Wednesday, 24 January 2018

No Country for Old Singaporeans

According to one study, there are about 900,000 elderly (age 65 and over) in SG now.

Let's assume that 50% of them are in good financial state - i.e. they can self support. Why 50%? This is just for this thought experiment. IIRC, there is some study that found that about 50% of CPF members have the required minimum sum at 55. And lets say CPF Life is sufficient to care for these 50%.

So about 450,000 don't have CPF Life.

But CPF Life is NOT the only possible source of income in one's retirement. Of these 450,000 who do not have CPF Life (or sufficient CPF Life) payouts, let's assume about 50% of them have other sources of income - say they can rent out a room in their flat, or their children give them money every month. Again, why 50%? Just a figure to work with. Feel free to project higher or lower numbers.

So about 225,000 elderly has no CPF life, and no other sources of income. They need help from the govt.

So, how much does one require to subsist in SG in one's retirement years assuming that one has a roof over one's head (owns HDB flat)? $500? $1000? $1500? $2000?

Full CPF Life is about $1200. Let's use that.

So for 225,000 people, they will need $1200. A month. Or $14,400 a year. Each. How much is that in total?

$3.24 billion. BILLION.

A year.

Every year.

And increasing every year as the number of elderly increases each year.

How much is $3.24 billion? That's as much as the budget of a medium size or small ministry.

Which Ministries? MND is at $3.8b (in 2016, all figures are from MOF 2016 budget estimates). MTI is $3.9b. Home Affairs is at $5.3b. And Social and Family Development is at $2.5b.

So to provide the poor elderly with no retirement income with the CPF Life equivalent in full, would gut the budget of either MTI, MND, or MHA. And wipe out the entire budget and more of MSF.

And that's based on CPF Life full payout of $1200. Some would argue that that is insufficient.

Others might argue that that is too generous, and we could make do with the Basic CPF Life - $700.

Half the payouts and we would still need about $1.6b. Which is the budget of MCI, MOM, MCCY, and MEWR.

What are you willing to give up?


Questionable Assumptions

Based on the above assumptions and projections, we already need about $1.5 billion just to provide a $700 a month allowance. 

Try living on $700 a month. For half a year. Or better yet, one whole year.

Living on $700 a month for a month is no real test. If you have long-term medication to buy, just delay for a month. If you can't get enough to eat, never mind, just imagine that you are on a diet. For a month. 

Can you live on $700 a month on an on-going basis?

I can't.

But that's me.

Maybe you can.

But some people might object to providing $700 a month to the poor elderly. I heard one MP argue that some CPF members saved their whole life in order to just get Basic CPF Life that pays them $700 a month.

And someone who does not have the Minimum Sum for even Basic CPF Life, gets $700? Without working for it? That would strike most Singaporeans as patently unfair.

To address this unfairness, the government would either have to

a) provide supplementary allowance to those with basic CPF Life - your CPF Life would get you $700, the govt should give you say $300 more, and then if the poor elderly gets $700, it is fair (or at least fairer).
b) provide less allowance so those who worked to save for basic CPF Life wouldn't feel cheated. So maybe just $500 allowance for the poor elderly who did not even managed to save Basic Retirement Sum (BRS).

The problem with (a) is that just increased the budget. It was about $1.5 billion. It would now be more, depending on how many CPF members just meet BRS. Also will this mean that those who COULD HAVE gone with the Full Retirement Sum (FRS), might have chosen to go with BRS so that they can get supplementary allowance from the government?

The problem with (b) is, if you found it difficult to live on $700, now you have to try to live on $500 a month. Sure, $500 a month for a poor elderly is better than nothing, but this isn't solving the problem for the poor.

Maybe, those with Basic CPF Life should also be considered living below subsistence and be eligible for financial assistance?

But if we decide to help the poor with $1000 allowance, then we need to help those with Basic CPF Life above $1000 - say $500 + the $700 from CPF Life so they have $1200 - a little better off than the absolute destitute. 

