TR EMERITUS

The CPF Scheme that had me decide 'Enough Was Enough' You may not believe this. I'll share this little snippet with you anyway. Do whatever you want with the information or just treat it as a fairy tale if you think it's a load of bullshit. It doesn't bother me anyway, because my mind was made up to leave after I did my analysis (be it right or wrong) and I have been standing by my decision since without regret. The first spark in my mind about migration occurred in 2006. That was the year started my first job in Singapore. My friend Tucky started work earlier than me, so he was much sharper towards any changes in our financial environment than me. In 2003, one major change was made to our CPF, the sole retirement fund of many Singaporeans. Back then, there wasn't much talk about it, especially among my peers who just started their careers. By 2006, we realised something was amiss and sat down one evening to discuss about it. The CPF minimum sum had already risen $14,000, or 17.5% since its inception 3 years before. Still, most of my peers were not bothered by it at the slightest. Not Tucky and I though. We knew something was brewing and eventually ordinary Singaporeans would be in hot soup in regards to this policy change. In 2006, migration was never on my mind. It was never an option. The thought of leaving Singapore to work and live elsewhere was simply too overwhelming for someone who planned to live and die in Singapore. I mean, who doesn't? Still, the first discomfort the CPF change continued to lingered in my mind, like a plague that refused to go away. By 2008, my worst fears were confirmed after I continued to monitor the progress of the new Minimum Sum scheme. It was the year I decided I had to do something drastic in my life because I knew I would be heading into financial hardship if I were to continue doing what I had been doing. There was only an obvious choice as a money minded Singaporean - to make more money. I was heading nowhere in achieving that goal be it in employment or self employment. Then the idea of migration was brought up by my ex-girlfriend Jen and the rest was history. The purpose of this is not to share my migration story. It has been done to death. Instead, I'm going to share what I saw in 2006 that got me panicking. As a matter of fact, by now I believe many more Singaporeans have already woken up to the fact that the Minimum Sum policy is going to have a much larger impact on themselves than they initially thought. An elaboration may not be necessary after all. Still, I thought it is a good time to do so, since we finally have 10 years of data to refer to. In 2006, I realised the inflation rate used by the CPF was close to 6% per annum since the Minimum Sum scheme was introduced in 2003. I used that rate to forecast the amount I would be dealing with at the year I turn 55 and I didn't like what I saw (if things continue to go on the same way). Sadly, a decade of data reaffirms that the Minimum Sum (MS) has been increasing around 6.3% year-on-year, worse in the 6% rate I used to project in fact. I would update my calculations today: If you are 50 years old today, your MS by your 55th birthday is likely to be $207,000 If you are 40 years old today, your MS by your 55th birthday is likely to be $371,000 If you are 30 years old today, your MS by your 55th birthday is likely to be $665,000 If you are 20 years old today, your MS by your 55th birthday is likely to be $1,119,000 * feel free to audit and correct me if I am wrong. The above doesn't defer much from my original forecast in 2006. Back then I knew that amount of Minimum Sum I had to deal with (for my case) was about half a million dollars. That was a great deal of money for any ordinary employee like me. I made an unrealistic projection of myself working for 30 straight years without a window of unemployment nonetheless. 500,000/30 (years) / 12 (months) = $1,388 is the amount of money I have to had to put into the CPF on average per month, if circumstances remain the same. So how much monthly salary do I require for me to deposit $1,388 into my CPF account without topping up with cash? On current rates (36%), my salary has to be at least $3,850. That was a nightmare of a finding to me because of 3 factors that make this totally unrealistic. Obviously, my entry level job during those years was never going to pay me $3,850 or anywhere close to it. In fact, many of my seniors who had worked for a few years did not hit this level of salary range. Even if I did better later on and manage to enjoy a $3,850 monthly wage or higher, how could I possibly make up enough for the deficient years? The second factor was that my assumption of 30 working years would have taken me to 60 years of age at the end of the projection. Many Singaporeans are still unaware that our employer's contribution to our CPF will drop from (the current) 16% to 14% (at 50 - 55 years old) and to 10.5% (at 55 - 60 years old). That will make a huge difference for 10 years worth of working wages. Lastly, of course, it is never realistic to expect employment for the full 30 years without a hiatus. A possible purchase of a HDB flat was not even considered for this equation. In short, I knew I was screwed. I knew I would not be able to withdraw a single cent from my CPF account at age 55. Don't get me wrong, I'm not implying that I would be able to withdraw a healthy pension fund elsewhere at the same age. Let's not go there and stick to the topic. What was truly disappointing was that I knew I would not even hit my Minimum Sum if I took an average career path. I might have a chance if I burst a gut (I tried for a few years and got bladder cancer as the prize) but even if I worked that hard, did better than the average and made it, what about the