Here's why Singapore might need an alternative pension scheme
CPF alone is inadequate, argues PwC.
Singapore's Central Provident Fund (CPF) is arguably the bedrock on which the city-state's strong social safety nets are built on. Analysts, however, argue that it might be time for Singapore to establish an alternative pension scheme, as the widely successful savings system might be inadequate to meet the needs of a changing workforce.
In a white paper on domestic taxation, PwC argues that the establishment of employer-provided pension schemes might help Singapore in attracting and keeping both local and foreign talent.
"Currently, there are no employer provided pension schemes available to employees working in Singapore. Whereas Singaporean citizens and Permanent Residents are able to contribute to the Central Provident Fund, the 'end of work' retirement balances for a majority of such employees is often seen to be inadequate. Furthermore, there is no viable supplementary pension scheme available to foreigners," said PwC.
"For high end talent wishing to save for retirement in Singapore, the options are thus limited and inadequate. The lack of retirement savings schemes may deter key talent from relocating to Singapore and staying for the longer term," the report added.
PwC highlighted that governments in other first-world countries encourage the set-up of alternative pension schemes by providing tax relief for both employers and employees.
"Singapore could consider introducing a regime that offers a supplementary employer provided pension scheme with vesting restrictions and providing tax relief for both the employer and employee contributions. This could encourage more talent to relocate to Singapore, and having done so, to stay in the long term,” said PwC.
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