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     FrontPage Edition: Wed 22 August 2007

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Significant changes to the CPF system


Remarks by Dr Ng Eng Hen, Minister for Manpower and Second Minister for Defence at the Press Briefing on CPF Reforms and Other Measures to Help Older Singaporeans Improve Retirement Adequacy and Work Longer, 21 August 2007, 11am

Many significant changes to the CPF system have been announced. Today, I will reiterate and clarify changes and answer queries but more importantly, I wish to explain how the changes will help elderly Singaporeans.
The MOM and CPFB will continue to reach out to members to explain these changes in simple and understandable ways.
We will use public ads, set up call lines, and work with the grassroot advisors and MPs. I will also make a Ministerial Statement in Parliament in September.
Five key changes were announced by PM Lee in his National Day Rally Speech on 19 August 2007.
The sum effect of the changes will have a big impact on all Singaporeans to better prepare us for an ageing population:
     (i) The changes will tilt the playing field to benefit older workers 每 for employers to hire them and for older workers to work longer.

     (ii) Over the medium and long term, these changes will ensure that CPF members will not outlive their retirement sums.
Need for changes
The cumulative impact of three fundamental shifts 每 falling fertility, increasing longevity and smaller family size 每 will mean that individual members will have to rely on their own savings and for longer to fund their retirement periods.
We have to update our CPF to adjust to these changes. Life expectancy was 61 when CPF was introduced in 1957 每 it is now 80.
Total fertility rate is currently 1.26, among the lowest in the world. In 1960, there were 23 residents aged 15 to 64 (economically active) to support one resident above 65 years.
There are now only 9 residents. In 2020 it will drop to 5 and 2030 to 3. This means there will be fewer young to support the old. It also means that each of us has to work and save for our own retirement.
Other countries are changing also 每 extending work and delaying retirement and pensions.
For instance, Italy's state pension fund will shortly have to pay out to retirees more than it receives each year in contributions from an ever decreasing national workforce. Last month (July), they decided to raise the official retirement age (55 for women and 57 for men) progressively each year until 2014.
In March, the German parliament voted to raise the retirement age from 65 to 67 as part of a reform programme aimed at tackling rapid population ageing and spiralling pension costs.
In Denmark, there is broad political consensus that the retirement age must be raised. An ageing Danish population and the rise in life expectancy means there will be more elderly who need care and fewer hands to give it. Last year, the Danish Parliament decided to raise the retirement age from 65 to 67.
Spain's pension system is currently studying incentives to encourage people to work beyond the current retirement age of 65. (Source: BBC News, Guide to Europe's pension woes, 17 August 2007)
Five key changes along two thrusts were announced by PM Lee in his National Day Rally Speech on 19 August 2007. Let me elaborate on them.
First and most important, helping Singaporeans work longer 每 the major focus of our efforts
Our previous efforts to help older workers are working - the employment rate for residents aged 55-64 stood at a record high of 53.7% in 2006, a significant 6.7%-points higher than that in 2004. See Annex A for details.
However, the employment rate for residents declines sharply after age 55 and we need to do better.

Table 1: Resident Employment Rate (%) by Age


Employment rate (%)





55 - 59




60 - 64




55 - 64




Source: Labour Force Survey, MOM

Since the employment rate for women has been lower traditionally, I will use data for men to illustrate.
Now, 8 out of 10 men are working at age 55 to 59, but only 6 out of 10 at age 60 to 64, and 3 out of 10 at age 65 to 69.
Put simply, our first challenge is to stop those two men from dropping out of the workforce after age 60.
This means 21,000 males currently aged 55-59 who stop working when they turn 60-64 in 5 years' time.
Within the next 5 years, we will work hard to keep at least half of them still working. This means that we will add 10,000 residents to the workforce but if our economy continues to grow and create about 180,000 jobs last - as it did last year - we can absorb them.
For women, the base is lower, but more effort will be needed to keep them in employment and to attract them to rejoin the labour force.

Source: Press Release 21 Aug 2007

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