Spotlight on options to supplement income in retirement as super-ageing looms in S’pore
https://www.straitstimes.com/business/spotlight-on-options-to-supplement-income-in-retirement-as-super-ageing-looms-in-s-pore
2024-06-15
Chor Khieng Yuit
Senior Business Correspondent
The Straits Times
SINGAPORE - Working adults will have to look after more than one generation of seniors in the future, a challenge that is becoming a norm as Singaporeans live longer and the population ages at a faster pace.
But in terms of finances, Singapore’s national annuity and medical schemes will provide a base for retirement, while income can be supplemented by private annuity plans and schemes, such as a housing lease buyback programme, say analysts.
Globally, efforts are also being made to cater to the needs of an ageing society, including tackling long-term care through more flexible insurance products.
Ageing is gathering pace in Singapore. By 2050, it will join Japan, Hong Kong and South Korea as economies in Asia with a large share of people aged 65 or older, according to the World Social Report 2023 from the United Nations.
The Republic will be in ninth spot, with 34.2 per cent of its population in that age range; Hong Kong will take top spot with 40.6 per cent; South Korea, second at 39.4 per cent; and Japan, third at 37.5 per cent.
The growing number of residents aged above 65 presents challenges, said reinsurer Swiss Re.
Speaking to The Straits Times, its global chief executive of life and health reinsurance Paul Murray said: “When we think about retirement, we think about supporting our parents as well as ourselves. In this future that we face, we might have to support two generations of parents and grandparents. It is becoming the norm.”
The Population in Brief 2023, an annual publication by the National Population and Talent Division and partner agencies, showed that the number of citizens aged 80 and above increased by 70 per cent from 80,000 in June 2013 to 136,000 in June 2023.
This age cohort represented 3.8 per cent of the population, from 2.4 per cent in 2013. The proportion has been increasing year after year.
At the same time, the proportion of citizens aged 65 and above rose to 19.1 per cent as at June 2023, from 11.7 per cent in 2013.
By 2026, Singapore will be super-aged, which occurs when the proportion of the population aged 65 and above reaches the 21 per cent mark.
And by 2030, the Population in Brief report showed that around one in four citizens – 24.1 per cent – will be 65 years old and above.
Similar trends are playing out globally.
The UN World Social Report projected that the number of people aged 65 or older worldwide will more than double to 1.6 billion in 2050, from 761 million in 2021.
The report also found that the number of people aged 80 or older is growing even faster. There will be an estimated 459 million of them by 2050, almost triple the number in 2021 at around 155 million.
Singaporeans have some safety nets to ensure a basic standard of living post-retirement, said Mr Christopher Gee, deputy director and senior research fellow at the Institute of Policy Studies in the Lee Kuan Yew School of Public Policy at NUS.
He said most Singaporeans should have a home that is fully paid off by the time they retire, so there are no rent or mortgage payments to make.
He added that CPF Life, the national longevity insurance annuity scheme, ensures every retiree will have a regular source of income for as long as he lives.
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According to the Central Provident Fund (CPF) Board’s website, someone turning 55 years old in 2025 can receive about $3,300 per month in CPF Life payouts at age 65, if he tops up his retirement account to the enhanced retirement sum.
As for medical expenses, MediSave, which functions like one’s personal healthcare savings account, and MediShield Life, which is the national health insurance scheme, provide a basic level of support over one’s lifetime, Mr Gee said.
An individual can also use his MediSave for family members, including his spouse, children, parents and grandparents.
There is also CareShield Life, which takes care of a person’s long-term care needs for life should he become severely disabled.
While CPF Life, MediShield Life and CareShield Life take care of the basics, a person will need more money for retirement if he aspires to a higher standard of living, Mr Gee said.
He can take up an Integrated Shield Plan, which provides medical coverage on top of MediShield Life.
For example, an Integrated Shield Plan will cover stays in a private hospital or in higher-class wards – A or B1 – in a public hospital.
He can also buy CareShield Life supplements, which complement CareShield Life by giving additional benefits such as higher monthly payouts.
Dr Joelle Fong, an assistant professor at the Lee Kuan Yew School of Public Policy, said there are private annuity plans from the insurers to increase one’s monthly income in retirement.
These plans allow the individual to get a payout for life, in addition to what he gets from CPF Life.
Some private annuity plans in the market include Income Gro Retire Flex Pro, Singlife Flexi Retirement, Manulife IncomeGen, Great Eastern’s Great Lifetime Payout, Prudential’s PruLifetime Income Plus, AIA Platinum Gift for Life and AXA Retire Treasure.
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Dr Fong said her research shows that the average Singaporean above 50 years old holds about 60 per cent of his wealth in his house.
Mr Gee said an individual who needs money can consider monetising his flat through the Lease Buyback Scheme for public housing flats.
Under the scheme, Housing Board (HDB) home owners who are 65 years old or older can sell part of their flat’s lease to HDB, with the proceeds going first towards topping up their CPF Retirement Accounts to the Basic or Full Retirement Sum.
In this way, they monetise their flat for a stream of income in their retirement years and can still continue to live in it.
Alternatively, they can choose to right-size their property by moving to a smaller, more affordable flat, Mr Gee added.
However, some may want to leave the flat for their children, or they may want to stay in the familiar environment of their home as they get older.
Said Mr Gee: “The CPF retirement financing scheme is too tied up with housing finance. We use our CPF to pay for housing and that, at the moment, is probably too much of a diversion.”
He added: “If you are not prepared to draw down on your housing equity – that is your retirement nest egg – to finance your post-retirement lifestyle, then you have a problem.”
Going forward, Swiss Re’s Mr Murray said the industry is developing convertible products.
“Typically, when people buy insurance products, they might buy a life insurance product that covers them if they die or something adverse happens to them.”
Increasingly, he said, more options will emerge that allow the individual to convert, say, his life insurance policy into a critical illness policy or a long-term care product, as his life needs change over time.
In China, the government has a pilot scheme under way to convert life insurance plans into long-term care insurance.
This allows the beneficiary of the life insurance policy to tap his insurance to fund his long-term care needs, should he become disabled after an illness or accident.
Mr Murray added that policymakers in the United States are looking at embedding long-term care into savings products.
“I think the better way to solve the long-term care challenge is to have insurance products that draw down on your retirement savings plans to fund your care needs,” he said, adding that this makes more sense than getting a care-focused product, which can be really expensive.
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