The Republic’s retirement system is becoming increasingly sustainable – according to a study released by insurance and asset manager Allianz on Monday (Nov 30).
However, the study also showed that existing schemes are not enough to maintain the same standard of living after retirement.
Allianz said that adjustments to the CPF system in recent years have improved the level of income for retirees. This can help reduce the number of elderly falling below the poverty line and relying on other forms of social benefits, thus making the retirement system more sustainable in the long run.
The rate at which the population is ageing in Singapore has slowed down compared to most parts of Asia where it is accelerating, added Allianz.
But it noted that that existing annuity schemes, such as the Retirement Sum Scheme, are not enough to maintain the same standard of living post-retirement. Allianz said that if only the retirement sum is annuitised, people run a considerable risk of having too low income later in life.
WEALTH TIED UP IN REAL ESTATE
Allianz added that a large share of wealth in Singapore is tied up in real estate, with local home ownership at 90 per cent, and said that Singaporeans should diversify their investments.
Said Ms Brigitte Miksa, head of international pensions at Allianz: “The question here is if that is sufficient if in case there is a real estate market bubble. You have no risk diversification. Also the question is if you can turn this rich asset into a cash pool, liquidity, so you can contribute to a retirement income stream.”
“Those are factors that contribute to the lack of adequacy,” she added. “You have to save more into those assets that can be diversified – new types of products that provide you with a higher income, and also with income streams that combine these kind of investments with annuities.”
An industry watcher added that while Singaporeans broadly realise the need to plan for retirement, many are not taking the necessary steps to do so.
Mr Alfred Chia, CEO of SingCapital, commented: “Retirement is not just about taking up savings plans. It’s important to first know what kind of retirement lifestyle you want. And when you retire, there are three very important things to have.
“First, a house that’s fully paid up, second, resources to be able to provide for medical expenses, so we have the Medishield Life, and third to have income for your retirement daily needs.”
news source & image credits: channelnewsasia.com