Singapore s Social Security Savings System

Transcription

1 Singapore s Social Security Savings System Benedict S. K. Koh SMU Proposal by SMU Executive Development Asian Financial Leaders Programme Feb 2014 March

2 Presentation 1. Structure of Singapore s Social Security Savings System 2. Review of Singapore s Social Security Savings System a) Home Ownership b) Financial Protection for families c) Healthcare Coverage d) Retirement Security e) Asset Enhancement 3. Reforms a) Retirement Adequacy b) Healthcare coverage c) Asset Enhancement

3 SINGAPORE MANAGEMENT UNIVERSITY Central Provident Fund 3

4 Structure of Central Provident Fund Employee s contributions Employer s contributions CPF Member s Individual Account Ordinary Account (OA) Special Account (SA) Medisave Account (MA) Retirement Account (RA) CPF Investment Scheme OA CPF Investment Scheme SA Hospitalisation expenses MediShield scheme Other Schemes: * Education * Home Ownership Other Scheme: Retirement * Family Protection

5 CPF s Summary Statistics Total Number of CPF Members (mil) Total Number of Active CPF Members (mil) Total Contributions (S$m) 20,294 20,125 21,993 24,628 26,048 28,530 Ordinary Account (OA) (S$m) 65, , , , , , Special Account (SA) (S$m) 30, , , , , , Medisave Account (MA) (S$m) 42, , , , , , Retirement Account and Others (RA) (S$m) 12, , , , , , Total Members Balance (S$m) 151, , , , , ,968.60

6 CPF s Contribution Rates Year Contribution Rate (for monthly wages $750) Contribution by Employer (% of Wage) Contribution by Employee (% of Wage) Total Contribution (% of Wage) Ordinary Account (% of Wage) Credited to Special Account (% of Wage) Medisave Account (% of Wage) Income ceiling for CPF contributions (S$) 1955 to , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , ,000

7 CPF s Contribution Rates for various age groups Employee Age (Years) Contribution Rate (for monthly wages $750) Contribution Contribution by Total Contribution by Employer Employee (% of (% of Wage) (% of Wage) Wage) Ordinary Account (% of Wage) Credited to Special Account (% of Wage) Medisave Account (% of Wage) 35 & below Above Above Above Above Above Above

8 CPF s Interest Rates CPF OA and SA Interest rates and Inflation Rate 10.0 OA rate SA rate Inflation rate

9 CPF Schemes Goal Scheme Year introduced 1) Home Ownership a) Public Housing Scheme 1968 b) Residential Properties Scheme ) Protection for family a) Home Protection Scheme 1981 b) Dependant s Protection Scheme ) Healthcare Financing a) Medisave Account 1984 b) MediShield Scheme 1990 c) Medifund d) Eldershield ) Retirement Adequacy a) Minimum Sum Scheme 1987 b) CPF Top-up Scheme 1995 c) CPF Life Annuity ) Asset Enhancement a) CPF Investment Scheme * 1986 b) Non-residential Properties Scheme ) Others a) Tertiary Education financing for children 1989

10 SINGAPORE MANAGEMENT UNIVERSITY Home Ownership 10

11 Home Ownership 1. Public Housing Scheme Introduced in 1968 Public Housing apartments 2. Residential Properties Scheme Introduced in 1981 Private Housing Much higher cost of ownership 11

12 Singapore s Home Ownership

13 Home Ownership across countries Percentage of Home Ownership across Countries 100.0% 90.0% 90.5% 80.0% 70.0% 60.0% 50.0% 69.0% 66.0% 64.0% 61.0% 56.0% 52.0% 44.0% 40.0% % Home Ownership 30.0% 20.0% 10.0% 0.0% Singapore Australia United States United Kingdom Japan South Korea Hong Kong Germany

14 Private Property Prices in Singapore 300 URA Property Index (Property Market in Singapore) Detached Houses Semi-detached Terrace Apartment Condominium 50 0 Years

15 Public Property Prices in Singapore 220 HDB resale Flat Price Index HDB resale Flat Price Index /12/ /09/ /06/ /03/ /12/ /09/ /05/ /02/ /11/ /08/ /05/2016

16 SINGAPORE MANAGEMENT UNIVERSITY Financial Protection for families 16

17 Home Ownership 1. Dependant s Protection Scheme Term insurance protection for S$46,000 Coverage up to age 60 Affordable premium 2. Home Protection Scheme Mortgage reducing insurance Pay off housing loan upon death or permanent disability Mandatory for public housing purchases 17

18 SINGAPORE MANAGEMENT UNIVERSITY Healthcare Coverage 18

19 3- M Framework for Healthcare Medisave Account 1) Savings used to pay hospital bills 2) allowed for members and their dependants 3) Gradually liberalised to allow selective outpatient treatments, care in community hospitals and hospices 4) Pay premiums of medical insurance plans MediShield Medical insurance to pay large hospital bills Insurance coverage up to age 85 Medifund Subsidized medical care for financially poor Means-tested for eligibility 19

