Friday, November 16, 2012

Income Replacement Rate Revisited

According to above table, after working 30 long years, the male guy earning $1,820 can expect a future income of only $2,340.  Even if the poor bloke had a guaranteed salary increment of 1 percent  each year, he should be looking forward to earning $2,428 or more. Do the math.  Discounted backwards, that kind of pay is not enough to cover the ravage of annual inflation at 2 percent. The Monetary Authority of Singapore (MAS) core inflation measure, which excludes costs for accommodation and private road transport, was moderated to 2.7 per cent in the April-to-June quarter. Official figures showed Singapore's Consumer Price Index (CPI) inflation rate rose to 5.3 per cent year-on-year in June 2012 from 5.0 per cent of the previous month.

So why did the professors use the number $2,340? Probably because it best fits Tharman's projected Income Replacement Rate (IRR) figure of $1,330 at age 65. Think of the tabulation as answers hashed to fit the question. However you look at it, the future is pretty bleak.

Professors Chia Ngee Choon and Albert Tsui of the National University of Singapore crafted their 27-page study using ministry wage data growth for the past 10 years, highly secretive numbers previously unavailable to the public or researchers. Which makes it difficult for anybody else on planet earth to challenge their computation. They argue that a 25-year old male who starts work at a median monthly pay of $2,500 will be able to build up sufficient CPF savings over 40 years, and retire at 65 with 70 percent of his pre-retirement income pegged at age 55. It would appear the objective of the exercise is to debunk the report by Professor Hui Weng Tat of the Lee Kuan Yew School of Public Policy, which had warned that young Singaporean graduates may not have enough CPF savings for retirement.

Prof Hui may not have access to the top secret data conveniently made available to the NUS dons, but the numbers may not withstand close scrutiny. Note that the starting pay for the 70th percentile (upper middle income, male) is indicated as $3,300. That means the $15,000 compensation for members of parliament, who also draws pay from their day job, must be categorised as supercalifragilisticexpialidocious. And the descriptive for the minister's pay check will surely be beyond this universe.

The NUS study also claims that the "Workfare safety net" provides a significant boost for the low-wage workers, rocketing their IRR from 80 percent to 92 percent. At those rates, even pigs will fly.

25 comments:

  1. Hahaha... Of course, just that these are PAPigs and our country is the Animal Farm.

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  2. I think the salaries shown in the table are on 2012 constant dollar basis, i.e. an assumed inflation rate has been taken into account.

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  3. This is a crap report. They begin with the end in mind and fit all data to justify the result. There are too many major changes that can happen in 40 years and the report should have presented 3 scenarios (best case, likely case and worst case).
    What if, the couple divorces?
    What if one party contracts an illness and is unable to work for a prolong period?
    What if they need a bigger house when they have more children?
    What if one or both spouses get retrenched and becomes unemployed or under-employed?

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  4. The biggest animal in the World in the tiniest(snallness) country on Earth. Everything is window dressed to the hilt for showcasing.

    Integrity is a much preferred value than beautifully dressed propaganda.

    patriot

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    Replies
    1. Dear All:

      My apology.

      Do add farm after the Word animal.

      patriot

      Delete
  5. This is a fantastically good report. It shows how bad the Singapore situation is. Look at the wages figures. By early or mid 30's, half of Singaporeans' earnings start dropping. Damn depressing picture. You do NS until 20's, do reservist until 30's, and your pay goes downhill.

    How can the Ministers be so happy shouting that the IRR is great? That's because the pay is damn low. Damn depressing.

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    Replies
    1. "How can the Ministers be so happy shouting that the IRR is great? That's because the pay is damn low. Damn depressing."

      Of course, they are happy because these clowns's bonus, promotion, benefit are tied to GDP. More money from IRR means more money to those clowns. But more problems to lesser mortals with lesser wages, substandard foreigners

      Delete
  6. Incredible.
    The Millionaire Ministers are using these numbers to justify their million dollar salaries.
    You decide.
    Are they worth their pay?
    Do they guarantee these results? No.
    And what are you going to do if they cannot achieve even these results? There is no provision for them to return their salaries.

