Retirement planning in Singapore

Retirement means different things to different people and industry observers say retirement aspirations of Singaporeans have evolved over time.

Mr. Edwin Chua, aged 39 this year, is already planning ahead. He intends to stop working full-time by the age of 45 and said that as a financial adviser, his work experience helps him manage his own money.

On a month to month basis, Edwin tries to save up to about 30% of his income which goes into various portfolios of investments. 50% of his income goes to pay for his expenses. He still has surplus that eventually goes into savings or is parked to investments.

He said he started thinking about early retirement at the age of 16 as he aspired to have more freedom with his time. Retiring early would mean that he would have more time to spend with family and to do things that really matter in life.

Edwin is happy to be in the financial planning industry. One thing unique about the industry is that there's no actual retirement, but more financial freedom. So working towards financial freedom would mean that he can still work on an ad-hoc basis, but would have more time to spend doing things that really matter to him.

Finance industry experts say there are a growing number of individuals like Edwin whose attitudes towards retirement stray from the conventional. Retirement used to be about working for a company for 20 to 30 years and then stopping, and that was it - you didn't work again. Now people are thinking in a much more active way about retirement. They're thinking about moving into retirement, by perhaps doing a bit less of their day job, and picking up some other work that's close to what they do, or something that's close to what they really enjoy. They might plan to do that for five to 15 years. Ultimately, they may eventually want to completely stop but it's much more of a phased approach now.

According to a recent survey by HSBC, seven in 10 people working in Singapore above the age of 45 would like to retire within the next five years. The study showed that top reasons for wanting to retire include having the freedom to travel and pursue other interests, spending more time with family and switching to another career or voluntary work. However, half of them said they would not be able to retire within five years mainly due to financial constraints.

A DBS-Manulife Retirement Wellness Study done in November 2015 showed that people living in Singapore start planning for their retirement at an average age of 38. The surveys also showed that about four out of five people in Singapore are not fully aware of how much they will need to put aside. Finance industry experts say the amount needed for retirement really depends on a person's current lifestyle and their aspirations to maintain that lifestyle - to increase or reduce that lifestyle or modify it during retirement years.

Amid changing retirement needs, the Singapore Government implemented enhancements to the Central Provident Fund (CPF) system recently.

(a) Describe the CPF Life Scheme and the Life Plans available, and analyze the benefits offered by the CPF Life Scheme.

(23 marks)

(b) Examine the latest enhancements to the ElderShield Scheme, CareShield Life. What are the options available to Edwin, who turns 40 in 2019 (born in 1979)?

(15 marks)

(c) Describe and discuss the Inter-Ministerial Committee (IMC)'s proposed pillars of providing financial security in old age.

(12 marks)