Cablegate: Pm Addresses Welfare of the Elderly

DE RUEHGP #1557/01 2360839
R 240839Z AUG 07




E.O. 12958: N/A


C. 06 SINGAPORE 1289

1. (SBU) Summary: Prime Minister Lee Hsien Loong used his
August 19 National Day Rally speech primarily to highlight
the government's growing concern for the welfare of the
elderly and the widening income gap. He announced a number
of new measures to address these issues, including through
strengthening the retirement system and making it easier for
the elderly to access equity in their government-built
housing. He also indicated the GOS would launch an
additional state-sponsored university to take pressure off
the existing three. Most of the new measures appear designed
to be seen as responsive to concerns about declining living
standards for the elderly and others living on the margins of
Singapore's competitive, and expensive, economy. However, in
keeping with its "no free lunch" philosophy, the government
opted to shore up the savings of the elderly with the
existing forced-savings retirement system, rather than assume
a greater financial burden for their care by moving to a true
social security system. End Summary.

Modifying the Retirement System

2. (U) In his August 19 National Day Rally speech (comparable
to the State of the Union address), Prime Minister Lee Hsien
Loong announced a number of new measures to strengthen
Singapore's retirement system. PM Lee proposed increasing
the interest rate earned on Singaporean's Central Provident
Fund (CPF) deposits (from 2.5 percent to 3.5 percent) and
raising the age limit at which the funds could be accessed.
The PM also suggested the GOS would require workers to
purchase an annuity with part of their CPF funds. The GOS
plans to gradually raise the mandatory retirement age from 62
to 65 by 2018, which would allow Singaporeans to work longer
and save more for retirement.

3. (U) Given Singapore's aging population and low birth rate,
the retirement system is beginning to show signs of strain.
The GOS does not provide a Social Security-like pension for
the elderly; Singaporean workers (and employers) contribute
to a compulsory savings program -- the CPF -- which is
supposed to provide for them in retirement. However, when
the CPF was established, the average life expectancy in
Singapore was 62; life expectancy is now 80. A retiree's
account can and increasingly frequently does run out of
money, and the GOS recognizes that individual CPF accounts
will not be sufficient for a growing number of retirees.

Housing Policy Changes

4. (U) PM Lee also introduced a program similar to a reverse
mortgage that would allow some retirees to remain in their
homes longer and tap their housing equity by offering a lump
sum payout followed by monthly payments for 30 years,
effectively supplementing retirement income in exchange for
the title to their property. In addition, to assist lower
income home buyers in a skyrocketing real estate market, the
GOS plans to increase the maximum housing grant for
first-time buyers of government-built housing by SGD10,000
(USD 6,600) to SGD30,000 (USD 19,800) and increase the
maximum qualifying monthly income by SGD1,000 (USD 660).

Refining the Housing Upgrade Tool

5. (U) PM Lee announced that future neighborhood renewal
programs and housing upgrade plans will offer more
flexibility to homeowners by: providing "town hall"
discussions of proposed neighborhood improvements; planning
projects on the basis of two or more districts so that
resources could be pooled; and increasing the number of newer
housing estates eligible for upgrading. The vast majority of
Singaporeans live in government-built and managed apartment
blocks, which individuals then purchase. Future home
improvement programs would allow homeowners to pay between 5
and 12.5 percent of the total bill for the upgrades and would
now allow homeowners to pay less in order to opt out of some
planned improvements. (Comment: In previous elections, PM
Lee's People's Action Party has offered to provide subsidized
housing estate upgrades to districts that voted for it and
threatened that districts that voted for the opposition would
be "last in line" for upgrades. The utility of this
electoral tool has declined over time as many voters found
the upgrades too expensive or not worthwhile. The new opt
out proposal would likely make the announcement more
appealing than it has been in the past. End Comment.)

New University in the Works

SINGAPORE 00001557 002 OF 002


6. (U) PM Lee said the GOS is planning to establish a fourth
public university in an attempt to accommodate the increasing
number of students interested in attending college. A panel
will be set up to study different university models and make
a recommendation next year on which models would be most
appropriate. Singapore currently has three state-sponsored
universities that provide space for only 23.5 percent of
secondary school graduates; the GOS wants to increase the
number to 30 percent. Due to enrollment caps at the local
universities, some Singaporean students are forced to go to
colleges overseas. No further details were offered.


7. (SBU) The PM introduced no major policy departures in his
speech and only made minor modifications to existing
programs. Nonetheless, his focus on the welfare of the
elderly reflects government concern about the increasing cost
of living in Singapore and the inadequate savings of the
elderly. The GOS does not want to assume the financial
burden of caring for the elderly, but recognizes that it must
take some action to forestall public pressure on it to do so.
In keeping with its "no free lunch" philosophy, however, the
GOS combined its small increase in CPF interest rates (from a
modest base) with measures making it harder for Singaporeans
to access their retirement accounts.

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