    You think they will return their salaries?
    Did George Yeo return his salary after he failed in his attempt to "transform" PAP?

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  7. The report is based on people buying BTO flats. What about singles who are barred and those who give up waiting to buy resale? Does it mean these people dont deserve to retire?

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  8. Selling koyok? Start work at 25 and retire at 65?? What kind of assumption is this? Sound like desperate insurance salesman pitch.Much more realistic to assum start work at 25, force retirement at 45.

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  9. I distrust statistics. They are tools used by the one who want to influence the audience. Remember some stupid research report telling us eating egg is bad only to be proved wrong by another idiot who claimed eating egg is indeed benefitial to our body. Same for palm oil and coconut oil. Figires quaoted are onesided. They are not wrong but not the whole picture either. It depends who pay for the research.

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  10. First of all with a salary of S$1,820, one already can hardly survive the costs of living at the current rate, is it realistic to expect that person to have adequate savings for retirement when whatever CPF savings will be entirely utilized for servicing the HDB mortgage? What is probably left untouched will be the medisave & special account.

    So honestly what retirement funds are these lecturers referring to actually when even a 3room flat costs around $200k, requiring a lifetime of mortgage payments to pay in full!

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  11. The professors have injured their credibility.

    The PAP have dug a deeper hole to sink into

    The people have more light

    This island will become better for it.

    Thanks for sharing your observations. More people will be awaken.

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    Replies
    1. Are these the same people who helped Mah Bow Tan craft those Today articles 'HDB is still affordable' with 30 year mortgage on two incomes?

      Delete
  12. If we continue to believe statistic dish out by PAP that traditionally has been massaged, we deserve the daft singaporeans title given by old fart. We know how smelly those fart is, don't we ?

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    Replies
    1. Does the old fart need adult diapers now?

      Delete
  13. I am sure the professors are asked to see if they can justify that all citizens should have enough after retirement. With this in mind, the professors will work backward and fill the gaps by including stupid clauses like if only people buy apartments of that matches their ability and must continue working after retirement.

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  14. the government has lost its moral ground to determine what is enough for the people the day they started paying themselves sky high salary. they don't practise what they preach. they can't ask the people to settle for less when they want more for themselves. what is enough or not is only separated by a threshold line. adjust the line up or down to tell a story to your favour is not that difficult after all.

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  15. The report says "OECD has qualified that Singapore's IRR would be 82% if all CPF savings are put toward retirement-income uses, without any pre-retirement withdrawals for housing."
    This is the most important point: it is the cost of housing that is robbing Singaporeans of their retirement account. That plus Medisave deductions. After deducting housing and Medisave, the IRR for Singaporeans is only 13% for a working career of 40 years, well below international average IRR of 66%. The fact that the study says we have to work after retirement to have a decent IRR is confirmation that there is no retirement for this generation of Singaporeans. Retirees have to work - that must be uniquely Singapore.

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  16. Can you see the cracks appearing?

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    1. Don't know about the cracks. But i do see a lot of crackpots in white.
      What do you do when you no longer trust your government or your political leeders?

      Delete
  17. How can you argue with dimwits who "lead" the country and this bunch of people who call themselves professors (but are actually "goal-seek" users of Excel, sorry they use Openoffice now, saving the money to pay their bonuses) who refuse to see or cannot understand the issue of income inequality? Even Henry Ford, 100 years ago, have understood that workers must be paid high enough or no one can afford to buy his cars. Its just painful witnessing the morass of crass at the "top".

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    Replies
    1. In a representative democracy;
      what do you do if the leeders no longer represent the people?
      Is it time for a regime change?
      what do you think?

      Delete
    2. When Singapore voted for a bunch of people who seem to have only their own interests at heart, this is what you get.
      It may be illuminating to compare their values with that of the president of Uruguay. See http://blog.yourmoney.ca/2012/11/meet-the-worlds-poorest-president.html

      Delete
  18. NUS's ranking amongst universities should experience a substantial drop becos of this farcial "research" by its dons!!!!

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