budget next year but social workers and academics are hoping that the scheme will be an inclusive one.

Dr Kang Soon Hock, head of the social science core at SIM University, said it was clear that the Government is aiming to help a large group of people.

"Ten to 20 per cent is not a small number. It is a clear indication that the Government is casting the net wider to beyond those under public assistance," he said.

There are around 3,000 people who receive public assistance. A single-person household gets up to $450 a month.

Still, there are many thousands of Singaporeans who do not get public assistance but continue to be in dire need of support, said social workers.

Mr Wee Lin, chairman of Sunlove Abode, a non-governmental organisation that takes care of needy Singaporeans, said the scheme should be extended to all elderly people living in rental flats.

"I know some families who cook a can of sardines and eat it for lunch and dinner. Sometimes they don't turn on the electricity to save money. That is how poor they are," he said.

Another group deserving of help are elderly low-wage workers, said Dr Lily Neo, a Member of Parliament for Tanjong Pagar GRC.

"These aunties and uncles earn around $1,000 for jobs such as cleaners or by working in coffee shops. They do not have much savings," she said.

Similarly, Dr Kang hopes to see the scheme extended to women in their sixties and older.

These women do not have much personal or CPF savings because they stayed at home for many years to raise families.

Dr Kanwaljit Soin, a former Nominated Member of Parliament, went one step further and said the Government should introduce a pension for all Singaporeans above a certain age, instead of limiting it to a specific group.

Her suggestion is to give all Singaporeans above 80 years old $200 a month.

This could set the Government back around $200 million a year.

But Dr Soin said: "That is not a lot of money for a rich country like Singapore. The fact is these old people will spend the money on food, transport or on their grandchildren."

At least I can relax a bit with extra cash: stroke victim
By Joanna Seow, The Straits Times, 20 Aug 2014

SOME months, Madam Mary Chau has to skip paying her utility bills when she needs to top up her ez-link card, buy a phone card or have her hair cut.

She gets $449 a month from Central Provident Fund payouts, but the money is barely enough for her.

After paying $33 for rent, $19.50 for conservancy charges, and $110 for utilities, the bulk of the money goes to buying her meals and essential items.

These consist mainly of noodles, vegetables and eggs. She also uses the money for sundries such as soap, detergent and cat food for her feline companion of 14 years.

"At the end of the month, if there is some money left, I can buy meat or fish for soup," she said. "Sometimes, I buy roast duck and share it with the elderly residents downstairs."

The 61-year-old divorcee, who lives in a one-room rental flat in Jalan Kukoh, had to stop working since a stroke 14 years ago left her with limited mobility in the left side of her body. Her last job was as a restaurant supervisor.

"If there's not enough money, (then I) also cannot help it," she said in Mandarin. "Who will hire me?"

But while she has struggled to find employment, the stroke has not stopped Madam Chau from continuing to help those less fortunate than her.

As part of the Caring Assistance from Neighbours scheme, she visits her elderly neighbours three times a day to make sure they take their medication.

"It's only me at home, so instead of doing nothing, it's better for me to go help others. They treat me like a daughter and I treat them like a mother or father," she said.

She rarely sees her own son and daughter, although her daughter gives her money if she needs to see the doctor for her high blood pressure.

When asked if she was happy that the Government would give her extra cash through the proposed Silver Support scheme, she smiled.

"$200 would be enough. At least I can relax a bit," she said.

First-hand know-how versus book smarts
By Tan Chin Hwee, Published The Straits Times, 19 Aug 2014

I HAD the great privilege of sitting in the front row at the National Day Rally. From there, I could feel the emotional connection and sincerity conveyed in the Prime Minister's speech.

Making Singapore more inclusive, and more open to non-graduates to succeed in the workplace, will be a pivotal shift.

It was Keppel CEO Choo Chiau Beng and team who interviewed me in 1991 and gave me the first Chua Chor Teck Scholarship despite my not being an engineering student and not having terrific A-level scores. I went on to study accountancy at the Nanyang Technological University.

As the case of Keppel shows, the tone has to be set right from the top. It's great that PM Lee said the civil service will merge some graduate and non-graduate career schemes and promote good-performing non-graduates into roles normally reserved for graduates.

But even with the PM's sincere and visible support, bureaucrats themselves need to embrace this new vision, and have a change of mindset and give non-graduates a chance.

Many of the administrators won scholarships to the best universities in the world.

When you award a 19-year-old a scholarship and tell him that he is the best in the world, he will start thinking and acting as such soon enough.

