factors such as the location and the environment could influence the “quality” or premium of these flats, added Dr. Wong. Rethinking asset-based social security Associate Professor Chia Ngee Choon, Deputy Head of the Department of Economics at the National University of Singapore, argued that there was a need to re-examine the CPF scheme by considering other alternatives to reduce the amount withdrawn from CPF for housing while ensuring “retirement adequacy”. The CPF system is an asset-based social security system that views the home as an appreciating asset as well as a place to live in. This has led to the current situation where many of the current elderly citizens are “asset rich” but “cash poor”, and where housing evolves to become their primary retirement asset. By extension, this means that those living in rental or smaller flats might not have adequate retirement income. She noted that there were challenges with an asset-based approach. For example, committing to too large a flat might result in one not being able to meet the minimum sum of S$40,000 in the CPF Ordinary Account upon retirement. This
would disqualify one from receiving monthly payouts for the rest of their lives through CPF Life, an annuities scheme aimed at retirement adequacy. This is an important consideration in the light of an aging society. Further, is accumulated housing equity indeed the “pot of gold” that could be—or should be— monetised upon retirement? Many of the elderly might be inhibited by the desire to bequeath the family with property and live out their golden years in the familiarity of their current homes, said Prof. Chia. In concluding, she suggested a re-think of the housing policy, including shortening the lease on HDB flats from 99 years to 60 years, which would have the twin goals of reducing the cost of owning a home and eeking out greater savings to qualify for CPF Life. A “first pillar” of a minimum pension guarantee could also be established for those who had less than S$40,000 in the plan upon retirement.
...there was a need to re-examine the CPF scheme by considering other alternatives to reduce the amount withdrawn from CPF for housing while ensuring “retirement adequacy”.
Debbie Soon (Debbie.soon@nus.edu.sg) and Chua Chun Ser (Chua.chunser@nus.edu.sg) are Research Assistants at the Institute of Policy Studies. · Jan–Mar 2012 · 23