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Nexus between housing and pension policies in Singapore: measuring retirement adequacy of the Central Provident Fund

Published online by Cambridge University Press:  01 February 2018

NGEE CHOON CHIA  and
ALBERT K.C. TSUI
NGEE CHOON CHIA
Affiliation:
Department of Economics, National University of Singapore (e-mail: [email protected])
ALBERT K.C. TSUI
Affiliation:
Department of Economics, National University of Singapore, Singapore
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Abstract

Empirically, in many developed countries, homeownership rises with age. Both housing wealth and financial wealth affect retirement adequacy. Focusing replacement rates based on pension incomes alone may detract from the full retirement adequacy picture, as homeowners do not pay rent and hence need less cash. This paper adopts a wider perspective of retirement adequacy and includes net imputed rents in the calculation of replacement rates to gauge retirement adequacy. Including net imputed rents in replacement rates calculation is particularly important for Singapore, given the prevalence of house ownership, made possible by the nexus between retirement and housing policies. Workers can use part of the monthly contributions to Singapore's central provident fund to finance housing. While this would tradeoff retirement savings, it boosts spendable income for home-owning retirees. It is found that incorporating net imputed rent in the computation of replacement rates boosts the replacement rates by 12 percentage points for a male median worker and by 15 percentage points for female median workers.

Keywords

Replacement ratesnet imputed rentdefined contributionretirement adequacy
Type
Article
Information
Journal of Pension Economics & Finance , Volume 18 , Issue 2 , April 2019 , pp. 304 - 330
Copyright
Copyright © Cambridge University Press 2018 

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Footnotes

We thank the editors and the anonymous referees for their many helpful comments and suggestions. Special thanks to Mike Orszag for his constructive comments. We like to acknowledge the Singapore Ministry of Manpower and the Central Provident Fund for the use of data in this study.

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