21
January
2016
|
18:04
Asia/Singapore

Improving social security for all

Singapore’s social security system has worked for the majority of Singaporeans but could be more inclusive; and prudent investors would do well to account for inflation, said NUS experts and invited speakers at the Symposium on Social Security, held on 12 January.

NUS Economics Department Head Professor Julian Wright set the backdrop for the symposium with his opening remarks — “designing an effective social security system that is sustainable and enhances social cohesion is a key policy challenge”, in light of Singapore’s rapidly ageing population and the country’s widening income inequality.

The first speaker, Professor Peter Diamond of the Massachusetts Institute of Technology, spoke on “Good Pension Design”. His presentation compared and contrasted selected pension systems including those in Chile, the Netherlands, Sweden and the US.

Speaking on Singapore’s social security system, NUS Economics Associate Professor Chia Ngee Choon highlighted, in her presentation “Adequacy of Defined Contribution Pension Design: Gaps and Policy Interventions”, that the Central Provident Fund (CPF) has worked well for the majority of Singaporeans who have made prudent housing choices. The CPF Board has raised the contribution rate for older workers and the first $30,000 of CPF balances now earns a 6 per cent interest rate. One suggestion to grow retirement savings is to allow members the flexibility of transferring excess money from the Ordinary Account (OA) to Special Account, subject to possible fees and charges. Another option is to rethink the way the OA rate is determined, for example, including weighted GIC returns, besides bank rates, as components in the CPF OA rate.

Assoc Prof Chia, who is the Co-Director of The Next Age Institute (NAI) at NUS, also said that a work-based social security system might not address retirement adequacy of its vulnerable members such as low-wage and casual workers, those who cannot work due to poor health, and stay-at-home mothers. Adding a means-tested non-contributory basic pillar to the system will make the system more inclusive and help the needy elderly meet their basic needs. However, simulation studies indicate that the financial viability of such a scheme would depend on the country’s economic growth and the speed of ageing. NAI co-organised the event with the NUS Faculty of Arts and Social Sciences’ Singapore Centre for Applied and Policy Economics.

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Prof Chia speaking at the symposium

NUS Business School Practice Professor Joseph Cherian, Director of the School’s Centre for Asset Management Research and Investments, spoke on “Avoiding Shock and Owe: How to Retire Worry-free and Well”. He said a retirement investment portfolio should be inflation-proof with payouts that would adequately cover the real dollar amount of a retiree’s needs. Any surplus can then be put into riskier investments, which might yield greater returns. This goes against current conventional investment advice, which says that investment risk decreases with time, but Prof Cherian says this belief might cause people to take on more risk than they intend to.

The symposium ended with a panel discussion focusing on Singapore that featured Prof Diamond, Assoc Prof Chia, Prof Cherian, NUS Economics Professor Basant Kapur and PriceWaterhouseCoopers Asia Actuarial Services’ Principal Pension Consultant Mr Marcus Kok. Among the topics discussed were ways in which pension systems could address the needs of a changing global economy, which now have more freelancers and expatriates who may not know where they will retire.

“If the programme is well-designed across countries…it shouldn’t matter where you live,” said Prof Cherian. However, one setback to coming up with a universal programme is that each country is unique in terms of demographics and longevity. Cost is also another issue, he added.

The symposium drew more than 60 academics, policymakers, and professionals from the economic, social services and healthcare sectors.