Budget 2012 Speech (Part 5): A fair and inclusive society

Equally, we are stepping up social policy: to provide greater economic security for the elderly and Singaporeans with disabilities. -AsiaOne
Fri, Feb 17, 2012

A fair and inclusive society

Mr Speaker Sir, we are making important moves to build a fair and inclusive society. We are growing our economy in a way that can lift incomes for all Singaporeans. Equally, we are stepping up social policy: to provide greater economic security for the elderly and Singaporeans with disabilities; and to help lower-income families develop resilience, strive hard, and move up.

We have two key challenges. First, to help the growing number of older Singaporeans live comfortably, even as they are living longer.

Our seniors want active and fulfilling lives. At the same time, many have worries, including those in the middle-income group. They worry about whether they will be able to afford treatments when they fall ill, whether they will be a burden on their children, and whether they can grow old in the company of family and friends.

We will do more to help them. We are particularly concerned about the current generation of older Singaporeans, many of whom have very limited cash savings. Their CPF balances are low because wages were much lower 20 or 30 years ago, and the Minimum Sum they were required to set aside was also much smaller.

However, these older Singaporeans do have substantial savings in the value of their homes.

We will help them use this wealth to boost their retirement income. At the same time, we will give them greater assurance of being able to afford their healthcare.

Our second challenge is inequality. The economic pressures that have led to widening income gaps nearly everywhere in the world will not go away soon. Furthermore, because Singapore is a city, our income inequality will inevitably be wider than in larger countries, like in many other global cities.

But we cannot leave our social compact vulnerable to market forces. We have to do all we can to contain inequality, and to sustain social mobility in each new generation.

We are therefore making a determined, multi-year effort to raise the prospects of success for lower-income families. We must also give our middle-income families every opportunity to achieve their aspirations in an evolving and often unpredictable economic environment.

We still see evidence of considerable social mobility, as students from all backgrounds flow through our education system. Take our PSLE cohorts. Each year the top students come from schools all around the island, including many neighbourhood schools. And a significant proportion of students from the lower end on the socio-economic scale make it to the top one-third in PSLE performance.

But it will get more difficult to keep up this mobility in the years to come – precisely because we achieved a very high degree of mobility in the past. We must therefore work harder at this. We must find every effective way to help those who start off lower down to catch up and do well; every way to prevent disadvantage from repeating itself across generations.

Education and jobs are the springboards to success in Singapore. We will do more to help children from disadvantaged homes, starting earlier in their lives – better quality pre-schooling, specialised intervention to help those with specific learning difficulties, and more after-school student care in the primary school years. We are also broadening education so that every student can develop their strengths, in and out of the classroom.

We are expanding our pathways to a university education, to match the aspirations of our students and give them skills that will find them good jobs. PM spoke about this at last year’s National Day Rally. We are also investing heavily to give every adult worker the opportunity to keep up-skilling, or even return to a tertiary institution mid-career to enrich his knowledge.

But we must also groom a larger pool of social workers and other professionals, to help lower-income families overcome the deeper and more complex problems that many of them face. The solution to low incomes does not only lie in supporting incomes through government transfers, as many societies have found. We need many more people with passion for the job, from speech therapists and learning support specialists to work with children in their early years, to counsellors who can help families work towards better times, or gain the trust of drug offenders and help them turn their lives around. This is an important priority. We will do more to attract Singaporeans into the social sector, reward them better, and enable them to have fulfilling careers.

Helping our Seniors Live Long, Live Well

Mr Speaker Sir, let me move on now to the main steps we are taking in this year’s Budget, as part of the broader shifts that we will be making in our social policies over the next five years.

First and foremost, we want to help Singaporeans age with dignity and grace. Our seniors aspire not just to live long, but to have fulfilling, active golden years. But they have worries as well, centering on whether they will be able to afford the cost of medical care when they fall ill, and avoid being too big a burden on their children.

The key change is that fortunately people are healthier and are living longer, but unfortunately working careers have not lengthened to the same extent. So the savings they have at the time they retire have to be stretched out in smaller amounts over a longer period. To help our older Singaporeans, we will provide strong support for those who desire to stay at work. We will also help them unlock the savings in their homes, so as to boost retirement income. And we will significantly expand hospital and long term care capacity and make services more affordable – including for the middle-class elderly.

Rewarding Work

First, helping older Singaporeans at work.

Increase CPF Contribution Rates

Earlier, I announced a strong incentive we will provide for employers to engage older Singaporeans. The Special Employment Credit (SEC) will especially help older Singaporeans who are in the bottom half of the income ladder.

On top of this, we will help all our older workers, including those with incomes in the upper half, by raising CPF contribution rates.