Don't get me wrong: I am the last one to demean scholarship students and their very important administrative work functions as I have enjoyed three sponsorships that changed my life and allowed me educational stints at two Ivy League colleges.

But while book smarts are good, the key is the motto of Japanese car maker Honda: "sangen shugi", which means knowledge has to be acquired first-hand.

On-the-job training is more important than being book smart and having a good degree, even in the finance industry, where human capital is over-touted.

At the end of the day, the simple objective yardstick for any parent or employer is what kind of good jobs can people in our society reach for, especially if they are not university graduates?

My parents were trail-blazers in this regard. Although we lived in a one-bedroom flat, they encouraged my sister, brother and me to pursue our interests. I went into finance, my sister chose a career in the arts, while my brother studied and pursued a career in music. My parents did not worry about what jobs their children would do. Instead, they encouraged us to pursue our passion and to develop deep skills in our areas of interest.

The answer to whether workers of all levels of education have good jobs has to come not just from the Government, but from employers, parents and society.

When we accept and reward people for their skills and performance, not paper qualifications, then we would have created many pathways to success.

The writer is a professional fund manager who sits on the boards of several non-profits including Lien AID.

Making vocational ladder on par with the academic
By Gillian Koh, Published The Straits Times, 20 Aug 2014

THE Prime Minister's National Day Rally speech on Sunday was not an annual report delivered by the chief executive officer of some commercial entity.

It was full of heart and soul, undergirded by a sense of informed realism about what it will take for Singaporeans to see their lives improve and the nation prosper.

Stories of three Keppel Offshore and Marine employees anchored the idea of hope.

Mr Lee Hsien Loong said Singapore should be a place where an individual's merit - or lack thereof - at ages 16, 18 or 25 will not prejudice his or her chance of progress in later life.

Mr Lee pledged that his Government would ensure that performance and contribution would draw their own rewards.

Deputy Prime Minister Tharman Shanmugaratnam had coined the term "continuous meritocracy" to refer to a system where a worker can progress on merit, regardless of his initial qualification. When increasing numbers of Singaporeans find that this is true, the common criticism that "meritocracy" is really only a fig leaf for "elitism" in Singapore will be debunked.

The desire to provide hope that "anyone can improve his life if he works hard" and that opportunities to upgrade will remain open throughout one's career is reflected in the Government's effort to level up the vocational education track from being a poorer cousin to the academic one, to one that is on par with it.

The Government is about to give greater traction to this commitment. Mr Lee said that Mr Tharman, a former education minister, is to head the effort to implement the recommendations of the Applied Study in Polytechnics and ITE (ASPIRE) committee, tasked to review tertiary technical education.

At a seminar held by the Institute of Policy Studies (IPS) with Swiss think-tank Avenir Suisse in October last year, participants learnt that the education and training system in Switzerland is guided by the principle of "permeability".

Swiss youth and workers - recognised for making up a world- class workforce known for its productivity, innovation and creativity - are able to toggle between three different paths through their lifetimes.

These paths are the baccalaureate system that leads to university; the upper secondary specialised school system that leads to training for specific professions like teaching; and the vocational education and training track that incorporates career-shaping apprenticeship programmes.

People on the third track are not severely disadvantaged by way of pay or career progression compared to the others. They also enjoy as much high standing in the sectors they are found in as the people who have taken the other two tracks.

One Singaporean commentator, ITE College principal Ang Kiam Wee, said that the three "Ps" - pay, progression and pride - had to be addressed to make a system like the Swiss one a reality in Singapore.

Perfect parity between the vocational and academic tracks may be difficult to attain. But with the blurring of lines through the mainstreaming of practice-oriented degree studies in our universities on the upside, and sadly, the degree inflation that is taking place in the more "popular" academic courses globally on the downside, trends in the world of work may close that gap.

What must also change is the Singaporean practice of human resource management or talent management. The practice of performance appraisal, the development of all manpower as talent, and the ability to integrate talent from all backgrounds - vocational, academic, degree holders and non-degree holders - must also be sharpened.

At an IPS Corporate Associates meeting last month, a leading human resource practitioner, Ms Karen Cariss, explained that the old Western talent management rule of 70/20/10, in which 70 per cent of skills development comes from on-the-job experience, 20 per cent from feedback and 10 per cent from formal training, should be replaced. In younger, dynamic Asian settings, the emphasis should be 50 per cent from skills development expected from on-the-job training, 30 per cent from feedback and 20 per cent from formal training.

Past surveys suggest that human resource and management practices can be very different between multinational companies and those based in Singapore.

