Singapore’s provision of social services has worked well for its people thus far but is failing to keep up with societal changes, including meeting the needs of a growing middle class, panellists at the Singapore Perspectives 2012 held by the Institute of Policy Studies shared.

Dr 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 had begun to appear in the last five years. The discussion focused on healthcare, housing and retirement funding.

Debbie Soon and Chua Chun Ser report.

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, had done very well in remaining financially sustainable. However, the question was whether the system had “transferred too much of the financial risk from the state to the individual” in the process, argued 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, what the basic level of healthcare would provide.

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 who also do not earn enough to afford private specialist 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), that gives 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 current rising home prices and what would be considered affordable for current and succeeding generations.

Fundamentally, there was the need to resolve the tension amongst the three objectives of the Housing Development Board (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 $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 eking 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.

Debbie Soon (Debbie.soon@nus.edu.sg) and Chua Chun Ser (Chua.chunser@nus.edu.sg) are research assistants at the Institute of Policy Studies.

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