Young workers in Singapore 'won't have enough for retirement'

Singapore

YOUNG workers in Singapore are at risk of a shortfall in retirement income despite widespread and high levels of private savings, a study by a member of a multinational consortium has found.

In its report, The Global Savings Gap, the International Longevity Centre UK (ILC-UK) said the average earner in 24 out of 30 high-income economies will face a retirement-income shortfall.

Average earners in Hong Kong and Singapore face some of the largest gaps, with the pension systems of these two cities failing to provide adequate retirement incomes. No exact figures were offered.

The mission of ILC Global Alliance is to help societies address longevity and population ageing positively and productively. It has members in 17 countries, including Singapore, the US and Japan. Its Global Savings Gap report by its UK member was supported by Eastpring Investments, Prudential's asset management business in Asia.

The report said young Singapore workers just starting work today in Singapore will need to save 12 per cent of their annual earnings, in addition to what they already save through mandatory and personal contributions.

The report noted that more than 90 per cent of the population in Singapore and Hong Kong make some form of savings contributions - significantly higher than in the US, UK and France; in Singapore, nearly a quarter save more than 30 per cent of their annual income.

But not all the money goes towards retirement. In Singapore, only 29 per cent of respondents said they were saving for retirement; 26 per cent were doing so to pay for "social care", the report said.

ILC-UK, noting the "complete lack of support from the state" in Singapore, said workers thus have to depend on their private savings during retirement.

However, it acknowledged the difficulty in increasing state support in Singapore, where the proportion of older people will rise dramatically in the next few decades.

Dean Hochlaf, a co-author of the report and an assistant economist at ILC-UK, said: "Singapore and Hong Kong have shown that it is possible to promote universal savings, but private savings alone will not be sufficient to generate adequate retirement incomes. Those with low earnings throughout their working life are particularly vulnerable to poverty in retirement."

Singapore's pension system is based on the Central Provident Fund (CPF), which provides for most social security functions.