rest of the Singaporeans? Is there any meaning to this if the majority of the population will not be able to make it? Now for the worse news, even if you hit the Minimum Sum, you will still withdraw nothing at 55 years old because the CPF board only allows you to withdraw anything beyond your Minimum Sum. So yeah, you burst your gut and made it at the last minute. Well done, thank you here is $16.88 for your effort. The rest of your money had been used for purchasing an annuity whether you agree to it or not. You will be paid $600 a month for your effort thereafter. Thank you for your participation. In my opinion, no one should be penalised for failing to amass a certain amount of money in their working career. Singaporeans grow up being guided to a selection of schools (because the rest are deemed shit), channeled to certain units during National Service (whether they like it or not), herded to take up a selection of jobs (because the rest could not pay enough to fulfill your Minimum Sum) and when we finally exhausted all our life capital to head towards the final chapters of life, we cannot even decide the way we want to die. Is that what life is about as a Singaporean? A Singaporean in Australia * The author blogs at asingaporeanson.blogspot.com.  Read More →

In a statement today (5 Jun), the Ministry of Health (MOH) said it supports proposals from MediShield Life Review Committee (MLRC) to raise claim limits and lower co-insurance, especially for large healthcare bills. "These enhancements will provide all Singaporeans with peace of mind against large healthcare bills for life," MOH said. However, with the enhanced MediShield Life benefits, payouts will increase, which in turn require higher premiums, MOH said. "The government will ensure that Medisave withdrawal limits will be sufficient for all MediShield Life premiums," MOH assured. To help Singaporeans with their MediShield Life premiums, the government will provide premium subsidies, financial assistance and other forms of funding support for the lower to middle income, as a permanent feature of MediShield Life. The premium subsidies for Pioneers are not means-tested and will be for life. The government said it will help all Singaporeans to adjust to the premium increases over 4 years through transitional subsidies. In other words, after 4 years, such transitional subsidies will be withdrawn. The government also accepts the committee’s recommendation to bear most of the cost of bringing in those with pre-existing conditions. "In this way, the government will help all Singaporeans, including those with pre-existing conditions and those who are currently excluded, achieve MediShield Life cover, while ensuring that premiums are kept affordable premiums for policyholders," it said. The government's support measures are: a. Premium subsidies for lower to middle income households, i.e. up to two-thirds of the population. There will be further financial assistance for those who need help, even after premium subsidies; b. Transitional subsidies for four years for all Singapore Citizens, regardless of income, to ease in the shift to MediShield Life; and c. Support for the Pioneer Generation, for life. MOH said, "With MediShield Life, all Singaporeans will be better protected against large healthcare bills for life, regardless of changes in their life and health circumstances." MOH said it will finalise the government subsidies, and provide the details at a later date. The government will consider the recommendations of the MLRC, after it submits its final report, and announce its findings thereafter. MediShield Life will be implemented in end-2015. Meanwhile, MLRC Chairman Bobby Chin said, "We have listened to what Singaporeans valued most in MediShield Life. Our recommendations will provide better protection against large hospital bills for all Singaporeans, for life." The following are some of the recommendations announced on 5 June 2014 by MLRC, following months of consultation with the public and key stakeholders: Removing the lifetime claim limit of $300,000 Increasing annual claim limits by 40 per cent from $70,000 to $100,000 Increasing daily claim limits for normal and ICU wards by up to 55 per cent Increasing claim limits for surgical procedures by 25 to 93 per cent Increasing daily claim limits for community hospitals by 40 per cent, from $250 to $350 Increasing claim limits for outpatient cancer chemotherapy and radiotherapy Lower co-insurance rates of 3 to 10 per cent, down from current 10 to 20 per cent Premium rebates to start from age 66, instead of 71 With MediShield Life, the current age limit of 90 will be lifted so Singaporeans can enjoy life-long coverage. Those with pre-existing conditions will also be covered. MLRC gave some examples highlighting the benefits of MediaShield Life: Example 1 - Higher MediShield Life Payout For Large Inpatient Bill (Heart Attack), Patient: Mr Tan, aged 66, Ward Class: Class B2, Length of Stay: 10 days, Medical Condition: Heart Attack (This is an example of a very large bill at the 96th percentile). Example 2 - Higher MediShield Life Payout For Very Large Inpatient Bill (Stroke), Patient: Mr Yee, aged 48, Ward Class: Class B2, Length of Stay: 14 days (4 day in ICU), Medical Condition: Stroke (This is an example of a very large bill at the 98th percentile). Example 3 – Higher MediShield Life Payout For Outpatient Bill (Cancer Treatment), Patient: Mdm Kamla, aged 63, Patient-type: Subsidised, Number of chemotherapy cycles: 4 cycles, Medical Condition: Cancer. MLRC also gave MediShield Life indicative premium examples for the different household types: All lower and middle income households will qualify for Government premium subsidies All Singapore citizens who will experience premium increases will also