Improvements should be made in the areas of structured programmes to ensure that on-the-job learning is effective, and that mentoring provides precious guidance for career development and effective integration of one's workforce as mentioned above.

This will give meat to the "cultural change" that allows Singapore to transcend the mind-forged manacles that hold other societies back.

There is no right caste, class or race that you have to be born into to succeed in Singapore; nor might past infirmities or disability stop you.

Dr Gillian Koh is a senior research fellow at the Institute of Policy Studies researching politics and governance in Singapore.

PM's account not overly rosy

THE commentary ("CPF changes do not go far enough"; Tuesday) misunderstood Prime Minister Lee Hsien Loong's comments on retirement adequacy at Sunday's National Day Rally.

The worked example of the hypothetical Tan family was not meant to show that $2,000 per month will definitely be sufficient for retirement - $2,000 was the majority view of the audience, but for each individual, the actual figure would come down to a matter of personal needs.

The conclusion that PM Lee drew was that the Central Provident Fund (CPF) Minimum Sum of $155,000 is not excessive. And if Mr Tan uses his flat for half the Minimum Sum, then the income he will get from CPF Life is only $600 per month, much less than the $2,000 per month he would need.

Far from painting too rosy a picture, PM Lee emphasised the need to recognise trade-offs in planning for retirement. For example, when explaining the option of increasing CPF Life payouts to keep up with the cost of living, PM Lee cautioned that this would come at the cost of lower payouts in the early years.

As he pointed out, CPF and home ownership work hand-in-hand to provide for Singaporeans in retirement. The Government helps citizens to own their homes, and pay for them using their retirement savings in the CPF, so that the home can be a nest egg for them to draw upon in old age.

This is why we have to see the property as both a home and an asset.

Having reached the end of their working lives and with their children having formed families of their own, our seniors' needs will tilt away from housing towards retirement. At this point, options to unlock the value in their homes become valuable.

By extending the Lease Buyback Scheme to four-room flats, the Government seeks to provide an additional option to more Singaporeans. This effort should not be dismissed offhandedly based on current take-up rates.

We do not expect all eligible Singaporeans to take up the Lease Buyback Scheme. Those who wish to bequeath their homes are free to do so, especially if their children support them or they have other sources of retirement income.

The fact that most eligible home owners have not taken up the Lease Buyback Scheme may well be a positive sign that most seniors do in fact have other support, and are adequately provided for in retirement.

Chong Wan Yieng (Ms)
Press Secretary to the
Minister for Manpower
ST Forum, 21 Aug 2014

CPF changes do not go far enough
By Hui Weng Tat, Published The Straits Times, 19 Aug 2014

THOSE Singaporeans who have been anticipating announcements of significant changes to the Central Provident Fund system to improve retirement financing may be forgiven for feeling disappointed by Prime Minister Lee Hsien Loong's National Day Rally on Sunday.

While the Silver Support bonus payment for poor elderly is to be applauded, the other announced changes do not address the fundamental source of concerns about retirement adequacy.

The extension of the Lease Buyback Scheme to four-room Housing Board dwellings would increase the number of households which are eligible by another 363,000. This compares with the approximately 230,000 three- room and two-room HDB dwellings currently eligible for this scheme.

However, it is not clear if this will make any significant difference to the popularity of the scheme. The low take-up of the current Enhanced Lease Buyback Scheme already provides strong hints that the typical Singapore family would prefer to have the option of bequeathing their property to the next generation.

Under the Lease Buyback Scheme, they sell back to the Government the last decades of the flat's 99-year lease in return for a lump sum and monthly payment. They can continue to live in the flat but can't bequeath it to their children.

For four-room HDB families with a larger family size, such bequest intentions would be even stronger. The continuing high property price, which reduces the affordability of housing purchase of the next generation, would only further strengthen such bequest motives.

PM Lee also seemed to adopt an overly-optimistic view of current retirement adequacy.

Take the example he cited, of a Mr Tan, whose monthly pay is $4,500. Mr Tan's current working income would place him around the 25th to 30th percentile of the Singapore household income ladder. According to the Department of Statistics (DOS), in 2013, the average monthly household income among resident employed households for the lowest 10 per cent of resident households was $1,711.

The $2,000 retirement income projected for Mr Tan, if paid out today, would therefore put him in this group of households with an income considered to be enough for basic or subsistence living.

The prospect of such retired households being forced down to the lowest decile on retirement certainly does not paint a very optimistic view of adequate retirement living in Singapore. And with inflation, the real value of the $2,000 Mr Tan is due to get in 10 years' time would be even more paltry.

