Ethos Issue 1, October 2006
The Real Challenges of
an Ageing Population
Opinion: Andrew Kwok
Tackling Over-Consumption
Singapore’s savings rate is already one of the highest
in the world. Exhorting citizens to save more will have a
marginal net effect. Instead, the focus should be on addressing
over-consumption, particularly on housing.
Since Singapore’s independence in
1965, housing policy has played a pivotal role in national
development. As incomes rose, so did home ownership, surging
from 29% in 1970 to 90% in 2003. Even among the lowest 20%
income households, home ownership rates were as high as 87%.
They have, on average, accumulated home equity (the sum they
would earn after selling their flat and paying off their outstanding
home loans to the Housing and Development Board) of $138,000
per household.
Current rules allow citizens to use their
Central Provident Fund (CPF) accounts, intended for retirement,
to finance their mortgages. This, coupled with easy access
to loans with relatively long repayment periods, makes monthly
instalments more affordable and facilitates larger home purchases.
Indeed, liquidity in the market was one factor that contributed
to a significant inflation of property prices in the nineties.
Earlier, in the 1980s, the Government also stopped building
smaller sized flats because demand was leaning towards larger
apartment units. With easy financing and lack of choice, some
people may have been encouraged to buy larger properties and
take on heftier loans.
Housing has a considerable impact on retirement
adequacy because over-consumption in property adversely affects
the ability to save, reduces capital available to invest in
other assets, and thereby results in a smaller retirement
nest egg. People have more of their wealth locked up in housing
than in other assets, yet have relatively few avenues to monetise
housing equity, especially when the property market is weak.
As a foremost factor affecting financial
adequacy for retirement, housing policy as a whole may need
to be rationalised. Housing as an investment tool should also
be de-emphasised, particularly when expectations of property
assets rising indefinitely are likely to be misplaced. In
recent years, steps have been taken to address this issue.
The Government has tightened controls on the use of CPF funds
for housing purchases, as well as resumed the construction
of two- and three-bedroom apartments.
Drawing The Lines Of Responsibility
In Singapore, it is socially accepted that families should
bear the filial responsibility of caring for their elderly.
However, appearances of functioning familial support structures
could be unreliable. The normative expectation of caring for
aged parents should be discerned against actual behaviour,
as normative culture can act as a cover, concealing more serious
problems. These difficulties may not be surfaced or adequately
dealt with because grown children avoid the issue, and aged
parents are too embarrassed to talk about them openly. Academics
point out that in reality, more and more children are no longer
supporting their parents, even in countries like South Korea,
where a strong normative culture of filial piety still holds
sway.
As the ratio of children to parents decreases,
filial piety should not be emphasised to the point of creating
an unrealistic burden on children. The concept of filial piety
can be used to raise awareness and garner support for a family
approach towards caring for the elderly, but the provision
and regulation of community and institutional care may need
to be expanded, and should not be seen as an arrangement of
last resort.
From the point of view of an ageing Singapore,
these three key challenges – generating economic growth,
avoiding over-consumption of housing and remapping the lines
of responsibility for the elderly – will demand shifts
in policy. How Singapore turns out as we age will likely be
influenced by how these challenges are met.
Andrew Kwok is a Research Associate
at the Institute of Policy Development, Civil Service College.
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