receive transitional subsidies in the first few years, to phase in premium increases and ease the transition from MediShield to MediShield Life, over and above any Government premium subsidies and Medisave top-ups a. For a lower income Singaporean nuclear family (2 adults and 2 children) with a monthly income of $2,000 and monthly Medisave contribution of $180, their net indicative premiums for the whole family will be about $32 per month or $384 per year after premium subsidies for the lower income and first year transitional subsidies. After the transitional subsidies are phased out after 4 years, net premiums will be about $55 a month or $660 per year. b. For a middle income Singaporean nuclear family (2 adults and 2 children) with a monthly income of $5,000 and monthly Medisave contribution of $450, their net indicative premiums for the whole family will be about $33 per month or $396 per year after premium subsidies for the lower income and first year transitional subsidies. After the transitional subsidies are phased out after 4 years, net premiums will be about $59 a month or $708 per year. c. For a middle income Singaporean extended family (2 adults, 2 children and 2 grandparents (younger than Pioneer Generation), with a monthly income of $8,000 (dual income) and monthly Medisave contribution of $720, their net indicative premiums for the whole family after premium subsidies for the lower income and first year transitional subsidies will be about $111 per month or $1332 per year. After the transitional subsidies are phased out after 4 years, net premiums will be about $147 a month or $1,764 per year. d. For a typical Pioneer Generation retiree household, they will see a decrease in their total payable premiums.  Read More →

A cleaner mopping the floor in Ang Mo Kio Hub. For the third year in a row, the National Wages Council has singled out low-wage workers and recommended they receive a minimum amount of pay increase. (Photo: ST) We refer to the article “National Wages Council recommendation: $60 pay hike for workers earning under $1,000” (Straits Times, May 31). Yet another recommendation for less than $1,000 workers? It states that “Workers earning less than $1,000 each month should get a pay hike of at least $60, the council said in its annual wage guidelines issued on Friday. This follows its recommendations that these workers receive minimum pay hikes of $50 and $60 in 2012 and 2013 respectively. 6 in 10 followed the guidelines? While more firms followed the guidelines last year – about six in 10 compared to three in 10 in 2012 – NTUC noted that they still lag behind the nine in 10 unionised firms.” 8 in 10 will follow the guidelines? Why do the above statistics seem to differ from that reported on the same day in the Business Times (“Minimum $60 pay rise for low income”, May 31) - “As at the end of last year, almost eight in 10 employers in the private sector had given or said that they intended to give a raise to workers earning less than $1,000 a month, up from six in 10 in 2012″? How many actually get the increase? What we need to know is the percentage of workers earning below $1,000 who received the recommended increase, instead of what proportion of employers or unionised companies who were surveyed accepted the recommendations or said that they intended to do it? Less than 3 in 10 in 2012? In this connection, the last time that the specific statistic was available last year for 2012, was that more than 70% who did not get the recommended increase. So much for yet another survey? If you remember last year, only 3-in-10 workers earning less than $1,000 received at least $50 increment recommended by the NWC in 2012. “Spin doctoring”? This starkly sobbing statistic has to be seen in the “spin doctoring” context that it was reported in the media that while eight in 10 companies in the unionised sector accepted the recommendations and boosted the pay of their low-wage workers by at least $50 in 2012, but only three in 10 non-unionised companies followed suit. If not for the MOM report which came out just a few days after the media reports last year – we wouldn’t be the wiser than 8-in-10 unionised and 3-in-10 non-unionised (implying unionised is so much better?) Actually what it means in totality is only 3-in-10 of less than $1,000 workers got the $50! NWC still relevant? Has the NWC outlived its usefulness (and the union movement too) – particularly from the perspective of lower-income workers – when the number of full-time workers earning less than $1,000 has remained almost the same in recent years (and we have not even adjusted the $1,000 for yearly inflation), and the real median and 20th percentile gross and basic wage growth (excluding employer CPF contribution) has been about 1 and close to 0 per cent per annum in the last decade or so? Real wages drop from age 37 to 20% less than when they were age 25? Also, according to the study on retirement adequacy (“ADEQUACY OF SINGAPORE’S CENTRAL PROVIDENT FUND PAYOUTS: INCOME REPLACEMENT RATES OF ENTRANT WORKERS”) commissioned by the Government in November 2012 – the graph on page 6 – the real growth in wages at the 30th percentile of income male workers – starts to decline from around age 37 until by age 65 – they are earning about 20% less than what they were getting at age 25! Productivity fell 0.2%? With regard to “It also urged firms not to let up on the productivity drive, noting that real wage increases should be in line with productivity growth over the long term, in order to be sustainable” Why are we still singing the same old song that wages can only increase with productivity increases – when productivity growth last year fell by 0.2 per cent, despite the billion dollar wage credit scheme? SY Lee and Leong Sze Hian  Read More →