By Non-Constituency MP, Yee Jenn Jong
[Delivered in Committee of Supply on 9 March 2015]
Sir, given the relentless rise in our cost of living, we should constantly explore new schemes that can help increase Singaporeans’ retirement savings and adequacy.
One way could be Corporate Retirement plans, which is currently provided for in Section 5 of the Income Tax Act, but intended mainly for foreigners. Corporate Retirement plans could be provided by employers on top of the employer’s CPF contribution and be a tool to retain workers, especially by large companies. To incentivise companies to offer the plans, the government can mitigate the cost through tax breaks and rebates. We can also incentivise Singaporeans to contribute further to their own retirement by getting companies to match contributions that employees make.
How would such a plan work? Each employee could get a base contribution from the company and this base contribution would have vesting criteria. A typical criterion would be length of service to encourage retention. Matching funds up to a cap could be used to encourage employees to make their own contributions. The exact details of each Corporate Retirement plan can be left to the employer as long as they have these 2 features.
To implement this, we only need to tweak existing schemes. For employers with the necessary scale and expertise, they can run their own Retirement Trust. However, Section 5 of the Income Tax Act would need to be changed to take into account new features like employee contributions and also to allow for tax deductions for such contributions made by both employer and employee, just like contributions to CPF. Smaller employers or those which do not want the overhead of managing a Trust, can offer the same retirement benefits using SRS as the vehicle.
The Singapore Actuarial Society has observed that CPF aside, retirement schemes are a missing item in the typical Singapore employee benefit program when compared to many other countries. I hope we can further explore the use of supplementary retirement provisions as additional options for Singaporeans.