The announcements in the Rally also did not deal with the major issue of protecting CPF Life retirement income from inflation. CPF Life is a national annuity scheme available to CPF members when they turn 55, which promises a monthly payout of about $1,200 from age 65 for life, for those who meet the current Minimum Sum in cash.

Latest available DOS data indicate that the average household expenditure of the lowest 20 per cent of households in 2007/08 is around $2,130 in current dollars. This will certainly be much higher 10 years from now, at between $2,600 and $2,850 (if inflation rate is between 2 per cent and 3 per cent).

A monthly payment of $1,200 would be barely enough to offer households even subsistence level retirement living. Hence the urgent need to keep CPF Life income inflation-adjusted so that real purchasing power is maintained.

More fundamentally, the critical issue of Mr Tan not having enough retirement savings was also not addressed. In the case cited, Mr Tan did not have the Minimum Sum of $155,000 in his CPF account. Pledging his property in lieu of half the Minimum Sum would give Mr Tan a CPF Life income of $600 per month when he reaches 65 years of age.

The Lease Buyback arrangement would add an additional $900 a month, giving a total of $1,500 a month which will be below current subsistence living level.

The critical question really is: Why did Mr Tan not even have $155,000 in his account? Has he used up too much of his CPF savings for housing?

If the withdrawals for housing are too high, is it not prudent and necessary to institute policy measures to tackle the problem of insufficient savings comprehensively at its source? That makes more sense than dealing piecemeal with post- haste measures of trying to augment retirement income through unlocking the value of property.

What of the increased flexibility of allowing lump sum withdrawals of the Minimum Sum at age over 65 years? To my mind, that is merely a cosmetic change that seems to pander to popular demands. Allowing this may not be in the best interest of most CPF contributors as any lump sum withdrawn means correspondingly lower amounts of retirement income for the individual.

It does not address the fundamental issue of the retiree not having enough in CPF savings.

PM Lee announced that an advisory panel will be set up to study CPF changes. Its priority should be changes to ensure that savings are sufficient for retirement. Attention has to be put on the savings accumulation stage, not just the withdrawal stage.

Singaporeans want the assurance that they can retire in their existing homes without downgrading or being deprived of the ability to bequeath wealth to the next generation. The current younger generation of CPF contributors must also have greater confidence that CPF savings will be enough for retirement.

The writer is an associate professor at the Lee Kuan Yew School of Public Policy, National University of Singapore.

Experts worried about retirees squandering CPF monies
By Xue Jian Yue, TODAY, 20 Aug 2014

While they acknowledged the need to provide flexibility in Central Provident Fund (CPF) withdrawals, especially for those who need cash for necessities, experts cautioned that allowing lump-sum withdrawals — albeit with limits — could lead to members squandering their retirement savings.

This concern was echoed by several Members of Parliament (MPs), although they said, given the desire for greater control over their CPF monies, the Government must trust CPF members to use their savings wisely.

To mitigate the risk of squandered monies, they suggested that withdrawals be limited to specific groups, allowed only on a case-by-case basis, be subject to caps and permitted only after counselling.

On Sunday, Prime Minister Lee Hsien Loong announced at the National Day Rally that CPF members would be allowed to withdraw part of their CPF savings in a lump sum when they need to, subject to limits and only during retirement.

Mr Alfred Chia, chief executive officer of financial advisory firm SingCapital, said the withdrawals could be done on a case-by-case basis.

“Before they do the withdrawal, the CPF Board can actually consider (doing) counselling, to understand what they need the funds for, and remind them of the importance of retirement funding,” he said, adding that applicants could be assessed based on their household income.

Mr Christopher Tan, CEO of financial advisory firm Providend, was “not very comfortable” with allowing lump-sum withdrawals, arguing that it would result in smaller payouts thereafter. “I let you take out, for example, S$10,000, S$20,000, and you are left with only a bit, (then) the CPF LIFE annuity (scheme) doesn’t make sense any more,” he said.

For those in dire need of money, he suggested there be guidelines to regulate such withdrawals, taking into account the minimum amount needed to provide for basic needs and the circumstances for withdrawal.

“If you really have no choice, and you are going to die without withdrawing, then we have no choice but to give it to them,” said Mr Tan, adding that this group is likely to depend on government welfare once the lump sum runs out.

MPs TODAY spoke to noted that CPF members have been asking to be given greater control over their CPF savings. The Government has to find a “judicious balance” between ensuring sufficient funds for members’ retirement and allowing them to enjoy the fruits of their labour, said Mr Zainudin Nordin, an MP for Bishan-Toa Payoh, who also chairs the Government Parliamentary Committee for Manpower.

