Pension Problems in Singapore

Lots of things been happening here the past few weeks. All ominous signs of worse to come. There was a huge fracas over how many jobs were being taken by foreigners at the expense of Singaporeans. The problem is the government is not transparent with labour statistics in the first place. Now, the biggest idea the government has come up with against the jobless recovery is to reduce the employer’s contribution to the worker’s pension scheme and also to lower the salary ceiling on which the contribution rate is based on. There is also the intention to make the contribution variable - raise it during good times and lower in bad times. Singapore’s pension is a save as you earn scheme. I’ve attached anews article on this:



CPF cuts 'bitter but necessary medicine'

That is the attitude of many people as well as of those in government, says DPM Lee, as he and PM reiterate need for cuts

By Lydia Lim and Tan Tarn How

NO ONE likes to do it but the sooner it is done, the better it will be for Singaporeans.

Prime Minister Goh Chok Tong and Deputy Prime Minister Lee Hsien Loong both made this point last night about the coming revamp of the Central Provident Fund, as they sought to explain why bitter medicine was best taken now rather than later. While clearly concerned about the impact of the changes, Mr Goh urged Singaporeans to face them bravely, saying 'the longer we wait to make the changes, the more serious our jobless situation will become'.

The planned cuts to CPF contribution rates and salary ceilings would save jobs, he told residents at a Marine Parade National Day dinner. This is especially critical for older Singaporeans, a group that needs help because they missed out on a good education and are now being passed over by employers. And he also reminded Singaporeans that they would have to face other adjustments if the country was to remain competitive. 'We must no longer expect lifelong employment in the same company, doing the same job and enjoying annual increments. We have to train and retrain. And we have to keep on increasing our productivity and lowering our costs,' he said.

Mr Lee, speaking at the opening of the Gek Poh Ville Community Club in Jurong West, cited a comment to show many realised there was no choice about the cuts. NTUC deputy secretary-general Matthias Yao told him that a young person from the NTUC had said: 'This whole package...I really don't like it at all but we have to do it.' Mr Lee added: 'I think that sums up the attitude for many of us, including in government. 'We don't like it but we have to do it.'

Like Mr Goh, he also explained the need for the changes, saying the CPF was Singaporeans' most important social safety net as they relied on it to pay for housing, medical fees and retirement. Revealing that the Cabinet had debated the changes many times over more than two months, he added: 'Any change to the CPF will affect almost all Singaporeans. It is, therefore, not something which we will alter lightly.' Although it is a safety net, the CPF is a cost companies have to bear here but not elsewhere. And Singapore wanted to avoid ending up like Europe where, as a result of heavy social security levies, firms try to avoid hiring extra European workers and prefer to expand overseas instead.

The result: Unemployment in Europe stays at around 10 per cent even when the economy does well. Mr Lee reiterated that the changes here 'are vital adjustments to make ourselves more competitive, and to prepare Singapore for the long term'. The Government has been meeting unions and grassroots leaders to explain the need for the changes, he said, and will continue to do after the details are released this week. 'If we don't do it, we will be in trouble. If we do this, it will be another part of getting Singapore competitive again.'