No Money, No Retirement

Author of more then 30+ academic papers, on retirement and other issues, Assoc Prof Hui at NUS should know his subject well. His latest study predicts that the present lot of tertiary educated Singaporeans with starting pay of $2,560 will only have one-third of what is required to maintain their lifestyle prior to retirement, after coughing up $560,000 for a Government 5-room flat.

His premise is that an income replacement rate of 66 percent is the international benchmark of retirement adequacy for homeowners. While some will quibble whether this is too much or too little, it should be safe to assume that at age 65, all major financial obligations on house, car and tertiary education outlays for their own children should have been met during the productive years. What's leftover in the piggy bank is meant for a comfortable subsistence, unless you still plan to zip around in a Ferrari California or ski at the Alpine slopes.

When the British colonial authority in Singapore introduced the CPF in 1955, it was a compulsory savings scheme to set aside money for the retirement years, since not all were entitled to the alternative pension fund. The contribution rate was calibrated for such intent, and should suffice for said needs. Until somebody upstairs decided housing could tap on the retirement funds, and while they are it, make the workers pay for health care out of same. Piggy started to slim down and has never been the same since.

Only 45 percent for CPF members have enough for the minimum sum last year - and the payouts based on that number probably won't be anywhere near the 66 percent income replacement rate quoted by the academic. Worse, some are pledging up to 50 percent of their properties to meet the minimum sum requirement. Meaning, cash wise, piggy is even skinnier - a large chunk of pork belly has been carved out by "affordable housing".

That political lure of "asset enhancement" has turned into an I.E.D. - improvised economic disaster. Add the expectation of home-owners seeking to make handsome profits from selling their homes and, Prof Hui said "the future of our next generation will be in jeopardy as it will not be sustainable." He proposed shorter leases to tame the obscene housing prices, and expects the outcry of existing HDB owners when numbers start to tumble. It will be like a recession, he said, the paper value goes down, but the roof is still there. No need on camp out at Changi Beach, yet. Unfortunately the bunch of guys currently in charge don't have the political will to do the necessary. They won't even tell us the true cost of construction.