Determination of Retirement Adequacy and Implication for Workfare Income Supplement Payouts

21 Mr Zainal Sapari asked the Minister for Manpower (a) how is retirement adequacy determined and what are the cost indicators that are used to determine it; (b) how many Workfare Income Supplement (WIS) recipients who are above 55 years old are assessed to have retirement adequacy; and (c) whether the WIS has helped low-wage workers to have retirement adequacy.

The Second Minister for Manpower (Mrs Josephine Teo) (for the Minister for Manpower): Mr Speaker, the Central Provident Fund (CPF) Retirement Sums provide a measure of retirement adequacy and they take into account retiree household expenditure patterns, as recommended by the CPF Advisory Panel. The Basic Retirement Sum (BRS) for the cohort turning 55 this year is $85,500 and that amount will provide a lifelong monthly payout of $720 to $770 from the age of 65.

In 2016, 58% of active CPF members at age 55 met the BRS. Ten percent of this group were Workfare Income Supplement (WIS) Scheme recipients.

Of the remaining 42% of active CPF members at age 55, 55% were WIS recipients. From that perspective, the WIS Scheme is going towards those who need it more for building up retirement adequacy. On average, these members received a total of $5,500 in WIS top-ups to their CPF up to age 55. For members who do not have the BRS at age 55, they can continue to work over the next 10 years and make up for this shortfall in their BRS through CPF contributions and WIS top-ups.

Mr Speaker: Mr Zainal Sapari.

Mr Zainal Sapari (Pasir Ris-Punggol): I thank the Second Minister for her reply. Every retiree will be concerned with inflation. Most low-wage workers may, at best, opt only for the BRS plan which gives a stagnant payout. What can the Government do to protect the real value of their savings against an inflation for this group of people to ensure that the payout will be sufficient to meet their basic retirement needs?

Mrs Josephine Teo: Mr Speaker, I thank the Member for his supplementary question. In fact, we are not depending on the WIS Scheme alone to help low-wage workers build up retirement adequacy. Aside from WIS, we have taken various steps to help low-wage workers. This includes higher interest rates of up to 6% on the first $30,000 of CPF balances for members age 55 and above. We have also liberalised our CPF transfer rules to enable members who have met their BRS to support their spouses and parents with lower balances through CPF transfers. So, in other words, if you are a WIS recipient, you can also get help from other members of the family.

In 2016, we introduced the Silver Support scheme to supplement the retirement incomes of the bottom 20% of the elderly who earned lower wages through life and currently have little or no family support.

Overall, it is an approach that encourages individual effort, as well as family support, supplemented by Government top-ups and schemes which strengthen social protection.

As to the Member’s concern about inflation, under the CPF LIFE Scheme, CPF members, not just those who do not meet the BRS, can opt for the CPF LIFE Escalating Plan. What that would enable them to do is to accept a lower monthly payout when they start but, over time, to have the payouts increase to meet their spending needs. The CPF LIFE Escalating Plan started on 1 January 2018.

Mr Speaker: Mr Ang Hin Kee.

Mr Ang Hin Kee (Ang Mo Kio): A supplementary question for Second Minister: what advice would she have for younger freelancers to start preparing for retirement adequacy before they reach 55 years old?

Mrs Josephine Teo: It is a very good question. I believe Mr Ang, together with colleagues from the Ministry of Manpower, are part of a tripartite workgroup that have been looking into this issue for the past eight to nine months, if I am not wrong. In fact, I am very much looking forward to the recommendations from the tripartite workgroup. But since the Member has asked the question, I would like to point out that, today, freelancers or self-employed persons can also make use of the CPF scheme to help build up their healthcare and retirement adequacy.

For healthcare adequacy, they are already required to make annual contributions to their CPF MediSave accounts. There is no such requirement for freelancers to contribute to their Ordinary Accounts or to their Special Accounts. But there is nothing to prevent them from making their own cash top-ups to the Special Account and to enjoy the benefits of doing so, for example, the very attractive interest rates.

What more can we do? I think we can have a meaningful discussion once the tripartite workgroup provides its recommendations. I believe we would not have to wait much longer for that.