By Chuin Ting Weber, CFP, CFA, CAIA
CEO & CIO, MoneyOwl
We need a new way of thinking about retirement and wealth planning in Singapore that focusses on the lower half of society in terms of numbers of people, and the more vulnerable.
Not the aggregate or average that is pulled up by the wealthy and more savvy.
This was my key takeaway from the many surveys, research and news about retirement planning and CPF over the past few weeks, issued by both the Government and private sector.
Retirement Planning
The overall trend is not too surprising. Things are getting better, but there’s still room to improve. (That latter message is always a good one for selling of products!)
More are planning and saving, according to the MoneySense National Financial Capability Survey 2023. CPF members’ voluntary top-ups have also crossed $3 billion in the first 8 months – up 15% year-over-year.
But I wonder how many Singaporeans who participated in the top-ups were from the segments that really need it?
The number of persons was not disclosed, but in 2022, 308,000 members topped up $4,647m (an average of $15,087), according to the CPF website.
This represented a minority, as there was a total of 4.2m CPF members and 2.15 active CPF members in 2022.
But it is a very sizeable group nonetheless, and thus an achievement.
Over the past decade, the view on CPF has turned decidedly positive, and kudos to the Government also for the tax incentives to encourage top-ups.
In the past years at MoneyOwl, I have had savvy clients, many in high income brackets, ask about how to maximise CPF, save taxes and so on. This is a testament to the strength of the CPF system, to be recognised by the savvy.
What needs to be done now is to enable more across the social and economic segments, especially the lower half, to attain that higher level.
The national retirement planning campaign on achieving financial calm, announced alongside the Survey, is one of those efforts.
Highly Ranked in Average Global Wealth
Another recent news, over the weekend, was Allianz’s global wealth report that Singaporeans ranked 4th globally in financial assets per person at $246,000.
A lot of this was attributed to CPF, as well as cash and securities, with insurance and (private) pensions lagging behind.
What is unsaid is the distribution behind this average number.
If you recall, UBS had, in July 2024, issued a global wealth report, too.
UBS placed Singapore 8th in average wealth, globally. But Singapore also, almost uniquely, had its median household stagnate in wealth over the last 15 years, while average wealth was up 116%.
It seems to say that the rise in overall wealth has mainly benefitted the upper segments.
Attention Needed
Two segments also stand out in recent news in relation to retirement and financial planning.
One, platform workers.
From 2025, 30-years old and younger platform workers will contribute to CPF – as will their platform operators, i.e., there is more income for them. Older workers can opt in.
Government is also providing support to defray the drop in take-home income.
But as reported by The Straits Times on 16 September, there are mixed reactions among platform workers to this. They may not want to opt in.
Their median gross income in 2023 was $2,000, and gig worker numbers are around 70,000.
This group seems quite far from topping up or optimising CPF for retirement.
Second, youth.
According to the MoneySense report, the majority of youth (18-35) are not planning for retirement. This is not surprising, as there are many pressing and immediate needs – as highlighted by the Etiqa Retirement Insights Report issued on 4 October 2024.
It is a global problem that is not easy to solve.
We need a different way of talking about financial planning to them. Retirement probably doesn’t resonate.
But what’s also important is that we don’t end up with only those who are privileged enough to inherit property and money from Boomer and Gen X parents having a nestegg, and those who aren’t so privileged not achieving financial security.
We need to get to a broad base of youth, not just the savvy.
Reaching the Many
When it comes to retirement and financial planning, it is only natural that banks, insurance companies, advisers, roboadvisers will go after the higher end of customers.
The distribution of capability and wealth does not matter for commercial companies.
But it matters for our social fabric and what we stand for as a country.
This means improving financial security for the many, and going beyond the aggregate or average numbers, even as we celebrate the latter.
On the supply side, regulators would be continuing to work on ensuring fair dealing.
But on the demand side, we need to find ways of reaching and serving not just those who are interested, but also those who won’t naturally check out financial knowledge on their own, who find it too complex, or who suffer from inertia.
For a start, we need to educate and mobilise. Beyond the public education campaigns such as that announced by MOM and CPF, employers and community organisations need to do their part.
Incorporating a functional financial literacy into staff or members’ learning and development , would be a basic starting point.
Nudging employees and members to save more towards retirement by providing the off-ramps for action would be yet another step.
Just like mental health, this is not just an individual’s private problem. A lot of support is needed to help people – the many – make sense of what to do and to overcome barriers.
Besides Government, we should all do our part, as employers, community organisations, and industry.
Subscribe here for our soon-to-come and free monthly OwlHoots on financial planning insights and analysis.
Disclaimer:
While every reasonable care is taken to ensure the accuracy of information provided, no responsibility can be accepted for any loss or inconvenience caused by any error or omission. The information and opinions expressed herein are made in good faith and are based on sources believed to be reliable but no representation or warranty, express or implied, is made as to their accuracy, completeness or correctness. The author and publisher shall have no liability for any loss or expense whatsoever relating to investment decisions made by the reader.
