Journal of Cross-Cultural Gerontology 13: 291–307, 1998.

291
© 1998 Kluwer Academic Publishers. Printed in the Netherlands.

Income protection and the elderly: An examination of social

security policy in Singapore

WILLIAM K.M. LEE

Department of Politics and Sociology, Lingnan College, Hong Kong

Abstract. This article examines the impact of the aging population on social security policy
in Singapore. The adequacies of public policy responses, specifically the Public Assistance
Program and the Central Provident Fund (CPF), are explored. The Singapore government’s
strategy of minimal approach to social security is challenged. Poverty among the elderly is on
the rise. Members from the working poor, a group that disproportionately consists of women
and Malays, have inadequate retirement income protection and are most likely to slip into
poverty as they age.

Keywords: Singapore, Aging, CPF, Poverty, Women, Malays

Introduction

The economic success of Singapore has been well documented (Nyaw &
Chan 1982; Pang 1985; Lim 1988; Chng, Low & Toh 1988; Lee 1996a,
b, 1997). Within 30 years of its independence Singapore has achieved the
second highest per capita income in Asia after Japan. However, like many
other industrialized and affluent societies, poverty prevails and certain groups
are left out of the benefits of economic prosperity and success, and Singa-
pore is no exception. As Singapore’s population ages, the poor will include
the elderly. Some elderly in Singapore have been left out of the success of
the city state with inadequate financial resources due to the weakness of the
present social security schemes. They have become an underprivileged class
struggling to survive in a society where the cost of living has sky-rocketed.
The Singapore government prescribes to the ideology of meritocracy, and
provides education and training to enable its citizens to achieve in society.
Hence, welfare support systems are limited, individual welfare, economic
well-being and success or failure is entirely dependent upon an individual’s
efforts. Consequently, compared to other affluent societies Singapore has very
little to offer in terms of welfare assistance to those living in or near poverty.
Unlike Singapore’s success story, which has frequently been told and
marvelled at, little is known of Singapore’s elderly and for that matter how
292 WILLIAM K.M. LEE

Singapore deals with them. This paper examines the care of the elderly
in Singapore with special reference to income maintenance and the social
security measures that are in place to deal with this issue. Firstly, the pa-
per discusses population characteristics and structure, with reference to the
changing population pyramid in Singapore. Secondly, it examines the eco-
nomic status of the elderly with respect to rise in poverty among them.
Thirdly, it describes the present social security policies and then investigates
the extent to which they deal with income protection and maintenance for the
elderly.

Aging in Singapore

Since independence in 1965, Singapore has had a parliamentary system of

government dominated by one party rule, the People’s Action Party (PAP).
The PAP’s political success in large part results from the government devel-
opmental policies that helped Singapore achieve rapid economic growth and
an unemployment rate amongst the lowest in the world. Through vigorous
industrialization and intense state interventionism, Singapore has achieved
great economic success, and this has enabled the government to provide a
wide array of public services (C.Y. Lim 1988; L. Lim 1983; Rao 1990; Lee
1997). In line with its intervention ideology, the government has long been
interested in influencing population structure and labor force development to
suit the needs of the economy.
Singapore has a population of 3.1 million people. Although very high
population growth rates occurred after the Second World War, the pace of
population growth has slowed markedly. With a land area of less than 540
sq. kms, the government in 1965 adopted a ‘Stop at 2’ policy to restrain
population growth. The policy was such a success that the crude birth rate
fell from 29.5 in 1965 to 16.6 in 1985, and the total fertility rate fell to 1.44 in
1986, well below the replacement rate (Chen 1979; Cheung 1989; Teo 1994;
David & Bartlett 1995).
In addition to the decline in the fertility rate, there has been a rapid aging
of the population. Table 1 shows the age composition of the population be-
tween 1957 and 1990. In 1957, about 43% of the population was under 15
years of age while the proportion of those over 60 years never exceed 4% of
the total population. By 1990, those below 15 years had declined to 23.2%,
while those above 60 years rose to 9.1% (Shantakumar 1994; Teo 1994). It
is clear that after 1970, the proportion of the young population, those below
15 years old, has declined. This was in part due to the decline in fertility rate
in the 1960s, 1970s and early 1980s, reflecting the success of the ‘Stop at 2’
population policy. While the bottom of the age pyramid is shrinking, the baby
 INCOME PROTECTION AND THE ELDERLY 293
Table 1. Composition of the total population by broad
age group, 1957–1990

Year Age group (% of total population)

0–14 15–59 60 and over

1957 42.8 53.4 3.8

1966 43.5 51.2 5.3
1970 38.8 55.5 5.7
1980 27.6 64.9 7.5
1990 23.2 67.7 9.1

Source: Shantakumar (1994).

