VZCZCXRO8919
RR RUEHCHI RUEHDT RUEHHM RUEHNH
DE RUEHGP #1557/01 2360839
ZNR UUUUU ZZH
R 240839Z AUG 07
FM AMEMBASSY SINGAPORE
TO RUEHC/SECSTATE WASHDC 3838
INFO RUCNASE/ASEAN MEMBER COLLECTIVE

UNCLAS SECTION 01 OF 02 SINGAPORE 001557 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: SOCI PGOV ECON EFIN SN
SUBJECT: PM ADDRESSES WELFARE OF THE ELDERLY 
 
REF: A. SINGAPORE 1404 
 
     ¶B. SINGAPORE 108 
     ¶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. 
 
Comment 
------- 
 
¶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. 
 
Visit Embassy Singapore's Classified website: 
http://www.state.sgov.gov/p/eap/singapore/ind ex.cfm 
HERBOLD