20150526 Under PAP, majority of Singaporeans can kiss retirement goodbye

It should be clear by now the PAP wants to continue treating Singaporeans as workhorses till our last breath.

PAP claims it has created so many good jobs which pays so well that there aren’t enough citizens to fill them. But according to MOM statistics, 627,600 jobs pay a salary of $2,000 (pg 117) and below. PAP does not distinguish between citizens and PRs and it is likely most of the lower paying jobs are taken up by locals.

PAP has created ‘too many’ jobs with starting salaries of between $1,500 and $2,000. This is relatively low in a country also rated as the most expensive city by the EIU. Can anyone even dream of retirement with such low wages?

Retirement planning requires the magic of compound interest to work. But most of our CPF would have been utilised to pay for the most expensive public housing in the world during our first 2 decades of work. Below are 2 scenarios:

Example A – Husband and wife with starting salary of $1,500 each, yearly increment of 3%*

– Couple buys 4-rm HDB flat costing $300,000.
– Downpayment using combined $100,000 CPF OA accumulated after 8 years.
– Loan of 25 years @ $908/month using CPF OA.

Some may argue that it’s better to buy a 3-room flat instead of a 4-room HDB. However, there are costs to upgrading such as renovation cost, stamp duty, commission, and miscellaneous costs amounting to tens of thousand$.

For a family of 4 with a domestic helper, there will be hardly any savings in cash and negligible CPF during the 20 to 25 years paying off the mortgage, children’s education, etc. The house should be fully paid around year 20 which means couple will be almost 50 years old when they start to build up their retirement funds. 30 years from now, the CPF MS could be around $400,000, compounded at 3% from today’s $161,000. Can retire?

Example B – Husband and wife with starting salary of $2000 each, yearly increment of 3%

– Couple buys 4-rm HDB flat costing $300,000.
– Downpayment using combined $100,000 CPF OA accumulated after 6 years.
– Loan of 20 years @ $1069/month using CPF OA.

With a starting combined income of $4,000, the couple will have paid off the last mortgage in year 15. This means Couple B will be able to start building up their retirement nest egg in their early 40’s. However, based on the CPF MS, the amount needed would be about $400,000 in 30 years time. Retirement will still be impossible.

Mortgage rates are also unlikely to stay at current low levels and their expected rise this year will affect one’s retirement plans. Worse, millions of foreigners with degrees, fake or otherwise, are invited to steal our $1,500 to $2,000 lunch by PAP’s open leg door policy.

PAP will continue to issue motherhood statements on the need to upgrade but can the whole company of cleaners be promoted to supervisors? Is it possible for all security guards to upgrade and become managers or every waiting staff promoted to captains?

The problem as we now know has been created by PAP. The objective of CPF is to save for our retirement but PAP has abused the scheme by mandating 23% of wages to support our housing bubble. If PAP’s objective is to ensure retirement adequacy, it could have reduced the percentage utilised for housing from 23% to 10% and increase the Special Account contribution by an additional 13%. But this will not happen because the housing bubble will burst and PAP’s flawed housing policy exposed.

PAP’s housing shortcut has not been used by any government because there are sufficient checks in their governments and the folly of PAP could not be more obvious.

Under PAP, low pay and retirement inadequacy are here to stay. Because PAP has maintained the disproportionate ratio of CPF retirement savings to support a housing bubble, the majority of Singaporeans can kiss their retirement goodbye.

* A 3% annual increase is realistic because Singapore Inc works by obscenely rewarding top management while squeezing ordinary workers. Many low wage workers could still be earning about $1,000 even after more than a decade. Under PAP, those earning low wages today are likely to continue earning low wages in future.

Before 2012, the starting pay of NTUC cashiers could be as low as $1080, really peanuts for the volume of work they do while living in the most expensive city. It has been adjusted to $1200 but isn’t this disgraceful to the government of a ‘wealthy’ country?

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