SINGAPORE: Economists say Central Provident Fund (CPF) contribution rates should be raised to 40 per cent in the future, up from the current 37 per cent for those aged 50 and below.
This will help Singaporeans save better for retirement, taking into consideration factors such as inflation, they say.
But they stress that this should not happen until the global economy has recovered further.
Their remarks follow the labour movement’s recent calls for rates to eventually be raised to meet the needs of longer-living Singaporeans.
Experts also say that contribution rates should be the same regardless of age, instead of the current situation where older workers above 50 years old get lower rates.
So, when is a good time to raise CPF contribution rates for workers?
Experts say the right time for such a move may be when the global economy recovers to levels seen before the recent crisis.
They believe that, when that happens, businesses in Singapore are likely to be better positioned to deal with higher contribution rates.
The government has signalled that more changes to contribution rates will not be happening anytime soon, and if further changes are to be made, economic conditions, business costs and competitiveness have to be taken into account.
Economist Song Seng Wun said restoring CPF contribution rates to earlier levels should be done in a phased manner.
Mr Song, CIMB Research’s director for Singapore research, said: “A phased approach, certainly will be, I think, acceptable from a business standpoint.
“From a worker’s standpoint, obviously they want it to be restored as quickly as possible, but at the same time, it does bring with it costs.”
He added that businesses, which are now pressured by rising wages, will definitely want costs to be “more muted”.
Experts added that employers should foot the bill if contribution rates are raised but they cautioned about possible drawbacks.
Professor Chew Soon Beng, from Nanyang Technological University’s Division of Economics, said: “If employer’s CPF contribution rate is to be increased further, then it will be at the expense of wage increases.
“Employers would say that ‘I don’t have to increase your pay to give you more wage increases because my labour cost is higher’.”
That’s why tripartite discussions among the government, unions and employers are needed to ensure any increase is carefully calibrated.
And to help Singaporeans shoulder future healthcare costs, experts say that the priority should be to channel increased contributions to employees’ Medisave accounts.