Table 2. Actual and projected elderly population of Singapore, 1980–2030 (in thousands)

Age group 1980 1990 2000 2030

N (%) N (%) N (%) N (%)

Total population 2413.9 100.0 2716.7 100.0 2995.1 100.0 3214.0 100.0
60–64 59.7 2.5 81.8 3.0 111.7 3.7 196.3 6.1
65–69 49.3 2.0 58.0 2.1 81.7 2.7 213.0 6.6
70–74 33.3 1.4 43.4 1.6 60.0 2.0 183.3 5.7
75–79 18.6 0.8 30.1 1.1 35.6 1.2 118.1 3.7
80 & above 12.7 0.5 25.7 0.9 43.4 1.4 124.7 3.9

Total 60+ years 173.6 7.2 239.0 8.7 332.4 11.0 835.4 26.0

Source: Chen & Cheung (1988).

boomers of the 1950s and early 1960s are moving up in age. Life expectancy
has increased from 50 years in 1947 to 74 years in 1990. This transition from
a youthful to an aging population is expected to continue well into the next
century as reflected in the population projection in Table 2.
It is projected that the proportion aged 60 and above will rise to 11% by
the turn of the century and to 26% by the year 2030 (Chen & Cheung 1988).
Accompanying this effect, the proportion of those below 15 years fell to
27.6% in 1980 and fell further to 23.2% which depresses the young depend-
ency ratio. The old dependency ratio, defined as the relative size of those age
60 and above to the working population, will increase. Table 3 shows that in
1980 the ratio was measured at 0.11 – there were 11 elderly persons aged
60 and older to every 100 persons of working age (15–59 years). By 2030,
this ratio will increase to 0.46. These projections have become a matter of
concern for the government as the proportion of the elderly dependent on
294 WILLIAM K.M. LEE

Table 3. Actual and projected dependency ratios, 1980–2030

1980 1990 2000 2030

Young dependency ratio 0.41 0.34 0.34 0.32

Old dependency ratio 0.11 0.13 0.17 0.46
Total dependency ratio 0.52 0.47 0.51 0.78

Source: Chen & Cheung (1988).

Table 4. Actual and projected distribution of elderly population by ethic

group, 1980–2030 (in %)

Ethnic group 1980 1990 2000 2030

Total 100.0 100.0 100.0 100.0

Chinese 84.0 79.0 79.0 78.4
Malays 9.3 11.8 12.1 14.5
Indians 5.3 7.2 6.4 5.2
Others 1.4 2.0 2.5 1.9

Chen & Cheung (1988).

economically active persons will rise rapidly in the next 40 years (Blak 1992;
Teo 1994).
Moreover, within the elderly population, the growth rate by age group is
not uniform. The ‘old old’ – those above the age of 75 – will experience
the fastest growth in the next forty years. In 1980, there were about 30,000
persons aged 75 and over. This number will grow to about 243,000 by 2030,
an eightfold increase (Chen & Cheung 1988).
The speed in which Singapore’s population is aging is also alarming. The
US Bureau of Census in its analysis of aging trends in 21 countries between
1985 and 2025 ranked Singapore second with a 348% increase in the elderly
population (Choo 1991).
The aging phenomenon also has an ethnic dimension. Table 4 shows that
in 1980 the elderly population comprised 84% Chinese, 9% Malays, 5%
Indians and 1% Others. The composition of Chinese elderly will decline
to about 78% by 2030. Conversely, for the Malays, its composition of elderly
will increase to about 15% within the same period. The proportion of elderly
Indians will remain about the same. Given that Malays are disproportionately
in the lower socio-economic class (Chiew 1991; Lee 1995b), an increase in
Malay elderly would heighten financial strain in Malay families and in the
Malay community.
 INCOME PROTECTION AND THE ELDERLY 295
Table 5. Actual and projected elderly population by sex and age, 1980–2030 (in
thousands)

