At the Lee Kuan Yew School of Public Policy (LKYSPP) 10th Anniversary Conference held on 17 Oct, 2 weeks ago, Professor Hui Weng Tat suggested raising the CPF income contribution ceiling for employees. He was speaking at a session on inequality and social security reforms.
Prof Hui said to help improve retirement adequacy, in particular for the middle-income group, the issue should be addressed early and when people are working.
“The amount of contribution that they are putting into CPF accounts is decreasing in real terms. That has to do with the fact that the income contribution ceiling has not kept in step with inflation. It has remained at S$5,000,” he said.
He noted that between the 1980s and 2011, the real value of the income ceiling has actually been halved.
“As a result, our real contribution to CPF for those who had exceeded the ceiling has actually been declining over time. What is needed is an increase in the income ceiling, especially for those who are contributing on the employee side,” he said.
“In other words, we can raise the income ceiling for the employee contribution, not necessarily the employer contribution, so that it does not add to the employer’s cost. For the employee, it is just increased savings which they can therefore use in retirement, and that will ensure an improvement in their retirement adequacy.”
However, raising the employee’s CPF income contribution ceiling means he will have less money to take home, which means the person will have a harder time to cope with the increasing cost of living in Singapore.
Prof Hui criticises PM Lee’s NDR speech
Two months ago, Prof Hui wrote an article which was published in the local media, criticising PM Lee’s speech at this year’s National Day Rally (NDR) in August.
In his article, Prof Hui said that Singaporeans who have been anticipating announcements of significant CPF changes to improve retirement financing may be forgiven for feeling disappointed by PM Lee’s speech at the NDR.
Fundamentally, Prof Hui said PM Lee’s announcement does not address the issue of the retiree not having enough in CPF savings.
“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,” Prof Hui said.
Prof Hui thinks that the extension of the Lease Buyback Scheme to 4-room HDB flats will probably not make any significant difference to the popularity of the scheme. The low take-up of the current Lease Buyback Scheme already shows that typical Singapore family would prefer to have the option of bequeathing their property to the next generation, he said.
Overall, Prof Hui had thought that PM Lee was taking an overly-optimistic view of current retirement adequacy and the critical issue of Singaporeans not having enough retirement savings was not addressed.
“If the (CPF) 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,” Prof Hui remarked.
“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,” he concluded in his critical article.
Who is Prof Hui Weng Tat?
Prof Hui taught in the Department of Economics at NUS before joining the LKY School of Public Policy in 2004. He has acted as a consultant to the Ministry of Manpower, the International Labour Organization, UNCTAD and was the Associate Research Fellow of the then Singapore Institute of Labour Studies from 1991-1994.
Way back in 2009 before the immigration issue became a hot political issue, Prof Hui already sounded warnings of Singapore’s over-liberal foreign immigration policy.
Singapore in maximising its GDP growth went overboard to import foreign workers. In 2007, of the 235,000 jobs added in 2007, 6 in 10 went to foreigners. The ratio rose in 2008, with foreigners taking 7 in 10 of the 222,000 new jobs.
Prof Hui also observed that importing foreign workers in large numbers had worsened the income gap. He then stated that the depression of low wage workers’ income would lead to social problems.
Hence, back in 2009, Prof Hui had already called on the Govt to tighten the tap on the flow of foreigners into Singapore and to discard the economic model of “growth at all costs”.