We lowered contribution rates for older workers in the late 1980s and again in the last decade, because their employment rates were lower compared to younger workers. Seniority-based wages discouraged employers from hiring older workers. The lower CPF contribution rates hence helped to offset the higher cost of older workers, and kept them in demand in the employment market. However, we have made good progress in recent years in flattening wage scales, and in increasing the employment of older Singaporeans.

We can expect this positive trend to continue. The labour market is tight. Our workers in their 50s and 60s will increasingly have better educational and skills profiles. Our re-employment legislation is now in place. And the SEC will provide further support.

It is therefore a good time for us to raise CPF contribution rates for three groups of Singaporeans – those aged 50 to 55, 55 to 60 and 60 to 65.

First for those aged between 50 and 55. We have had good consultations with our tripartite partners, and reached a consensus that we should give this group the same CPF contributions as younger workers, rather than reduce CPF contribution rates after age 50.

We therefore need to raise CPF contribution rates for this group by 6 percentage points – 4 percentage points from the employer and 2 percentage points from the employee – to reach the full CPF contribution rate of 36%. However, we cannot make this major move in one step, and particularly with an economic slowdown at hand.

For the first step this year, we will raise CPF contribution rates for those aged between 50 and 55 by 2.5 percentage points – 2 percentage points from the employer and 0.5 percentage points from the employee. This will bring their total CPF contributions up from 30% to 32.5%.

For the second group comprising Singaporeans aged between 55 and 60, we will raise contribution rates by 2 percentage points – 1.5 percentage points coming from the employer and 0.5 percentage points from the employee.

For the third group, those aged between 60 and 65, their employer contribution rate will increase by 0.5 percentage points. There will be no increase in their employee contribution rate. (See Table 1 for full schedule.)

We will have to watch how the employment market develops before making any further moves. The SEC will hopefully encourage employers to attract and retain more of these older workers.

These changes in CPF contribution rates will take effect from September 2012, in line with the first disbursement of the enhanced SEC.

We will also raise contribution rates of self-employed persons into their Medisave Accounts, to be in line with those of employees. The Medisave contribution rates for those aged 50 and above will be raised from 9% to 9.5%. This change will take effect from January 2013.

More details are in Annex B-1, and a press release that the Ministry of Manpower will issue later today.

Enhanced Earned Income Relief

I will also raise the income tax relief for older taxpayers so that they can retain more of their income from work. They deserve this. I will double the Earned Income Relief for those aged 55 and above. Those aged 55 to 59 will now enjoy $6,000 in Earned Income Relief per annum, while those aged 60 and above will enjoy $8,000.

119,000 older Singaporeans will benefit. The increased relief will cost the Government $30 million per annum, and will be effective from Year of Assessment 2013.

Helping Seniors Unlock Savings

As I mentioned earlier, many of our current generation of elderly have significant wealth in their homes. We will provide them an attractive option to free up money for their retirement years by moving to smaller homes.

Silver Housing Bonus

First, we will introduce a Silver Housing Bonus of $20,000.

This Bonus will be given to older Singaporeans who wish to sell their existing flats and purchase 3-room or smaller HDB flats. Many of our senior citizens are in fact keen to do so – the great popularity of our Studio Apartments speaks for itself. It is not just a desire to unlock their savings, but that the apartments are practically designed for them. And they have nearby amenities that cater to the elderly, such as Senior Activity Centres. We will be building more Studio Apartments in the next few years.

The Silver Housing Bonus works like this. The Government will provide $15,000 in cash and $5,000 to the CPF accounts. To benefit from the scheme, the homeowners will use the proceeds from the sale of their previous home to top up their CPF savings up to the prevailing Minimum Sum. All amounts above the Minimum Sum can be withdrawn in cash, and we expect many to be able to do so.

Providing the best care for our seniors

Transforming Long-Term Care

Singaporeans are living longer. A larger proportion of our people are going to be elderly – by 2030, one in five residents will be aged 65 and above. We want to provide our seniors with the best possible care and help them stay healthy and active in their retirement years.

We are continuing to make significant investments with new acute care hospitals – Khoo Teck Puat Hospital has opened last year in the north, and Jurong General Hospital will open in 2014.

Our next big priority is to build up our long-term care sector. We will develop a high quality and comprehensive system, to provide the best possible care for the elderly and the disabled, not just in our hospitals but also in the community and in their own homes. We will provide enhanced government support so that we can develop the VWO sector for long-term care – good people and institutions that bring passion, expertise, and resources to help the elderly and disabled.

Today, we already have several good long-term care providers amongst our VWOs. For example, St Luke’s ElderCare provides day care services; Metta Welfare Association helps the disabled to stay active; the Home Nursing Foundation does good work to help the elderly in the community. We need more of them, and must raise the quality across the whole spectrum of providers – including community hospitals; day rehabilitation centres and home-based care so that the elderly can be close to family and friends; and institutionalised care in nursing homes and hospices.

The Minister for National Development will elaborate on these measures in the COS.


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