1980 1990 2000 2030

N (%) N (%) N (%) N (%)

Male 81.0 46.6 111.1 46.5 151.2 45.5 375.0 44.9

60–74 69.0 39.7 89.2 37.3 120.4 36.2 281.6 33.7
75+ 12.0 6.9 21.9 9.2 30.8 9.3 93.4 11.2

Female 92.6 53.4 127.9 53.5 181.1 54.5 460.3 55.1

60–74 73.4 42.3 94.0 39.3 132.9 40.0 310.9 37.2
75+ 19.2 11.1 33.9 14.2 48.2 14.5 149.4 17.9

Source: Chen & Cheung (1988).

Life expectancy of Singapore women is about 5 years higher than that of

men (Chen & Cheung 1988). Table 5 shows that in 1980, there were about
93,000 elderly females and 81,000 elderly men, giving a sex ratio of 87.5
males per 100 females. By 2030, older women will continue to outnumber
older men, especially in the ‘old-old’ category. The sex ratio will decrease
to 81.5 males per 100 females, and in the ‘old-old’ category the sex ratio
is estimated to be 62.3 males per 100 females. A problem highlighted with
elderly women is that they generally lack financial support.
Concern about the aging of the population and fears of labor shortages
have prompted the government to abandon its ‘Stop at 2’ family planning
program, replacing it with a tax incentive to ‘Go for 3’ policy. This
rapidly aging population, particularly the rise of elderly Malays and elderly
women, has immense implications for the government’s social security
programs and particularly the Central Provident Fund (CPF) (Chen & Cheung
1998). The CPF will become a major source of support for all retired salaried
workers. For those without the benefits of a CPF account or those with a
small amount in their CPF account, financial support from the family will be
important. For those who are in financial difficulties arising from a lack of
CPF coverage and family resources, the Public Assistance Scheme would be
the last resort.

Incidence of poverty among the elderly

Singapore has achieved not only rapid economic development but also full
employment. In general, extreme poverty has declined. In 1991, the Popula-
tion Planning Unit set an absolute poverty line for a four persons household
296 WILLIAM K.M. LEE

living in a one room flat at S$ 510,1 and it was estimated that 38,000 house-
holds fell below this minimum household expenditure level. Based on an
average household size of 4.1 persons, an estimated 155,800 persons, or about
5% of the population, were in economic distress and/or living in poverty (Goh
1991). Poverty in Singapore, however, is largely hidden behind the doors
of Housing Board flats. It is not the crushing poverty of some cities, where
masses of homeless people sleep in the streets or beg for food. Yet poverty
in a sea of affluence creates a burden on those with inadequate income, for
disadvantaged families often face multiple problems, such as aging, poor
physical or mental health, and physical disabilities.
In the 1990s new groups of poor can be identified. Poverty among the
aged in Singapore is disproportionately high (Ramesh 1992). In 1990, it was
estimated that 56% of all married couples with a husband aged 60 and over
received no income, and a further 36% earn below S$ 2,000 per month, which
was considerably lower than the national average monthly household income
of S$ 3,000 (Phillips & Bartlett 1995). Moreover, a national survey of people
over 55 by the government in 1991 found that the proportion of those without
personal income was 31.1% for men and 73.5% for women. Furthermore,
over 55% of those surveyed had no savings and 44.2% foresaw financial
problems during retirement. The higher incidence of poverty among the el-
derly is accompanied by an aging population due to declining birthrate and
increasing life span. This problem will multiply in the next two decades as the
proportion of elderly increases. Even among the working elderly, the majority
are in lower income categories. Table 6 shows that among the working aged
most are found in the second lowest income category.
Among the elderly population, more women are likely to experience finan-
cial insecurity and poverty than men. There are three factors that contribute
to this phenomenon. Firstly, as shown in Table 5, Singaporean women, on
average, lived longer than males. Hence, there will be more elderly women
as Singapore’s population ages. Secondly, women more often enter the labor
force late, and thirdly, most are in lower paying service and manufacturing
jobs (Cheng 1980; Lee 1992, 1995a). Hence, they are likely to have no bene-
fits or to have small amount in the CPF. Consequently, women are more likely
to be dependent on the family as a source of financial support. Table 7 shows
that in 1986, over 90% of elderly women depended on their children and/or
grandchildren for financial support. This problem is likely to increase in the
next two decades as more of the older generation of women, who have little
education and therefore earn less and save less, retire.
Among the working aged, elderly women tend to earn lower wages. Table
8 shows the income distribution of the working aged. Working elderly women
are over represented in the last two income groups. This is because they tend
 INCOME PROTECTION AND THE ELDERLY 297
Table 6. Income distribution of resident working persons by age
group, 1990 (%)

