Saturday, February 11, 2012

Singapore: Reactions to Proposals Raising Age Before CPF Rates Are Cut

After Singapore Prime Minister Lee Hsien Loong said that employers' contribution rates to the Central Provident Fund (CPF) for older workers have to go up gradually, concerns have been expressed as to what the effect will be on older workers. Currently, CPF rates are cut when workers reach 50 years old, and cut further when they turn 65.

Unions have welcomed the move, recommending that the policy would be revised so that the drop from 16% to 12% takes place at age 55, 12% to 9% at age 60, etc., stressing that businesses can tackle the extra costs with some smart planning. However, others are worried that it will depress employment for older workers, noting that a larger proportion of older workers kept their jobs during the recession because their CPF was lower and so they were cheaper to retain.
Employers also said that raising the CPF contribution rates will disadvantage older workers, as "it does not help to price an older worker beyond what the employer can afford", reckoned Dr Randolph Tan, SIM University's business programme head.
Sources: Reuters "Singapore to raise pension contributions for older workers" (February 17, 2012); Channel News Asia "Employers' contributions to older workers' CPF to be raised: PM Lee" (Feburary 8, 2011); AsisOne "Employers concerned over higher CPF contribution rates" (February 10, 2012); The Business Times "Start cutting CPF rates only at age 55, say unions" (February 11, 2012)

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