20 CPF MediShield Scheme MediShield Scheme No. of Persons 1,955,392 2,763,673 2,870,631 3,075,994 3,298,682 3,389,815 3,496,523 3,542,898 *Percentage of Insured Persons 56% 78% 78% 84% 88% 90% 92% 93% Singapore Population_residents ('000) 3, , , , , , , ,818.2

21 Retirement Adequacy 1. Minimum Sum Scheme finance living expenses during old age Increased from S$30,000 in 1987 to S$148,000 in 2013 Amount increased to adjust for inflation 2. CPF Members do not have sufficient Cash Savings Contribution rate to SA may be too low Too much savings invested in housing 3. Policy changes Increase contribution rates to Special Account Increase interest paid on SA savings 21

22 CPF Minimum Sum Scheme Minimum Sum Scheme (MSS) Required MSS Amount 90,000 94,600 99, , , , , , ,000 CPF Members Turning 55 No. of persons 57,754 57,129 59,262 71,613 80,969 30,916 33,644 35,182 % of persons meeting MS requireme 37.5% 36.4% 36.3% 33.8% 37.5% 40.7% 45.0% 48.7%

23 CPF Balance across age groups Distribution of CPF members' balances by Age group and Sex (as at Dec ) Balances Average balance No of Balances Age group No of males (thousands) for males female (thousands) Average balance for females Up to 20 56,576 48, ,244 67,265 1,196 > , ,012 6, ,947 1,463,692 12,003 > ,723 4,112,847 33, ,918 5,271,792 40,893 > ,315 8,882,045 59, ,347 9,532,861 61,365 > ,037 13,915,684 85, ,692 14,009,962 85,587 > ,840 18,254, , ,694 16,196,750 93,789 > ,515 21,629, , ,606 16,970,595 88,570 > ,845 22,876, , ,458 16,741,320 92,260 > ,140 17,470, , ,668 12,621,079 81,077 Above ,603 17,486,199 51, ,356 11,827,654 33,759 Unspecified 15,831 29,885 1, ,803 8,386 2,205 All groups 1,732, ,437,927 72, ,681, ,711,356 62,264

24 Employment of Cumulative CPF Savings Retirement & Others Balance 2.39% OA Balance 21.90% Property withdrawal 43.88% SA Balance 7.50% Medisave Balance 13.00% Special discounted shares 0.72% CPFIS-SA 1.87% CPFIS-OA 8.57% Education withdrawal 0.19%

25 Asset Enhancement 1. CPF Investment Schemes CPFIS OA Scheme CPFIS SA Scheme 2. Wide variety of investment options 3. Low participation rate in investment scheme Lack of financial literacy and overwhelmed by wide choice High transaction costs Professional fund managers lack stock selection and market timing skills

26 CPF Investment Scheme CPFIS-OA Full Ordinary Account savings can be invested in: Fixed Deposits Singapore Government Bonds Statutory Board Bonds Bonds Guaranteed by Singapore Government Annuities Endowment Insurance Policies Investment-linked Insurance Products Unit Trusts Exchange Traded Funds Fund Management Accounts CPFIS-SA Full Special Account savings can be invested in: Fixed Deposits Singapore Government Bonds Statutory Board Bonds (Secondary Market only) Bonds Guaranteed by Singapore Government Annuities Endowment Insurance Policies Selected Investment-Linked Insurance Products* Selected Unit Trusts* Selected Exchange Traded Funds* Up to 35% of investible savings # can be invested in: Shares Property Funds (or real estate investment trusts) Corporate Bonds Up to 10% of investible savings # can be invested in: Gold (currently only UOB offers new gold investments)

27 Employment of Ordinary Account Savings CPFIS-OA 11.52% Property withdrawal 59.03% OA Balance 29.45%

28 Employment of Special Account Savings SA Balance 80.07% CPFIS-SA 19.93%

29 CPFIS Transaction Costs Number of funds sampled Average sales loads Average management fee Average expense ratio Equity Funds % 1.4% 2.1% - active % 1.4% 2.1% - passive 3 2.1% 0.7% 1.0% Balanced Funds % 1.3% 1.9% - active % 1.3% 2.1% - passive 4 3.5% 1.0% 1.3% Income Funds 39 # 2.1% 0.9% 1.1% Cash Funds 3 0.1% 0.5% 0.7% Sample mean 4.4% 1.3% 1.9%

30 CPFIS Transaction Costs fund types years Equity -6.9% -3.0% -2.6% -2.3% Balanced -6.6% -2.9% -2.4% -2.2% Income -3.2% -1.5% -1.3% -1.2% Money market -0.8% -0.7% -0.7% -0.7%

31 SINGAPORE MANAGEMENT UNIVERSITY eforms 31

32 Reforming Singapore s Social Security Savings System 1) Retirement Adequacy - Raise contribution rates of older age groups - Monetization of Homes - Limit withdrawal of savings for housing - Increase return on default accounts - Enhance features of life annuity - Avoid using CPF as Macro-economic tool - Extending retirement age 2) Healthcare coverage - Universal and lifetime health insurance 3) Asset Enhancement - Low cost default portfolios - Reducing transaction costs 32

33 End of Presentation 33