Monthly income (S$) Age-group

50–54 55–59 60+

Total 100.0 100.0 100.0

Below 500 0.7 0.9 1.4

500–<1,000 35.6 39.6 42.6
1,000–<1,500 30.1 33.0 35.8
1,500–<2,000 11.5 10.6 9.8
2,000–<4,000 14.0 9.7 6.6
4,000–<6,000 5.1 3.9 1.9
6,000–<10,000 2.1 1.5 1.1
10,000 and above 0.9 0.8 0.8

Source: Shantakumar (1994).

to concentrate in lower paying manual work. According to the 1996 Report

on the Labor Force Survey (RLFS), over 38% of working women aged 55
and over were found in cleaning and laboring work (RLFS 1996: 78).
Poverty among the elderly also has an ethnic dimension. Increasing
numbers of the elderly in the Malay community are experiencing financial
difficulties. A survey in 1992 found that 16% of the elderly Malays live in
households in which the total monthly income was below the 1991 absolute
poverty line (S$ 500 or less) (Blak 1992). Thirty-two percent of elderly
Malays lived in households where monthly income was between S$ 500–
1,000. Hence, a significant percentage of elderly Malays are living below the
poverty line, and a large percentage are living in marginal poverty. Recipients
of social assistance represent the lowest income groups, 68.7% from house-
holds with a monthly income below the poverty line, and an additional 25.3%
were from households in marginal poverty (with income between S$500–
1,000). A total of 94% of elderly Malay households received some form of
social assistance from the government.
A very high proportion of elderly Malays have no formal education (Blak
1992). More than 52.7% had no formal education, and 32.7% had received
only primary education. The percentages are even higher for elderly Malay
women. Table 9 shows that over 90% of elderly Malay women in 1990 had
no formal education. The employment experience of elderly Malay men has
been predominantly in sales and service occupations (51.1%) and in manual
labor (22.9%). Most elderly Malay women had been employed in unpaid
298 WILLIAM K.M. LEE

Table 7. Elderly’s source of financial or material support in the past year by sex and
age (%)

Source of support Sex Age group Total

Male Female 60–69 70–79 80+

Own source
Salaries/business income 30.4 9.3 25.4 11.9 1.9 19.2
Interest/dividend/rent 11.9 5.2 7.5 9.8 9.0 8.4
Pension/CPF/insurance 28.5 5.9 19.1 13.4 8.3 16.4
Own savings 46.2 29.3 39.9 34.8 26.3 37.2

Other sources
Spouse 4.7 10.9 10.9 4.2 1.9 8.0
Children/grandchildren 79.6 91.2 82.3 89.9 95.5 85.8
Relatives 3.9 4.4 3.5 5.1 6.4 4.2
Friends 1.9 1.8 1.4 1.8 5.8 1.8
Others 3.0 2.5 3.0 2.8 1.3 2.8

Source: Survey of the Aged Living in the Community (1986).

Table 8. Income distribution of resident working persons by age group and sex,
1990 (%)

Age group
Monthly income (S$) 50–54 55–59 60+
M F M F M F

Total 100.0 100.0 100.0 100.0 100.0 100.0

Below 500 0.3 1.8 0.4 2.1 0.9 3.0

500–<1,000 32.0 44.4 36.4 49.2 41.0 48.0
1,000–<1,500 30.1 30.2 33.2 32.5 35.5 37.0
1,500–<2,000 13.1 7.5 12.2 5.6 10.8 6.4
2,000–<4,000 15.6 9.9 11.0 5.6 7.4 3.7
4,000–<6,000 5.2 4.9 4.0 3.9 2.2 1.1
6,000–<10,000 2.6 1.0 1.8 0.8 1.3 0.5
10,000 and above 1.1 0.3 1.0 0.3 0.9 0.3

Source: Shantakumar (1994).

