The Symposium on Social Security saw Nobel Laureate and Professor of Economics at MIT Peter Diamond and other esteemed experts weighing in on Singapore’s Central Provident Fund (CPF) pension system. The Symposium was held on 12 January by the Singapore Centre for Applied and Policy Economics (SCAPE) and Next Age Institute.
The panel comprised Prof Diamond; Assoc Prof Chia Ngee Choon, Department of Economics and co-director of Next Age Institute; Prof Joseph Cherian, Director of the Centre for Asset Management, Research & Investments; and Mr Marcus Kok, Principal Pension Consultant with PricewaterhouseCoopers Asia Actuarial Services.
There was a shared consensus among the panellists that the interest rate for CPF’s Ordinary Account (OA) could be tweaked in the light of rising interest rates in the United States. There were several recommendations that would ensure that the CPF remains relevant and beneficial for Singaporeans.
Assoc Prof Chia opined that the returns of the sovereign wealth fund GIC could be included when devising the formula that determines the OA rate. She added that despite the suggested tweak in the formula, the legislated 2.5 per cent floor rate for OA should still be maintained. However, she noted that more study is still needed in this area.
At the panel discussion, Prof Diamond suggested the inclusion of low investment charges and inflation-hedged pay-outs in the pension system. He shared that these are the key characteristics of a good social security system.
Prof Cherian highlighted the importance in ensuring that a person’s retirement income is “safe, adjusted for inflation and guaranteed”. He advocated a safety net in which a certain portion is kept in safe assets such as the national annuity scheme, CPF Life.
The Symposium also featured sharing sessions by the panellists. Prof Diamond spoke about his research on public pension systems of countries while Assoc Prof Chia discussed the gaps and policy intervention of the DC pension design. Last but not least, Prof Cherian shared tips on how to have a generally worry-free retirement.