Reliance on CPF to fund retirement and medical expenses

Majority of Singaporeans are reliant on CPF to fund retirement and medical expenses

  • CPF remains the main source of retirement savings for 64% of consumers who have begun saving/investing for retirement. Further, one in every two (54%) supplement retirement funds with endowment or investment-linked plans.
  • Three in four (73%) consumers plan to use Medisave to pay for medical expenses
  • Overall, 44% of Singaporeans have not begun saving for retirement

While discussions on the Central Provident Fund's (CPF) adequacy to provide for Singaporeans' retirement continue, Aviva's Consumer Attitudes Survey released today found that it is still being cited by consumers as the most common source of savings to fund retirement. Among those who have started saving for retirement, 64% rely on CPF. Further, 54% also have endowment or investment-linked plans to supplement their retirement fund and 45% have direct investments such as shares, bonds or unit trusts.

When it comes to medical expenses incurred in old age, CPF – or more specifically, Medisave and MediShield – is the most common tool Singaporeans are relying on (73% Medisave, 70% MediShield). One-third (34%) plan to make use of their Integrated Shield plan, with 32% listing cash as part of their plan.

Mr Daniel Lum, Director of Product and Marketing at Aviva Singapore, said, "Singaporeans are increasingly aware of the need and importance of retirement planning. CPF is a great tool and offers one of the highest guaranteed returns in Singapore. However, many Singaporeans have their savings tied up in property and they need to consider unlocking returns from such assets to supplement their retirement fund. The challenge remains for Singaporeans to build a diversified retirement portfolio that earns returns high enough to beat inflation, as well as to ensure they will have sufficient cash in their later years, rather than being asset-rich but cash-poor. The importance of protection coverage should also not be underestimated. Without sufficient medical and long-term care coverage to protect savings built up over the years, retirement funds are at risk in their later years."

There also remains a significant number of Singaporeans (44%) who have not started saving for retirement at all. Whilst it may be expected that a majority of those aged between 25 and 34 would be in this position (55%), it is more concerning that 31% of those over age 55 have also yet to begin saving for retirement. Among those who have not started saving, 41% said that they cannot afford to save, while 25% are saving for other priorities such as their children's education.

Mr Lum explained that a large part of the inertia possibly comes from not knowing how much will be needed in retirement. "Often, people guess rather than calculate how much they need. They may underestimate the amount required and think they still have time to delay saving. On the flip side, they could also overestimate the amount needed and intimidate themselves into not making a decision. Either way, it is not helpful as without a goal, you will not be able to put together a plan to get there."

In order to help Singaporeans understand how much they need to retire, Aviva recently developed a Retirement Planner calculator. The calculator helps users visualise the lifestyle they want to lead in retirement and uses Household Expenditure Survey figures to give an estimate on the costs they should plan for, after factoring in inflation.

"We hope tools like this will help people to take the first step in retirement planning," Mr Lum said.