 INCOME PROTECTION AND THE ELDERLY 299
Table 9. Educational attainment of resident working aged by level, ethnic group and
sex, 1990

Educational Chinese Malays Indians

qualification M F M F M F

Total 100.0 100.0 100.0 100.0 100.0 100.0

No formal education 67.2 89.4 73.6 94.3 62.0 73.4

Primary 22.1 6.6 23.4 4.9 24.4 11.4
Secondary 6.0 2.2 2.4 0.6 8.7 7.7
Upper secondary 2.6 1.1 0.5 0.2 2.6 3.4
University 2.1 0.7 0.1 – 2.3 4.1

Source: Shantakumar (1994).

household work (62.5%), with a smaller percentage encouraged in sales and

service occupations (21.3%).
Mandatory savings provided a means of sustenance for less than 43% of
the elderly Malays. CPF coverage is contingent upon occupations held prior
to the age of 55. A large proportion of the current cohort of the Malay elderly
were excluded from CPF coverage because they were in independent hawk-
ing and self-employment. Thus, they did not receive any benefit upon their
retirement. The second largest occupational category in which no retirement
benefits accrued is that of manual labor.
According to Blak (1992), in addition to little or no retirement bene-
fits, Malay elderly may face varying degrees of severe financial difficulties
depending on the type of household they live in. The first household type
includes the young old, below 65 years old, who are still responsible for the
maintenance of their children who are not working. The second type includes
the elderly living with working children who earn very low incomes. The
third type includes elderly who reside in three-generation households, where
shared financial responsibility is heavy especially, among many other things,
the cost of their grandchildren’s education. The fourth type comprises the
elderly living with their single parent children who have little or no income.
In conclusion, the incidence of poverty has declined quite dramatically
since the mid-1950s, but there remains a modest but significant number of
households still living in poverty. With Singapore’s population aging, the poor
will increasingly include those elderly who are either not covered or inade-
quately protected by the CPF and those who do not have adequate financial
retirement resources and family support. In the next two decades, it appears
that elderly women and the elderly from the Malay community are likely to
suffer greater financial insecurity.
300 WILLIAM K.M. LEE

Social security programs in Singapore

This section examines whether Singapore’s social security programs are

adequate for income maintenance and reducing financial insecurity among
elderly citizens. In general, Singapore has most of the social security
programs found in welfare states. However, these programs are characterized
by low public funding, fragmentation, incomplete coverage and heavy depen-
dent upon inequitable policy instruments (Ng 1991; Ramesh 1992). Hence, in
comparison to its development status, Singapore’s support for social security
programs mirrors that of third world countries.
Singapore’s social security program, for poverty alleviation, retirement
income protection and health care, consists of the CPF and an extremely
limited public assistance scheme (Asher 1991). Hence, in this regard, the
state plays a limited role in direct provision of social security, but formulates
various measures which allow individuals to take care of themselves during
hardship. Despite being transformed from an undeveloped to an affluent
society in a relatively short period of 30 years, Singapore continues to practice
the provident fund strategy for providing social security, a strategy that is only
used by third world countries (Dixon 1986; Asher 1991; Ramesh 1992).

The public assistance program

The idea that public money should not be wasted on the undeserving is a
dominant value underpinning Singapore’s public assistance program (Dixon
1986; Asher 1991). Public assistance is reduced to the bare minimum and
given to those in extreme destitution. As Y.C.L. Lim (1990: 187) notes:
Public assistance is awarded only on extreme stringent criteria: nearly
90% of its recipients are single, elderly persons, most of them immigrants
who have spent a lifetime at hard labor, never married, and have no family
ties, with the remainder being the mentally or physically handicapped,
widows and orphans, and abandoned wives and children.

