Covering our ’super seniors’ for a lifetime

SINGAPORE: To the young, living to age 100 feels like a fantasy, and even reaching retirement seems like many lifetimes away. Yet, to the Beatles generation, ’When I’m Sixty—Four’ is no longer just a catchy song but a reality.

While the younger generation is duly preoccupied with whether they will have enough in their Central Provident Fund (CPF) account to buy their first home, the larger picture is that nearly half the population will live to 85, a quarter will live past 90 and almost 4 per cent will be centenarians.

To the potential Golden Ager, the prospect of outliving one’s resources is all too real given rising standards of living and healthcare costs.

Furthermore, most of those living past 90 will not be able to depend on their children (if they have any) as they too will be retired.

So what policy changes should we consider to ensure our senior citizens receive better health financing and security post retirement? And how should such extended benefits be paid for?

LONGER COVERAGE, CAPPED PREMIUMS

It may be too much to hope for hospitalisation bills to be entirely covered by state subsidies, Medisave or one’s CPF—approved health insurance plan. But we can aim for all outpatient charges to be waived or covered, or at least pegged to a level comparable with what Civil Service pensioners enjoy; as well as free, or notionally priced, medication beyond a certain age — say, 20 years after the prevailing retirement age.

For convenience, let us call this the Golden Year.

All CPF—approved health insurance plans could be revised to provide cover until death.

MediShield, a catastrophic illness insurance plan, only covers up to age 85; and not all of the related Private Integrated Shield plans provide lifetime coverage. In the case of severe disability insurance scheme ElderShield, the payouts are for a maximum of 72 months.

As premiums for such products tend to go up with age, there should be a cap on premium rates beyond the Golden Year.

The various managers and actuaries of the different CPF insurance schemes are naturally protective about the viability of each scheme, and tend to make conservative assumptions about survivality, adverse selection and so on.

The end—result is that such schemes’ "reserves" tend to accumulate as the worst—case scenario is unlikely to materialise for all the schemes year after year. Golden Agers end up bearing the brunt of this "kiasu" approach, in the form of higher premiums or lower benefits.

I hope to see all such CPF insurance schemes follow the actual Mortality Tables compiled by the Department of Statistics, without adverse modification.

Actuaries should also be instructed to assume that there are no survivors after age 99. This would reduce premiums or increase benefits for all.

This suggestion is not made lightly, as the potential number of centenarians, while quite small presently, appears to be growing rapidly (see table). The Government should reinsure (that is, compensate) the insurers for any actual losses they would suffer from these changes. It might be hoped that through the National Conversation, Singaporeans will come to a consensus that Golden Agers and centenarians should be treated with honour.

LOWER CPF INTEREST rate FOR FOREIGNERS

To pay for the above proposals, I suggest that we acknowledge that the CPF scheme must primarily be about Singaporeans, for Singaporeans. Foreigners should continue to contribute CPF, so as to level the employment field, but they should receive a lower rate of interest.

Is this unfair? I submit that generally, non—Singaporeans are shorter—term CPF account holders. Therefore, their interest rates should be lower; more in line with fixed deposit rates or short—term government bonds, rather than the higher rates of 4 per cent and 2.5 per cent given now for the Special and Ordinary accounts (benchmarked to 30—year government bond rates).

For foreigners who commit to taking up citizenship, CPF can recalculate the higher interest due to them for, say, the previous 10 years. Those who casually take up citizenship and give it up later should be penalised.

Long—time permanent residents and stateless persons who have repeatedly failed to acquire citizenship despite applying, and who have no other countries to go to, should be treated on par with Singaporeans since they will likely live out their retirement years in Singapore.

The issue of how to treat Malaysians is rather tricky, as they cannot withdraw their CPF till age 55. So paying them a short—term rate may be rather unfair. This is an issue that policy—makers would have to work out; however, this anomaly should not be the reason to reject this idea, since our focus should be about putting Singaporeans first.

Lest I be accused of being xenophobic, consider the following. Many Employment Pass holders have their own national retirement schemes to count on and their CPF money is "bonus". Some others avoid taking up citizenship, or have only one spouse take up the invitation. Many have good personal reasons such as wanting to buy or keep land in their birth country for retirement, which they cannot do as Singaporeans.

Individuals should not be condemned for seeking the best advantage for themselves, but with a "Singaporeans First" policy, we can ensure that a larger part of CPF monies goes to Singaporeans, in particular, the "Super Seniors" for easing their Golden Years. —

TODAY

(Anthony Chia occupied senior management positions in MediaCorp and NTUC Income. He is now a part—time management and media consultant.)