And then those with FRS and Full CPF Life getting about $1300 will wonder why they worked so hard and they are not much better than those with just BRS but are helped by the govt.

So we need to give them something also?

Headache, ah!


chino said...

Very interesting write-up. Almost sounds like we are arguing whether it is more important to be fair or to be compassionate, although, this is not a mutually exclusive situation. There's definitely no simple and straightforward solution, like you said. Perhaps, one thing to consider is to take government aid (which most likely end up with higher tax on the masses) as a solution out of the whole picture for a second.
Just thinking out loud...

For those who has HDB, perhaps a non-profit can house the elderly in a retirement community center, while their HDB is rented out. The rent would be used to cover the basic living expenses + a small management fee. This might even improve the elderly's wellbeing with all the social interactions. Schools or companies can do their social responsibility bit here by volunteering to say, maintain the property and infrastructure, keeping the living cost low, while the kids can perform recitals dance, music, etc. as free entertainment to the elderly. Good training for the kids too.

For those without HDB, maybe an "adoption" program, where generous folks may provide the fund to "raise" these elderly? How compassionate are Singaporeans? I don't know. Anyway, I don't expect this to close the gap entirely... but it's a start.

I'm sure there are many creative and viable solutions out there... and as long as people don't put on the "let government take care of this" mentality.

El Lobo Loco said...

Chino wrote: "fair or compassionate". Yes. Being compassionate is a humanitarian question or issue. Being fair is political question or issue. Why is the political question important? Sustainability and feasibility. If it strikes the electorate is eminently unfair, the govt will pay a political costs, and then be out of power. And the next govt will get in based on a promise to get rid of the unfair policy.

Chino also suggested that "Non-profit house elderly in retirement community" (for those with HDB). Two issues I have with this suggestion: One, there is a cost to set up and run a retirement community. The land space required in land scarce SG is very high, and a non-profit could conceivably have other use for that land. Which may better serve their strategic goals.

The second issue is that people with HDB flats are not necessarily the problem. SOME HDB owners/dwellers may be unable to retire properly. But they are generally in a better situation than those without a HDB flat.

I accept that my use of 'no minimum sum for CPF Life" is also subject to objections, hence my many "modifiers" and considerations.

The problem is a big one. 900,000 elderly. Assuming just 20% are in dire straits (and that is a very conservative estimate), that's 180,000 in need. Depending on non-profit to help 180,000 is very optimistic. This is a huge political issue and requires a political solution.

In other words, the government has to be part of the solution.

chino said...

Thanks for your response. It is obvious that my first pass at suggesting a solution would ultimately not be the one that would work as is. Otherwise, I would have won a Nobel Prize already. It is precisely discourse like this or crowd sourcing of ideas where we can ultimately come up with the right solution. For example, your comment that "government has to be part of the solution" had me think. Perhaps, they can grant a piece of land to whichever organization that can develop a self-sufficient retirement community?
Even those without HDB can be part of it, where they'll be provided with the very basic housing and meal by being a productive member of the community.
So, the government is part of the solution, which may win them some brownie points for being compassionate. And, since it is not dictating how the solution will be implemented, no one can accuse them from being unfair.
Of course, I don't expect this to work without any generous souls in Singapore that would donate or help reduce the expense burden of these retirement center. But, that would be the challenge for the community director on how to raise fund successfully and be as self sufficient as possible.
I might be an optimist... But "without hope, we have nothing.n

El Lobo Loco said...

Oh good. A dilettante.

Thank you Chino for your well-informed opinions. I hope your comments here have not taken too much time away from your work on your Nobel Prize. I really think you should get back to your Nobel Prize winning work. Whatever it may be.

Your refreshing optimism cheers my cynical heart. Truly, with optimism there are no problems that cannot be overcome. Or overlooked. Or glossed over.

And of course, one must "ask not what your country can do for you, or what you can do for your country. Ask instead what kind-hearted and generous souls can do for your country so you are free to work on your Nobel prize".

Truly you are well-intentioned. And we all know what road is paved with good intentions.