The government’s view is that the program should not provide for all Singa-
pore’s poor individuals and families. Provision is thus based on very stringent
criteria. In 1989, for example, only 53% of the applicants were successful
(Asher 1991; Ramesh 1992). In 1992, the public assistance rate was set at
S$ 140 for a single person, S$ 270 for a family of three adults and S$ 345 for
a family of one adult and two children. In general, rates for more than one
person households are 25% lower than what the government considered to be
minimum household expenditure required for subsistence. Public assistance
is meant to provide supplementary assistance to the poor, in conjunction with
assistance provided by relatives, community and charitable organizations.
 INCOME PROTECTION AND THE ELDERLY 301

This, however, demeans those who, for whatever reason, cannot work and
have no family to rely upon, and need financial assistance from the state. In
part this is due to the societal perception of the poor (Goh 1991). Among
Singaporeans many have little knowledge or understanding of the problems
faced by the poor. Some even think that the poor only have themselves to
blame. They think that the poor are poor because of laziness and other
personal defects such as inferior genetics. Such perceptions in part are fuelled
by government policies on eugenics and encouraging the educated to have
more children. A further reflection of the government’s residual approach to
welfare is the fact that expenditure on welfare related programs accounted for
2% of total government expenditure in 1995.
In general, the number of people receiving public assistance has declined
in recent years, a product of full employment and Singapore’s improved
economic conditions (Kalirajan & Wiboonchutikula 1986). But it is estimated
that as the proportion of elderly in the population increases, in particular
women and Malays, the public assistance scheme is likely to come under
increasing pressure because the number of people without sufficient resources
to finance their retirement is expected to rise (Chen & Cheung 1998; Asher
1991; Ramesh 1992).

The Central Provident Fund (CPF)

The CPF was established by the colonial government and is the main
retirement income protection program for aged Singaporeans (Kalirajan &
Wiboonchutikula 1986; Asher 1991; Y.C.L. Lim 1990; Ramesh 1992). It is a
compulsory saving scheme requiring employers and employees to contribute
a fixed percentage of wages to a retirement account set up by the CPF for each
employee. It covers workers who are employed by the same employers for
more than one month, but it excludes civil servants with government pension
schemes, the self-employed, those in low paying jobs, and those in part-
time and irregular employment. Thus, the scheme does not cover the entire
working population. Nor does it provide cash assistance to workers during
periods of sickness or unemployment. CPF contribution rates have changed
since its inception. In 1955 the rates for employers and employees were 18
and 22%, respectively (US, SSA 1995). At present, the contribution rate is
40% with employer and employee each contributing 20% (CPF Handbook
1997). CPF contributions are tax deductible for the employer but not for the
employee. Withdrawal is permitted at the retirement age of 55 and is tax-
free. Hence, the scheme benefits most of those who have been in full time
employment throughout their working life. Contributions amassed for each
member are channeled into three accounts: an ordinary account, a medisave
account, and a special account. The balance in the ordinary account can be
302 WILLIAM K.M. LEE

used for retirement, housing purchases, approved investments, mortgage re-

ducing insurance and other approved purchases. The balance in the medisave2
account can be used to cover health care costs. The balance in the special
account is meant for old age and in the event of disability.
To what extent does the CPF cover the population? According to Asher
(1991), there has been a steady decline in CPF contributors. In 1989,
contributors account for 75.7% of the total labor force, a significant decline
compared to the high of 81.4% in 1981. Hence, about one fourth of the total
labor force has no CPF account. A certain proportion of those not covered,
for example, unpaid family workers, contract workers, hawkers, and part time
workers, who earn no or low income, are likely to face inadequate resources
to finance their old age. They are left on their own to secure retirement income
through personal and/or family savings. These statistics show that a greater of
proportion of the working population, and indeed the population as a whole,
is being excluded from CPF coverage. Increasing numbers of employers who
are resorting to part time workers may also contribute to this result. It has been
estimated that in the year 2000, 19% of men and 34% of women, in particular
those in marginal jobs, reaching the age of 60 in that year will have no CPF
coverage. Further, it was estimated that about 23% of those covered by CPF
will have a final balance of less than S$ 10,000, inclusive of withdrawals for
housing purchase and medisave, when they retire in the year 2015 (Sunday
Times, 2 October 1988; Asher 1991). This is woefully insufficient for the
twenty years or so that one may be expected to live after retirement at age
55. Hence, the main strength of the CPF scheme is that it does not involve
expenditure from the government and it mobilizes saving at a low cost. In
actuality, the CPF is a compulsory public saving scheme that substitutes for
private savings. However, in reality, CPF does not protect those in marginal
jobs with little or no income, and it does not cover those people who are in
greatest need of social protection (Ramesh 1992).
Who then are the main contributors to the Fund? According to Asher
(1991), more than half (51.9%) of the contributors come from the two lowest
wage levels (earning less than S$1,000 per month), while only 7.4% come
from those earning more than S$ 3,000 per month. In other words, CPF saving
is an important source of retirement income protection for the working poor,
but their contributions are small. Moreover, in 1989, 49.1% of those closest
to retirement, age 55, are in the two lowest wage levels (earning less than
S$ 1,000 per month), and over two-thirds (67.4%) of those above age 55 also
belong to the two lowest wage levels. In short, those closest to retirement and
those already in retirement have small balances in their CPF accounts due to
their low paying jobs throughout their working lives during Singapore’s early
stages of industrial development.
 INCOME PROTECTION AND THE ELDERLY 303