The move is a major shift in CPF policy, but such a shift cannot be taken to the extreme, he added. In giving members greater control, he pointed out, more efforts need to be made to educate Singaporeans and help them become more financially-savvy — a view also held by other MPs and experts.

Ms Foo Mee Har, an MP for West Coast, said the Government’s decision to respond to public calls reflects a maturing society.

She felt the option should be given to all retiring CPF members, not only those in need. There could be members who want to fulfil personal goals or invest the sum withdrawn for potentially higher returns, she said.

The Government, she added, could encourage saving by allowing members the option to top-up beyond the Minimum Sum, increasing their CPF Life payouts.

Lump-sum CPF withdrawal, lease buyback change hailed
Observers glad for options for accessing CPF funds, but warn against blowing away retirement kitty
By Kenneth Lim, The Business Times, 19 Aug 2014

The Central Provident Fund (CPF) should discourage Singaporeans from frivolously taking lump-sum withdrawals from their retirement savings, even though the government's granting the option gives valuable flexibility, observers have said.

They were reacting to Prime Minister Lee Hsien Loong's announcement in his National Day Rally speech on Sunday that retired CPF members will be allowed to take out part of their CPF savings in a lump sum, subject to limits; the amount that can be withdrawn will be capped, and details are being worked out.

Academics and financial advisers who spoke to The Business Times also welcomed the other major announcement - the expansion of the lease buyback scheme for Housing Development Board (HDB) flats to four-room flats, instead of having it capped at three-room flats as is the case now.

With the HDB buying back all but 30 years of the remaining lease of a flat, retired flat owners will be able to monetise some of their real estate in their later years, they said.

On the change to the CPF lump sum rule, Eddy Cheong, the head of financial planning at advisory firm Providend, said of the opening up of options: "I think there are some people who work very hard, and they just want to enjoy a little bit; they want to have some enjoyment at 65, so I think, in general, it's a good idea.

"You want to feel like you have tasted the fruit of your labour."

Observers also tempered their positive reaction with a note of caution that retirement savings could be insufficient.

Brian Tan, associate director of private wealth management at Financial Alliance, said: "People should be incentivised not to take it out willy nilly."

Newly-selected Nominated Member of Parliament and Associate Professor Randolph Tan of SIM University suggested that the government withhold certain amounts of top-ups or grants, depending on a member's CPF balance.

"People don't seem to realise the future value of money of their CPF savings... And the government should let them reconsider if they realise they made a bad choice in two years' time."

Nanyang Technologicial University Assistant Professor said the already-announced CPF Life annuity payouts could offset some of the risks of allowing lump-sum withdrawals. But he said investors hoping to outperform CPF's returns by investing their lump-sum withdrawal elsewhere might want to think twice.

"Generally speaking, we would expect that people will not be able to purchase an annuity on the same terms as they can get from CPF Life," he said.

Professor Benedict Koh of the Singapore Management University called on CPF to step up its education efforts: "CPF ought to give advice... What does it mean to take out that 20 per cent? I would expect CPF to be a bit more proactive in coming out to meet people; instead of just communicating by letters, they probably need more face-to-face meetings."

Although the expanded lease buyback scheme also drew praise, those interviewed said they hoped that HDB would also address concerns of homeowners about outliving the remainder of their lease.

Prof Koh said: "They could have gone a step further... Usually with the lease buyback, there's some concern by owners about tail-end risk. What happens if you live longer than 30 years? To encourage a strong take-up rate, they should assure homeowners that should that happen, HDB will come in and take that risk."

He noted that PM Lee had not mentioned CPF Life, though the scheme had drawn questions about whether its annuity payments can be indexed to inflation.

Also on Prof Koh's unfulfilled wish list for the rally speech was the subject of private pension schemes, which he said could offer even more options to CPF members: "Now you have only two extreme options - those who don't know how to invest leave all their money with CPF, while those who do know invest on their own - but those who don't know how to invest and want to take a bit more risk don't really have an option."

Lease Buyback: 'Better, but limited take-up expected'
Experts say extended scheme will likely appeal to only a small segment
By Janice Heng, The Straits Times, 19 Aug 2014

WHILE letting owners of four-room Housing Board flats sell part of their lease back to the Government is a good move, it will probably appeal to only a small section of the population, said property experts and academics.

