By Rachel Armstrong and Aradhana Aravindan
SINGAPORE (Reuters) - Singapore is to reform its mandatory retirement savings scheme and will provide greater support to low-income pensioners, the Prime Minister said on Sunday, in response to growing public criticism of the system.
Providing for Singapore's aging society is one of the biggest challenges facing Lee Hsien Loong's government, with the present enforced savings system threatening to erode dwindling support for his ruling People's Action Party, which won its lowest ever share of the vote in a 2011 election.
Singapore's Central Provident Fund (CPF) has won widespread international admiration for the way it forces citizens to put aside money to fund their retirement, healthcare and housing costs, but many people are unhappy at the rate of return on their CPF savings and a rise in the minimum sum they must save before making withdrawals.
A survey published last week by insurance firm Manulife found that only 20 per cent of Singapore investors believed that their CPF accounts would cover their needs in old age.
"People are living longer and we need to provide more money for longer retirement," Lee said in his keynote speech at the National Day Rally, adding that poor retirees who have not been able to save enough during their working lives - estimated to be 10-20 percent of pensioners - will be given an annual "bonus" after turning 65.
The government will also allow people to make some lump-sum withdrawals after they have retired, rather than receiving only incremental payouts.
"We need to build more flexibility into the CPF system and give CPF members more choices," Lee said.
Though Lee said that the minimum sum savers aged 55 and over must have in their retirement accounts before making withdrawals would rise again next year to S$161,000 ($129,348), from S$155,000, he said that he doubted there would be any more "major increases".
(1 US dollar = 1.2447 Singapore dollar)
(Editing by David Goodman)
- Banking & Budgeting
- Lee Hsien Loong