As the chief retirement income protection program for the aged, the CPF
inadequacies are critical. According to Asher (1991), the CPF Board esti-
mated that Singaporeans retiring at 60 who have contributed continuously
for their full working lives (about 35 years) at the rate of 40% of net wages,
could expect a retirement income of 20% to 40% of the last take-home pay
(inclusive of withdrawals for housing purchase and medisave). The question
is whether the benefits under the CPF scheme and the public assistance
programs are sufficient to alleviate poverty and to provide adequate retire-
ment income protection among the elderly?
To answer this question, it is necessary to distinguish between those who
have moderate or no exposure to CPF and those who have high exposure
to the CPF. The former group consists of people who have had low paying
jobs and irregular employment throughout their working lives. Their CPF
accounts are low or zero. Included in this category are individuals who were
over 20 in 1975. This group will not be able to meet even the modest levels of
retirement income replacement estimated by the CPF Board mentioned above
(Asher 1991). This is because before 1975, the CPF contribution rate was well
below 40%. It is estimated that in 2015, those over 20 in 1975 will account
for 600,000 people, over 20% of the estimated population of 3.1 million. In
addition, at present, about 25% of the working population is not covered by
CPF. These include unpaid family workers, contract workers, part-timers and
temporary workers who are predominately women and Malays (Chiew 1991;
Lee 1995a). Hence, in the next 20 to 30 years the problem of zero or small
balance in the CPF will become a serious issue. Presumably these individuals,
upon retirement, would be able to apply to the public assistance program.
However, given the strict criteria and the inadequacy of the public assistance
program to meet even the minimum household expenditure, as noted above,
a certain proportion of those with small or no CPF balance will face financial
difficulties upon their retirement. In short, individuals who have moderate and
no exposure to CPF will have problems maintaining their incomes when they
retire at 55 and may likely slip into poverty.
Those who have contributed at 40% of net wages throughout their working
lives face a different set of problems. For this group, whether the present
set of benefits under the CPF scheme and the public assistance program be
sufficient to keep them out of poverty and maintain their retirement income
will be influenced by two issues: inflation and longevity (Dixon 1993). At
present, most of CPF balances may be withdrawn upon reaching age 55,
and the returns on such balances will very much depend upon how they
are invested and the rate at which they are used. Since CPF balances are
not indexed against inflation, any large, unexpected inflation or inadequate
investment returns would adversely affect final balances. Inflation affects CPF
304 WILLIAM K.M. LEE

