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Adequacy of Singapore's Central Provident Fund Payouts: Income Replacement Rates of Entrant Workers

Listed author(s):
  • Chia Ngee Choon


    (Department of Economics, National University of Singapore)

  • Albert Tsui


    (Department of Economics, National University of Singapore)

The study examines whether the Central Provident Fund (CPF) can provide adequate retirement savings for a young Singaporean joining the workforce today, using the Income Replacement Rate (IRR). The paper fills gaps in previous studies on Singapore’s IRR by incorporating unique institutional features of CPF. It also shows how IRRs vary with individuals’ decisions on their housing consumption and use of CPF savings. Assumptions used in the model are largely based on empirical data to remove subjective elements as far as possible. The study finds that CPF savings are able to support robust IRR outcomes comparable to OECD countries. Amongst entrants to the workforce today, the median male earner will be able to replace 70% of his wages when he retires. For the median female earner, the net IRR is slightly lower at 64%. If imputed rent on owner-occupied homes is taken into account, the net IRRs would be higher. For lower income earners, the Workfare Income Supplement boosts the IRRs significantly. The study affirms that for those who work consistently, the CPF system will be able to provide adequately for retirement, with prudent choice of housing and the wise use of withdrawn CPF savings.

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Paper provided by National University of Singapore, Department of Economics, SCAPE in its series SCAPE Policy Research Working Paper Series with number 1302.

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Length: 28 pages
Date of creation: Mar 2013
Handle: RePEc:sca:scaewp:1302
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  1. Giovanni Mastrobuoni & Filippo Taddei, 2011. "Age Before Beauty? Productivity and Work vs. Seniority and Early Retirement," CeRP Working Papers 120, Center for Research on Pensions and Welfare Policies, Turin (Italy).
  2. Brady, Peter J., 2010. "Measuring retirement resource adequacy," Journal of Pension Economics and Finance, Cambridge University Press, vol. 9(02), pages 235-262, April.
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