Comrade Tan Peng Heng,
President of Singapore Industrial & Services Employees’ Union,
Distinguished guests,
Ladies and gentlemen,
Good Evening,
Tonight, you are all here to enjoy yourselves. But allow me to share some thoughts with you on a topic that will affect all of us in due course and that is working beyond retirement.
At present, Singapore has about 400,000 residents aged 60 and above. Of these 400,000 people, about 72,000 are working. This means that we have a labor force participation rate of about 18% for those aged 60 and above. This is lower than our more developed neighbours such as Japan and Korea. In both Japan and Korea, the labor force participation rate for those aged 60 – 64 is more than 50%. And if those countries are an indication of things to come, we should expect more people to be working past 60 in Singapore. What are the reasons behind this and what should we do about it? This is something that I think we should give serious thought to.
I believe there are at least 4 inter-related reasons for people working past retirement age. They are: people are living longer; they do not have enough savings for retirement; they have fewer children; or they simply want to continue working.
Longer Life Expectancies
Singaporeans now live longer. The average life expectancy is about 80 years old. This has risen due to advances in medical science and also better living conditions and diets compared to the past. This also means that if one were to retire at age of 62, there is another 18 to 20 more years of living. The fortunate ones who managed to build up sufficient nest eggs or have families to support them can look forward to a leisurely retirement. They can pursue their hobbies or spend time with their families or do things they always wanted to do but did not have a chance in their earlier years. These people have little to worry about.
Shortfall in Savings for Retirement
However, not everyone will be so fortunate. Some will have to work because they lack sufficient funds on retirement. This is made more acute because they will live longer, and so need a larger nest-egg.
Let me illustrate this with an example. A person aged 40 now, retiring at 62 and wishes to live on $1,000 a month upon retirement will need to have about $180,000 in his bank account at age 62, to buy an annuity. I have assumed that he or she will have paid for his roof over his head and this $1,000 is purely for food, transport, utilities, entertainment and medical expenses. This amount at retirement is conservative as we should expect expenses to grow with age. For example, medical bills are likely to become larger as we grow older.
Relying exclusively on CPF funds will not be sufficient. The CPF minimum sum of $120,000 mandated by year 2013 will provide less than $1,000 per month. What more, the CPF minimum sum is not required to be all cash and can be withdrawn at age 55 before official retirement age of 62.
Members of Parliament have also come across many cases of people age 60 and above asking for help in looking for jobs in their weekly Meet-The-People sessions. They say they do not have sufficient savings for retirement.
If you think that $1,000 per month is inadequate, and expect more, say $1,500 per month, then on retirement you should have about $270,000 in cash savings on retirement to buy an annuity.
Therefore, if savings are insufficient, we can expect many more people to work after age 62.
Shrinking Family Size
Traditionally our society expects the children to support their parents when they retire! Unfortunately, shrinking family size means that there are now fewer young people to support the elderly. According to the Department of Statistics, Singaporeans in their fifties and above have an average of 3 to 4 children, while those in their thirties have only 2 or less children, 1.8 to be exact. Now, that two precious sons or daughters (assuming they are married!) are expected to take care of two sets of grandparents as well as their own families. That is quite a load on their shoulders.
What about those who do not marry? Would they be expected to look after their aged parents and at the same time save up enough for themselves in old age?
At the same time, family values have changed over the years. The elderly are now increasingly expected to be self-sufficient after retirement.
Desire to Continue Working
There are also people who would prefer to work, even if they have adequate savings. Some people might want to work because they feel they can still contribute to the workplace or out of passionate interest in certain jobs or simply a good way to spend their free time. Having been in the workforce for the better part of their lives, working after retirement keeps workers feel engaged in the larger society.
Other Countries
Other countries are also coming to the conclusion that people need to work longer. In some countries, the retirement is closely associated with the age when workers can withdraw their pension benefits. In recent years their governments have been considering to raise the age when people start to draw pensions, primarily due to insufficient funds. In the United States, the age when pensions can be drawn has been raised from 65 to 67 years. Under discussion is a plan to set up a savings scheme like our CPF, to supplement the pensions.
In Britain, the government is contemplating asking people to defer taking pension payouts until the age of 70, from the current age of 65 for men and 60 for women. This is due to a pensions’ crisis where many workers have not accumulated enough pension funds to finance a decent retirement lifestyle. Pension savers in Britain now need to face either a longer working life, or a poorer quality of life upon retirement. This week, the media reports that the British government will disallow employers to force people to retire!