balances in two ways. If inflation occurs over the contribution period, then the
real value of the member’s deposit falls unless interest rate credited exceeds
inflation rate. If inflation occurs after a member withdraws the balance then
the real value generated by its dispersal diminishes (Dixon 1993). Changes
in government policy can also adversely influence the financial status of the
elderly. For instance, the recent implementation of the goods and services tax,
3% levied on all goods and services consumed, affects the purchasing power
of the elderly. Since its implementation, inflation has risen slightly to about
4 percent from 2 percent. While this is only a marginal increase in inflation,
the cost of living has risen and would certainly reduce the real value of the
accumulated CPF balances needed to finance retirement. The old are living
longer, and many will find that their CPF savings may not be adequate to
finance their post retirement years. An Advisory Council Report on the Aged
(1989: 83) noted that “even a large CPF balance is not a guarantee of ample
resources in extreme old age, even for those who have behaved responsibly.
Only a very large balance, indeed, will enable a person to live from 55 to the
onset of frailty, at say 75 or over”. Adding to this problem is the rising cost
of health care. With the government reducing its role in financing health care,
a greater proportion of CPF balances will be spent on health care costs. It is
clear that there is direct trade off between the amount set aside for health care
and the final balance available upon retirement. Hence, absence of social in-
surance, combined with the lack of protection against inflation and longevity,
ensures that inequality of income during the working years will be carried
over to post-retirement income. Singapore’s CPF scheme and its very limited
social assistance program present an inadequate solution to the problem of
poverty in Singapore, especially amongst the elderly. This will become more
obvious as more Singaporeans reach retirement age.

Conclusion

Since independence in the late 1950s, extreme poverty has declined. This
decline is due to the expansion of employment opportunities, in particular for
women, hence increasing household income, and the decrease in family size,
a tribute to the successful government family planning program. However, as
Singapore’s population ages, its poor profile reflects the fact that more elderly
are falling prey to poverty. It is argued that poverty among the elderly will
rise because present social security policies do not provide adequate social
protection.
The main instrument used for providing social security in Singapore
includes the CPF scheme and a very limited public assistance program. Both
are inadequate in terms of meeting the needs of the elderly, and are inequit-
 INCOME PROTECTION AND THE ELDERLY 305

able in their bias toward the rich and those with the greatest capacity to
save. The CPF scheme is based on individual financing of social security
for retirement. However, it excludes a significant percentage of the working
poor, those in low paying jobs and irregular employment, a group that
disproportionately make up of women and Malays that need income protec-
tion the most. Those who made small contributions, during the start-up years,
will have inadequate financial coverage to see them through retirement. Even
for high contributors, the present arrangement of the scheme does not protect
them from future loss of income and financial difficulties due to inflation
and the increased cost of living. The public assistance program available to
the unemployable poor is harsh, in terms of eligibility criteria and levels of
benefits. Hence, the present social security policies are inadequate in meeting
the needs of an aging population.
Despite the inadequacy, the present set of social security policies is a
dynamic instrument that enhances economic, social and political control of
the State. As a result, the continuation of the present arrangement is eminent.
However, measures to deal with specific problems may be introduced with-
out undermining the broad principle of state intervention and social control.
Such measures could include widening the scope of the Medisave scheme,
bringing the self-employed and some categories of part-time work into the
CPF scheme and expanding and liberalizing the public assistance program.
In addition, to provide better protection against inflation and longevity,
the government should convert the minimum sum required in the present
CPF provisions into an annuity, with added benefits of partial or full protec-
tion against inflation. Augmented annuities, as provided in Fiji and Western
Samoa, somewhat alleviate the problem of low deposit levels and inflation,
and offer a more effective means of providing social security protection
(Dixon 1993). To further strengthen the social security protection offered, an
additional account, similar to some sort of pension scheme, could be intro-
duced under the broad CPF scheme. This, in effect, would extend the present
arrangement to a wider population which is better suited for providing pro-
tection against longevity. An example of such a scheme is the Family Pension
Scheme established in India (Dixon 1993).

Acknowledgments

I would like to thank Professor William T. Liu for providing comments on

earlier drafts of this paper. An earlier version of this paper was presented
at the 32nd annual meeting of the Canadian Sociology and Anthropology
Association (CSAA), Memorial University of Newfoundland, St. John’s, 8–
306 WILLIAM K.M. LEE

11 June 1997. Further, I appreciate the helpful comments of three anonymous

reviewers.

Notes
1. US$ 1.00 = Singapore $1.60.
2. Singapore’s health system is for the most part, a privately financed fee-for-service system
in which patient payments, through the Medisave, account for more than two-thirds of
expenditures. The government mandates that 6% of one’s monthly income be used for
payment for hospital care of the account holder and his/her immediate family.

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Address for correspondence: Dr W. K. M. Lee, Ph.D., Department of Politics and Sociology,

Lingnan College, Tuen Mun, Hong Hong, PR of China