Written Answer to Unanswered Oral Question

Retirement Adequacy for Current and Future Cohorts of Retirees of Different Income Profiles

4 November 2019 · Ministry of Manpower

Speakers

Josephine Teo (Minister for Manpower and Second Minister for Home Affairs) Liang Eng Hwa

Summary

This question concerns the state of retirement adequacy and projected CPF LIFE payouts for various retiree income profiles as raised by Mr Liang Eng Hwa. Minister for Manpower Mrs Josephine Teo responded that Basic Retirement Sum (BRS) attainment has improved from two in five to over three in five active members over the last decade. She noted that younger cohorts benefit from rising incomes and labour force participation, with those born in the 1970s having triple the median CPF balances of the 1950s cohort. These higher balances, which are seven times higher at the 20th percentile, are expected to translate into increased monthly CPF LIFE payouts for future retirees. The Minister emphasized that retirement adequacy is also supported by private savings, housing monetisation through the Lease Buyback Scheme, and family support.

Transcript

38 Mr Liang Eng Hwa asked the Minister for Manpower (a) what is the state of retirement adequacy for current and future cohorts of retirees of different income profiles; and (b) what are the projected average monthly CPF LIFE payouts which each of these income groups are expected to receive when reach payout eligibility age.

Mrs Josephine Teo: Members are likely to have a combination of means to fund their retirement, of which CPF is a component. The others include private savings, housing monetisation through the Lease Buyback Scheme, as well as support from their family. Nonetheless, with the Basic Retirement Sum (BRS) designed to provide members with monthly payouts in retirement that cover their basic living expenses, the BRS attainment is one indicator for retirement adequacy. Over the last decade, the proportion of active CPF members attaining their cohort BRS at age 55 has improved from about two in five to more than three in five.

We are optimistic that retirement adequacy will continue to improve for younger cohorts. Among other things, their CPF balances have grown with rising incomes and labour force participation. This can translate to higher CPF monthly payouts in retirement.

In fact, a recent study by MOF showed that the median real income of younger Singaporeans born in the 1970s was double compared to those born in the 1950s when both were in their 40s. The younger generation also had a labour force participation rate 10% points higher. As a result, the median real Ordinary and Special Account CPF balances of the younger generation was three times higher than the older generation, with balances at the 20th percentile more than seven times hig