In Japan, about 1 in 2 Japanese aged 60-64 are employed. This makes Japan one of the top countries in the world in terms of labour force participation rate among the elderly. Working after retirement is common in Japan and is frequently attributed to a cultural need to feel useful even in old age.
From the experience of other countries, we can see that factors that are pushing for a longer working life are not unique to Singapore. As we grapple with the reality of financing retirement amidst rising medical costs and longer life-spans, working longer is becoming a real need.
Extending the retirement age
Minister Mentor Mr Lee Kuan Yew recently made some comments on the need to work longer, sparking off a debate. One solution is to legislate the retirement age to a level higher than 62. Singapore legislated the retirement age and fixed it at 60 years in 1993. In 1999, the retirement age was raised from 60 to 62.
But even so, the labour force participation rate of those in the target age range of 55-62 years did not increase as much as we had hoped. Statistics show that the labour force participation rate for those aged 55-59 increased by about 10 percentage points from 1993 to 2003, i.e. from 47% to 56.8%, and the participation rate for those aged 60-64 rose less than 3 percentage points from 30.6% to 33.4%. These suggest that legislating a higher retirement age has not lead to as many older people working as we had hoped.
Legislating a higher retirement age may also encourage workers to continue working in their old jobs unnecessarily long. For example, some jobs will be too physically demanding or complex for older workers. But due to established habits and change being difficult, workers will tend to keep to their old jobs. Workers will persist to struggle in their old jobs and their health may suffer for it. This suits neither the worker nor the company. The company may even decide to terminate the older worker for productivity reasons. This is a lose-lose situation for both the worker and the company.
The opportunities
What, then, are the other options to raising the retirement age? One way could be to allow corporations and unions to find ways and means to allow workers to work beyond retirement age. More flexible work arrangements can be made to make it easier to workers to work after retirement. Management, unions and workers can work together to create windows of opportunity for workers to continue working in the same company after a certain age, though not necessarily in the same capacity and salary. Workers can also work on flexi-hours arrangements, or part-time and contract arrangements.
Alternatively, workers are also free to move out of their current jobs after retirement and take up other jobs. For many, this would be the likely option.
In Finland, where 40% of the workforce is over 50 years old, a “work ability programme” was set up whereby, instead of asking elderly workers to retire, workers are given special reviews at age 53 and 59. These sessions enable workers to review where they might need extra training, what type of work they think would be more appropriate for them. This programme thus enables employers to tailor their work to individuals as they age. This also enables to employers to ensure that useful information and experience is transferred effectively to the younger workers. Since the work ability programme was introduced, the employment rate of Finnish workers aged 55-64 has increased more than 13%!
In the United Kingdom, there have been examples of people starting their own businesses after retirement. One example was a Mr. Jack Bock who offered Do-It-Yourself (DIY) furniture for sale and he only hires retired or semi-retired people in his workforce. His annual revenues is about S$1 million Singapore dollars. In the United States, there is an example of a lady aged 77 years old who works 32 hour weeks at a women’s boutique in New York City.
In Singapore, NTUC FairPrice’s Grandparent of the Year award for 2004 was given to Madam Mary Lee May Li, aged 84. Apparently, she continues to work at a coffee stall at Boon Lay Hawker Centre! While the NTUC FairPrice most active Senior Citizen prize for 2004 was given to Dr. Anamah Tan at age 64. She has continued to tirelessly spearhead the rights of women and fight for the less privileged in Singapore on top of her legal work.
These examples locally and abroad paint a positive picture of working after retirement. The key to helping our workers do so is to provide them with the avenues and opportunities to continue working, and to place them in positions that best taps on their experiences and interests.
However, one crucial point that underlies these efforts is that older workers would need to stay relevant and employable. If workers do not have the skills that are needed for the economy, then finding work after retirement will be tough.
Conclusion
In conclusion, it is expected that many of our workers will be working after retirement age either out of economic necessity, longer life expectancy, shrinking family size or a simple desire to contribute to society. Raising the retirement age via legislation may not necessary be the solution. We have to find out what works and what does not. This, is one of the most pressing task that we have ahead of us.
Thank you very much and please enjoy the rest of the evening.