They do not expect a spike in applications in response to this extension of the Lease Buyback Scheme, which was previously for three-room and smaller flats. Rather, the scheme will continue to have a limited appeal, they said - to low-income households who are short of retirement funds on the one hand, and savvier owners on the other.

Under the scheme, flat owners sell part of their flats' lease back to the HDB. The proceeds from selling the lease are used to top up owners' Central Provident Fund (CPF) Retirement Accounts, for larger monthly payouts under the CPF Life scheme.

The required top-up level is the Minimum Sum for those aged 70 and younger, and slightly less for older flat owners. The owners will receive the funds in excess of this as cash.

Response has been lukewarm since the scheme's launch in 2009. As of last month, just under 800 households have benefited.

"There is likely to be a better take-up than the current state of things, but we do not expect a surge," said ERA Realty key executive officer Eugene Lim.

One obstacle to a wider take-up is the fear of outliving one's lease. Under the scheme, flat owners keep the next 30 years of their lease and sell the rest back to the HDB.

The HDB has said that "no elderly flat owner will be left homeless" and that "appropriate housing arrangements" will be provided for flat owners who cannot pay for a lease extension.

But it is unclear what this means and the big fear is that the flat owner will get chased out of his home, said experts.

Another obstacle is cultural. Many Singaporeans wish to keep their flats so they can leave them for their children.

"This bequest motive is a very strong motivation," said National University of Singapore Associate Professor Chia Ngee Choon.

It is thus the "more open-minded, more educated or investment-savvy" home owners who may be comfortable with this option, said R'ST Research director Ong Kah Seng.

But investment-minded owners have other reasons to be reluctant. Flats under the scheme cannot be wholly sublet or resold, thus limiting their options, noted OrangeTee head of research Christine Li.

"Subletting out the entire flat for rental income would probably derive greater returns compared to payouts by CPF Life," she added.

The median rent for a flat was $2,300 last month.

About one in 10 flat owners above 55 either sublets a room or the entire flat for income, said the HDB.

It added that the scheme is aimed at low-income owners with limited monetisation options, which is why it was not previously open to larger flats.

Civil servant Lim Swee Leong, 59, owns a four-room flat and could qualify for the scheme when he retires. But he, too, sees it as being chiefly for the lower income.

"For me, it's quite different because I don't need the money," said Mr Lim.

There is the off chance that the scheme will generate a lot of demand, which would mean that the Government has to buy back many leases, which will cost it a tidy sum.

But NUS Associate Professor Albert Tsui noted that the Government is buying an asset which it can resell or use as rental housing.

"You can see it as just a transaction. It should not be a big problem," said Prof Tsui.

Options available to elderly to monetise their flats
By Olivia Siong, Channel NewsAsia, 21 Aug 2014

About 293,000 HDB flats in Singapore are owned by residents aged 55 and older and 72 per cent of these flats are three- and four-room units. This means these seniors have the option to sublet or 'right size' to monetise their flat.

Selling part of their leaseback to the HDB is another option - for those who have met their CPF drawdown age, which is currently at 63.

Madam Han Siew Lan, 65, has been renting out her four-room flat in Bukit Merah for the last three years. She currently gets about S$2,900 a month. She moved in with her daughter and grandchildren, who live in a five-room flat in the neighbouring block.

Madam Han said: “Each month, I use about S$700 to S$800 for my daily expenses. The rest, I use it to buy insurance or save it. When you are older, you may have more problems, so it is good to save it as standby."


In the second quarter, the median rent for a four-room HDB flat was about S$2,400, according to the Singapore Real Estate Exchange flash report in July. According to HDB, the median rent for a bedroom was S$650 in July.

Mr Eugene Lim, key executive officer at ERA Realty Network, said: “If you have the spare capacity, or you are able to rent out your whole flat, actually it gives you a pretty good return for investment. You would have bought your flat many years ago and so your capital value is very low. So from the current rental that you can get from the HDB, when you rent out the whole flat, it gives you a return of between six and eight per cent. This is very high considering private residential rental returns are only in the bracket of two to perhaps four per cent."

But not all seniors see subletting as an attractive option. Only one in 10 of eligible senior citizens chooses to rent out a room or the whole flat. A previous study showed that reasons cited for not wanting to sublet included privacy and security concerns, not needing the rental income, as well as not having a spare room.

Associate Professor Sing Tien Foo from the Department of Real Estate at the National University of Singapore said: "Subletting very much depends on the rental market and the location. If you are looking at the rental mainly from foreign students and workers in Singapore, they may have a certain preference for location. For example, if it is students from university, they may want to choose rental flats near the university areas or in the western areas. So there could be a difference in terms of demand for some of these rental flats in different locations. Not every area can probably command the same sort of rent."


