Focus
Towards
a new social compact
by Debbie Soon and Chua Chun Ser
Singapore’s provision of social services is failing to keep
up with societal changes, including meeting the needs
of a growing middle class, according to panellists at the
Singapore Perspectives 2012 held by the Institute of Policy
Studies. Debbie Soon and Chua Chun Ser report.
D
r. Aline Wong, former Minister of State for
Heath and Education, and former Chairman
of the Housing and Development Board (HDB)
who chaired the panel, describes the Singapore
model of social services system as one guided by
principles of individual responsibility, with the
family as the “first line of defence”, aided by the
“many helping hands” of community organisations which provide a range of support services,
and backed by a government that provides subsidies for basic services and a safety net of last resort.
While the social services system has served
Singapore well, cracks have begun to appear in
the last five years. The discussion focused on
healthcare, housing and retirement funding.
Remaking healthcare
Dr. Jeremy Lim, Chief Executive Officer of
Fortis Healthcare Singapore, a private healthcare services group, agreed that Singapore, with
its hard-nosed pragmatic and utilitarian approach
to healthcare, has done very well in remaining
financially sustainable. However, the question is
whether the system has “transferred too much of
the financial risk from the state to the individual” in the process, according to Dr. Lim. At this
stage of development, the current system is still
providing a basic level of healthcare for all, but
not formulated in a way to sufficiently cover rare,
esoteric and expensive diseases.
Dr. Lim pointed to the balance that needs to be
struck between policymakers who function as fiscal stewards and the level of healthcare the general public requires. Difficult discussions have
to take place to determine the “price of life” or
simply put, the basic level of healthcare to be
provided.
Over and above that, the government needs to
find the “sweet spot” for the right level of protection to also cater to the middle income earners
who often do not qualify for subsidies but also
do not earn enough to afford private specialist
· Jan–Mar 2012 · 21
Image: Paul Lachine
...the question
was whether
the system had
“transferred
too much of the
financial risk from
the state to the
individual” in the
process, according
to Dr. Lim.
22 · Jan–Mar 2012 ·
healthcare. It could provide a basic level of universal healthcare, where tertiary healthcare would
be left to market factors. In other countries, the
purchase of private insurance to help manage
healthcare expenditure is more common amongst
residents.
Dr. Lim offered that more could be done to
involve the private sector in providing healthcare services to the general population to aid
the over-stretched public healthcare service
system. For instance, the government could
further new initiatives such as the Primary
Care Partnership Scheme (now known as the
Community Health Assist Scheme), giving
the public access to subsidised healthcare at
selected private clinics.
Fine-tuning housing policy
Professor Phang Sock Yong of the School of
Economics, Singapore Management University
addressed the need for a more sustainable housing policy, in light of rising home prices and what
would be considered affordable for current and
succeeding generations.
Fundamentally, there is a need to resolve
the tension amongst the three objectives of the
HDB—“housing affordability that is dependent on income levels, the amount of subsidies
required to assist the younger generation to own
their homes, and house prices that need to appreciate sufficiently to meet the retirement needs”,
said Prof. Phang.
There are current policies such as the
Additional Central Provident Fund (CPF)
Housing Grants and Special Housing Grants to
help young couples afford their first flats as well
as efforts to enhance HDB assets to encourage
investment, which may have contributed to rising housing prices.
Projections carried out by Prof. Phang suggested that the gap between current market prices
and what was considered affordable could widen
with succeeding generations.
She proposed re-examining the interface
between private, resale and new HDB housing
prices, the true market value of housing and land,
the future median house type or size, its housing
affordability policy, as well as the rate of housing
price appreciation amongst other factors.
Going by current trends, there was a decline
in the size of houses that most could realistically
afford, noted Prof. Phang. Nonetheless, other
factors such as the location and the environment
could influence the “quality” or premium of these
flats, added Dr. Wong.
Rethinking asset-based social security
Associate Professor Chia Ngee Choon, Deputy
Head of the Department of Economics at the
National University of Singapore, argued that
there was a need to re-examine the CPF scheme
by considering other alternatives to reduce the
amount withdrawn from CPF for housing while
ensuring “retirement adequacy”.
The CPF system is an asset-based social security system that views the home as an appreciating asset as well as a place to live in. This has led
to the current situation where many of the current
elderly citizens are “asset rich” but “cash poor”,
and where housing evolves to become their primary retirement asset. By extension, this means
that those living in rental or smaller flats might
not have adequate retirement income.
She noted that there were challenges with an
asset-based approach. For example, committing
to too large a flat might result in one not being
able to meet the minimum sum of S$40,000 in
the CPF Ordinary Account upon retirement. This
would disqualify one from receiving monthly
payouts for the rest of their lives through CPF
Life, an annuities scheme aimed at retirement
adequacy. This is an important consideration in
the light of an aging society.
Further, is accumulated housing equity indeed
the “pot of gold” that could be—or should be—
monetised upon retirement? Many of the elderly
might be inhibited by the desire to bequeath the
family with property and live out their golden
years in the familiarity of their current homes,
said Prof. Chia.
In concluding, she suggested a re-think of the
housing policy, including shortening the lease
on HDB flats from 99 years to 60 years, which
would have the twin goals of reducing the cost
of owning a home and eeking out greater savings
to qualify for CPF Life. A “first pillar” of a minimum pension guarantee could also be established
for those who had less than S$40,000 in the plan
upon retirement.
...there was a need
to re-examine the
CPF scheme by
considering other
alternatives to
reduce the amount
withdrawn from
CPF for housing
while ensuring
“retirement
adequacy”.
Debbie Soon ([email protected]) and
Chua Chun Ser ([email protected])
are Research Assistants at the Institute of
Policy Studies.
· Jan–Mar 2012 · 23