By Chris Kuan
This is surely something Singapore is not Number One, not even Top Ten based on the Global Retirement Index put together by Natixis Global Asset Management.
Singapore is ranked 25th, behind every 1st World peer and even behind Korea. Northern Europe dominates the top of the ranking.
In my view, there is a glitch in the report which even overstate Singapore’s rank No.2 in the sub-index for Finance In Retirement Category.
This seems odd at first sight given what we already know about retirement inadequacy. On closer examination, the sub-index does not measure retirement adequacy but such things as inflation, government indebtedness, governance, tax pressure. We know Singapore do very well on these measurements hence our high ranking. But if retirement adequacy is factored in, then I am certain Singapore’s No.2 ranking in the sub-index would have fallen which would cause Singapore to fall out of the top 25.
The report has a useful advice: follow the leaders. What did leader Norway do so well? Strengthen the 3 pillars of retirement – government benefits, employment pension and personal savings. Australia came in for special mention for the excellence of its superannuation program – a workplace pension that is the main vehicle for retirement income, supplementing a means-tested basic state pension.
Notice the absence in Singapore of the things that Norway and Australia did so well – government benefits and employment or workplace pensions. It is especially poignant in the Norwegian example because its is publicly funded unlike Australia which is mostly privately funded.
In Norway, funding is supplemented by tapping up 100% of the inflation adjusted returns from its Government Pension Fund (GPF). It can be said that Norwegians have a direct benefit from GPF’s investments.
We in Singapore have GIC and Temasek, which are nearly comparable to GPF. Therefore there is no reason for retirement inadequacy except that our government only tapped 50% of the inflation-adjusted returns of GIC and Temasek (plus MAS). Furthermore, the funds are not used directly for funding retirement and healthcare but spent at the entire discretion of the government.
In order to improve our retirement proposition, the government should follow the leaders. First, re-design the pension system to allow the flexibility of private workplace pensions like in Australia. Second link the Net Investment Return Contribution, i.e. the constitutional rule permitting spending of the earnings from reserves, directly to the provision of state pensions and healthcare. Make those reserves work directly for the benefit of the people.
Then Singapore can climb the ranking. As it is now, the Number 25 ranking is poor in relation to its GDP per capita* – like the old saying “Nice from far, but far from nice”.
Did someone mention something about Swiss standard? Well… Switzerland just so happens to be Number 2.
*According to the 2015 ranking by International Monetary Fund, Singapore is ranked third in GDP per capita while Norway is ranked at sixth and Switzerland at ninth.