S'poreans 'not well-prepared for early retirement'
Most surveyed by AXA think their CPF savings are enough, but it may
not be so
By Arthur Poon
Oct 10, 2006
The Straits Times
SINGAPOREANS have a clear idea about retirement - call it quits at
54 and enjoy a better living standard. Think again, says an
insurance expert.
The unrealistic financial expectations of many people here were
unearthed in a global survey of 10,000 people by insurer AXA.
Respondents were asked about the ideal retirement age, what plans
they had made and if they expected a better standard of living
after retirement.
The local findings, as outlined to a conference by Mr Richard
Shermon, chief executive of AXA Life Insurance Singapore, showed a
worrying disconnect with reality.
'There is a huge retirement funding gap in Singapore,' he said.
'People dream of an early and comfortable retirement, but they are
not financially prepared (for it).'
Those dreams include retiring at an average age of just 54 -
earlier than people of any other country - while one in four
believe that their living standard will then improve.
And 90 per cent of Singaporeans think they are saving enough by
contributing to the Central Provident Fund (CPF), Mr Shermon said,
and almost half think their CPF will give them a monthly income
equal to their last drawn pay.
The reality, he said, is that the minimum sum required in a CPF
account will be $120,000 by 2013, but this will provide a meagre
monthly payout of less than $1,000, assuming that one draws on it
for more than 10 years.
Many people, such as sales executive Steven Chin, 54, and a father
of three, are not sure about where they stand.
'I estimate my CPF savings will give me $1,500 to $2,000 a month
after retirement, but I have never really done the sums,' said Mr
Chin.
The need for people like Mr Chin to plan was addressed by the CPF
Board's chief executive, Mr Liew Heng San, in the opening address
yesterday.
He told the conference organised by the Singapore Actuarial Society
that the ageing population poses vital challenges. He also expects
financial support for the elderly from family members to
shrink.
'There might be a value change in that elderly parents may now be
more reluctant to rely on their children for financial support.
With more working overseas, we can also expect family support to
become more fragile,' he said.
CPF has in the past focused on helping members accumulate savings
but not given enough thought to how the savings should be disbursed
post- retirement, he admitted. An area that CPF is studying is a
bigger role for annuities, and how these products can be better
designed for the Asian market.
Mr Liew urged members to defer CPF payouts if they are financially
able to do so. 'For every one year that they postpone payouts, they
can extend it by two more years'.
The reason: Members with only the minimum sum will have just 20
years of payouts if they start getting them at 62.
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Funding gap
Ninety per cent of Singaporeans surveyed think they are saving
enough by contributing to the CPF. Almost half think their CPF will
give them a monthly income equal to their last drawn pay.
The reality, says AXA?s Mr Shermon, is that the CPF minimum sum
will be $120,000 by 2013, but this will provide a meagre monthly
payout of less than $1,000, assuming one draws on it for more than
10 years.
