Wednesday October 11, 2006

Three storm clouds over retirement savings

business-times.asia1.com.sg :

Singapore is staring at three 'storm clouds' over retirement savings as fertility rates fall, life expectancy rises and family support shrinks, according to CPF Board chief executive Liew Heng San. Mr Liew said that Singapore faces issues similar to those of other countries grappling with underfunded pensions. One is the 'inversion of the age pyramid' as the proportion of people over 60 rises. In Singapore, the total fertility rate in 2005 was just 1.24, well below replacement rate. On life expectancy, one in 12 Singaporeans today is age 65 or older. By 2030, the ratio will be one out of five.

Family support is also shrinking as families get smaller. The proportion of elderly depending on their children as a source of support dropped from 76% in 1995 to 66% in 2005. 'There might be a value change in that elderly parents may now be more reluctant to rely on their children for financial support. With more working overseas we can also expect family support to become more fragile.'

Mr Liew said that the CPF has tried to address the issue of the retirement savings shortfall. Singapore already has one of the highest savings rates in the world. On investments, the CPF is studying ways to lower the cost of investment. The investment experience, however, has not been happy. 'Most of those who invested in the market would have been better off leaving their money to earn interest with CPFB.'

(2006-10-11 13:42:58 SGT) [Biz] Permalink

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