So other options to help seniors monetise their flat are available, including the Lease Buyback Scheme. Prime Minister Lee Hsien Loong announced at the National Day Rally that the scheme would be extended to four-room flats. Previously, only those with three-room flats or smaller could apply for the scheme.

Here is how it works. Take for example a couple who have met their CPF drawdown age of 63 and whose flat has a 70-year lease left. A professional valuer determined its market value to be S$323,000. Thirty years of the lease - worth S$185,000 - is retained by the couple. HDB will buy the remaining, tail-end 40 years of the lease for S$138,000.

But how is the value of the 30-year lease determined? According to HDB, the depreciating lease term is taken into account - that is, the value of a flat goes down over time. Restrictions placed on flats under the Lease Buyback Scheme that prevent resale and subletting are also considered.

There have been 797 households who have taken up the scheme since it was introduced in 2009. With plans to extend the scheme to four-room flats, analysts said that while the take-up rate should improve, a large surge is not expected.

Assoc Prof Sing said: "Even though the prices have come down, I think there is still demand in the market and prices still remain pretty stable and strong. So that is also one of the factors that hold back a lot of people's choice or decision to participate in the Lease Buyback Scheme."

Mr Lim noted: "The two main concerns is firstly, your flat will no longer be allowed to be sold in the open market if you want to. If you do not need the flat anymore, you will have to sell it to HDB. Secondly, you will not be able to bequeath your flats to your successor. For example, you can't give it to your children in your will anymore."

Some analysts added that communication about monetisation schemes should be improved and made simpler to understand for seniors, so more can unlock the value of their homes for retirement.

Inculcate civic-mindedness

IN HIS Rally speech, Prime Minister Lee Hsien Loong related an incident of a fishball stick that had been left on a walkway for more than a day ("New office to tackle estate matters"; Monday).

The district's mayor, on being alerted to the stick by a resident, found out that three agencies managed different parts of the walkway.

To avoid more such fiascos, a Municipal Services Office will be set up to get different public agencies to work more closely together.

This is all well and good, but my question is: Since the fishball stick was on a busy thoroughfare and was noticed by at least one resident, why didn't the person just pick it up and throw it into the dustbin?

Isn't this a whole lot easier than getting the mayor to call various government bodies?

It is vital to have inter-agency efficiency, but is it really necessary to create yet another agency? What about educating citizens to be more civic-minded?

Loh Toon Seng (Dr)
ST Forum, 20 Aug 2014

Municipal office still needed

UNLIKE Dr Loh Toon Seng ("Inculcate civic-mindedness"; Wednesday), I see the benefits of a municipal services office.

The problem with dealing with different agencies is not as simple as fishball stick litter as suggested.

Some time ago, I wrote to the National Environment Agency (NEA) about the dustbins at the Bukit Batok Nature Park carpark and at the bus stop along Upper Bukit Timah Road, at the rim of the park, being ransacked by monkeys.

The monkeys spread litter all over the carpark and around the bus stop.

I suggested that bins around the park (at carparks or bus stops) be replaced by monkey-proof ones used inside the park itself.

That was when I learnt that the carpark is managed by NEA, the bus stop by the Land Transport Authority and the park by the National Parks Board. Up to today, the situation remains unresolved.

A municipal services office can help address this issue and others that we may not be aware of.

Vicky Chong (Madam)
ST Forum, 22 Aug 2014

Some Muslims seek option to tap CPF at 55 to go on haj
By Nur Asyiqin Mohamad Salleh, The Straits Times, 22 Aug 2014

SOME Muslims would like to withdraw a larger portion of their Central Provident Fund (CPF) savings before turning 65 to perform the haj - and Minister of State for National Development and Defence Maliki Osman hopes the Government will consider this wish when it reviews its policies.

At a post-National Day Rally dialogue attended by over 100 Malay residents of the East Coast GRC on Wednesday night, participants asked if they could be given the option of tapping into their CPF savings at age 55 to fund the pilgrimage.

"We don't know whether we'll be well enough to do our haj, or if we can even move if we wait till 65," said a 50-year-old Changi resident who wanted to be known as Sofea.

According to the Islamic Religious Council of Singapore, haj packages cost from about $7,000 to over $13,000.

Speaking in Malay to reporters after the dialogue, Dr Maliki said: "This is a concern in our community, and we can channel these worries... And I hope when the Government tries to draft new policies related to the CPF, the concerns voiced by our residents will be taken into account."

