·WHAT are the economic implications of ageing and how can we as a society respond to them?

 

THE economic implications of ageing are daunting. With the baby boomers already hitting 65 and national fertility rates continuing to be at abysmal levels, there are now only 7.9 people aged between 15 and 64 for every person aged 65 and above, down from 17 in 1970.

 

This precipitous decline in what is known as the 'old age support ratio' means that there are fewer younger people on hand to support older Singaporeans. This means that older Singaporeans will simply need to work longer in order to support themselves. This is especially true of the growing group of singles who don't have children to be their 'old-age insurance'.

 

The Government will need to step in to help the elderly who can't help themselves or have no family to turn to for financial support in their twilight years. This will cost money.

 

In recent years, the Government has launched a slew of measures to improve the financial future of older Singaporeans.

 

The Workfare Income Supplement, for example, tops up the wages of low-wage Singaporeans aged 35 and above. This year, the Re-employment Act came into force. This allows companies to offer to re-hire workers after they reach retirement age.

 

During the Budget session this year, Finance Minister Tharman Shanmugaratnam also announced a scheme to subsidise the wage bills of companies that hire workers aged 50 and above.

 

Another key announcement made during the Budget session was that workers between the ages of 50 and 65 would enjoy higher Central Provident Fund (CPF) contribution rates of up to 2.5 percentage points, the bulk of it paid by bosses.

 

All this, of course, is good news. But in Parliament, some MPs questioned whether this was enough. One wanted the higher CPF rates to apply to workers above age 65. Another suggested that the Government raise the interest rates paid for funds in the CPF.

 

A rate of 2.5 per cent - what the CPF currently pays on funds in the Ordinary Account - will grow a $1,000 balance into $2,098 over 30 years. If the rate went up to 5 per cent, for example, it would grow to $4,322.

 

Current rules require workers to set aside a minimum sum of $131,000 in their CPF accounts when they reach 55 to meet retirement needs.

 

Someone with $131,000 in his CPF account at age 55 will get a payout of $1,100 a month for life from age 65, under the CPF Life annuity scheme.

 

But only 45 per cent of CPF members who turned 55 last year were able to meet this minimum sum.

This includes home-owners, who are allowed to pledge their properties to account for up to half the minimum sum.

 

The Government also announced a $20,000 'silver housing bonus' earlier this year to encourage senior citizens to consider selling their larger flats for retirement income and move into smaller HDB flats.

 

Mr Tharman said during the Budget debate that CPF savings were enough for retirement for low- to lower-middle income groups. However, the fund was not designed to meet the needs of higher-income earners. The rich, after all, often have private savings, he said.