MOM announces acceptance of recommendations to refresh retirement and re-employment framework

29 August 2019

On 19 August 2019, the Ministry of Manpower (“MOM”) announced that the Singapore Government has accepted 22 recommendations made by the Tripartite Workgroup on Older Workers (“Workgroup”) and will work closely with the tripartite partners to implement them.

The recommendations aim to accomplish the following goals:

  • To refresh Singapore’s retirement and re-employment framework
  • To strengthen older workers’ retirement adequacy
  • To promote an inclusive workforce and progressive workplaces that value older workers

An overview of the recommendations is provided here.

Rise in retirement and re-employment ages

 The Workgroup noted that both the retirement age and re-employment age remain relevant in Singapore, ensuring that Singaporeans can remain active in work for as long as they are able, while businesses can continue to tap on a pool of experienced older workers.

However, the Workgroup recommends that both the retirement age and re-employment age should be raised by three years to 65 and 70, respectively. The implementation of the raising of the retirement age to 65 and re-employment age to 70 should be completed by 2030. The Workgroup notes that these changes will coincide with a decade of significant demographic shifts in Singapore, with the number of citizens aged 65 and over doubling to 900,000 by 2030. It is therefore important to pace the increases so that more cohorts of older workers can benefit, while providing a clear roadmap for businesses to plan ahead.

The first increases in the retirement age (to 63) and re-employment age (to 68) are expected to take effect from 1 July 2022.

It is also recommended that the Government should provide a wage offset scheme to accompany the raising of the retirement age and re-employment age to 65 and 70 respectively.

Rise in CPF contribution rates

The Workgroup recommends raising Central Provident Fund (“CPF”) contribution rates for workers aged 55 to 70, retaining a stepped reduction in CPF contribution rates by age bands with the total CPF contribution rate for those aged 55 to 60 raised to 37% in the longer term and for workers aged 60 to 70, the increase should be smaller but meaningful. For workers above 70, the total CPF contribution rate should remain unchanged at 12.5%. Raising CPF contributions risks making these workers less employable, with no significant gains in retirement adequacy, as employers have no obligation to re-employ workers beyond the age of 70.

As a first step, the CPF contribution rates should be raised from 1 January 2021. Employers and workers will each increase their contribution by either 0.5%-point or 1%-point.

The Workgroup noted that given the economic slowdown and uncertain outlook, employers feel strongly that the Workgroup’s recommendations are ambitious in scale. The Government should therefore provide transitional support to employers, in the form of one-off wage offsets, to mitigate the higher CPF contribution rates.

Engagement with mature workers

 The Workgroup states raising the retirement age and re-employment age must be accompanied by efforts to reduce, and eventually eliminate, the barriers to a truly age-friendly labour market. To achieve this, the Workgroup recommends employers engage with mature and older workers in structured career planning sessions. Conversations with mature workers (around age 45) can be centred on their future career plans and potential support from companies, while those with older workers (around age 55) can focus on relevant skills needed for re-employment.

The Workgroup also recommends that an employers’ determination of a worker’s fitness for work in a particular role should not be based solely on age, but also on the objective assessment of job requirements and relevant health or physical conditions that would affect his performance of those job requirements.

Employers should also be encouraged to provide part-time re-employment opportunities and embark on job redesigning to effect organisation-wide and systems-level changes. Such endeavours increase the number of older workers who can perform the job and/or extend upwards the age at which workers can do a job.

The Government should support employers to undertake key shifts in their HR policies. In particular, to: (i) systematically create part-time opportunities for employees seeking re-employment; (ii) raise awareness of structured career planning sessions, and build capabilities to conduct such sessions; and (iii) support transformational job redesign to overhaul organisation-level systems and processes, so as to benefit more older workers.

Reference materials

The following materials are available on the MOM website www.mom.gov.sg:

 

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