The Government, he added, acknowledges that people want more options when it comes to their CPF savings, "but this choice must also be limited, so it does not reach a stage where people don't have savings after they retire".

As residents discussed the announcements Prime Minister Lee Hsien Loong had made in Sunday's National Day Rally, some were still riled up over retirement funds.

There were raised voices and demands to know how many Singaporeans could meet the CPF Minimum Sum.

But dialogues like this are a platform for the Government to soothe such fears, said Dr Maliki.

"When I clarified the reasons and ways we draft government policies, they showed understanding... their feelings of anger started to recede."

He told participants about his late father, who died this February at age 91.

There was no Minimum Sum in place for his cohort - when life expectancy was 65 years. He withdrew all his CPF savings at 55 and spent them all by age 60, when he stopped working.

"He had nine children to help him... but how many children do you have, and do you want to continue depending on them?" asked Dr Maliki, adding that life expectancy has gone up, making the Minimum Sum scheme necessary.

Residents also asked about the future of young Malays without university degrees.

Ms Mardina Aziz, 27, who has a polytechnic diploma, said she has the skills and hands-on experience some university graduates lack.

But she cannot qualify for most government jobs, which require degrees.

At this year's rally, Mr Lee said the public sector will take the lead in shifting the focus away from paper qualifications to take skill and experience into account in hiring and promotions.

Dr Maliki said parents and students also need to change their mindsets.

"We want (students) to change their mindsets, to ensure that they keep on believing that they are able to succeed."

Retirement is the hot topic in rally feedback
By Walter Sim, The Straits Times, 22 Aug 2014

THE bulk of public feedback gathered by government unit REACH since Sunday's National Day Rally has centred on issues related to retirement.

There were 530 contributions on platforms such as the REACH microsite, discussing announcements like the extension of the Lease Buyback Scheme to four-room Housing Board flats, and the option for retirees above 65 to withdraw a lump sum from their Central Provident Fund (CPF) savings.

People also wrote in about the new moves to help the less academically inclined achieve their potential, and the proposed municipal services office to streamline work processes between agencies, Reach said yesterday.

Unit chairman Amy Khor said: "Singaporeans have largely responded positively to the National Day Rally, saying that it was an uplifting, heart-warming and caring message, which resonated with different segments of the population.

"They appreciated the PM taking pains to explain the mechanics and rationale of the CPF scheme and Minimum Sum to them as well as him paying tribute to the work and contributions of our pioneer generation."

Such issues also came up yesterday, during a moderated 1½-hour Facebook public chat between Dr Khor - also the Senior Minister of State for Health and Manpower - and 130 participants.

Many asked how a shift away from a "paper chase" mentality could be effected.

Dr Khor said: "I think everyone has to be involved - individuals, parents, employers, government... The Government must walk the talk, take the lead, and change its human resource policies."

On retirement adequacy, Dr Khor was "pleasantly surprised" that a fair number who gave feedback said care should be taken with moves to allow more flexibility for CPF withdrawals after age 65, as there was a risk of people depleting their savings. They wanted more done to make sure people understood the implications of such withdrawals.

Big thumbs up for Silver Support Scheme
By Walter Sim, The Straits Times, 5 Sep 2014

THE Silver Support Scheme was the most well received among the measures announced at this year's National Day Rally, a recent government poll has shown.

More than eight in 10 applauded the scheme, which will provide a payout in the form of an annual bonus to low-income Singaporeans aged 65 and above.

Other measures to provide greater retirement assurance also enjoyed support, with seven in 10 cheering a move to allow lump sum withdrawals of Central Provident Fund savings, subject to limits, from age 65 onwards.

Meanwhile, 67 per cent supported the extension of the Lease Buyback Scheme to include four-room Housing Board flats.

These were some of the findings of a telephone poll of 1,136 Singapore residents aged 15 and above. They were announced yesterday by government feedback unit REACH, which said the poll results were consistent with over 1,600 feedback inputs it received between Aug 17 and Aug 31.

In the telephone poll, 75 per cent said they believed people would have enough opportunities to upgrade skills and education after entering the workforce. Six in 10 expressed confidence that the Government's efforts would help to improve career prospects, regardless of qualifications.

These findings relate to the report by the Applied Study in Polytechnics and ITE Review (ASPIRE) committee on ways to enhance opportunities for non-degree holders.

REACH chairman Amy Khor said response to the Rally announcements has been positive and "our challenge is to communicate and enable Singaporeans with different circumstances to understand how they can benefit from these initiatives".



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