Wednesday, 2 December 2009

Singaporeans, pepper crabs, JB and the ‘Golden Years’

The Singapore government has established a Special Needs Trust Company. Families who are worried about the fate of relatives with disabilities can contribute to the Trust which will take care of the individual once the current care giver passes away.

It is a uniquely Singaporean response to a thorny problem.
The solution hinges on good faith in the state and government. In turn, the government provides certain benefits (hidden subsidies?) in the form of lower operating costs and higher returns for the trust funds. Characteristically and most importantly, the trust relies upon private funding.
There is no reliance on the government budget for supporting the enterprise.
Essentially, the trust is a 'defined contribution' care giving plan for families who wish to rely upon the state for securing the future of challenged relatives. The extent and nature of the care will be determined by the amount of cash invested into the trust by each family.
Over time, the size of the trust should pick up. Subsequently, the benefits of critical mass will accrue to all members. However, if the trust follows in the footsteps of the Supplementary Retirement Scheme (SRS) then it may take some years for the trust to reach a reasonable size.
The establishment of the Special Needs Trust Company is a response to growing needs of the Singapore population. The demand hints at some of the changes in population and mindset that are permeating younger Singaporeans.
The trust is an obvious sign of greater affluence. Only wealthy families with reasonable discretionary income can buy into such a fund.
More ominously, the scheme hints at a slow but inevitable breakdown of traditional Asian values. In the past, a family will not consider abdicating their 'clan' responsibility to the state. The family will take care of its own members without any recourse to the state.
Granted, there are mitigating circumstances: these are individuals with disabilities.
The wind is clearly blowing in a particular direction; a path ultimately leading to nursing homes for elderly Singaporeans.

Earlier this year Singapore's Health Minister was ridiculed for suggesting that Singaporeans consider just such an option in Johor Bahru, Malaysia. It might be a difficult truth for many Singaporeans to grasp but the Minister's comments deserve further evaluation.
The greying problem is as severe in Singapore as in Japan. The recent wave of new immigrants will pay taxes and fund essential government services but Singapore is not a welfare state.
Retirement is self-funded. There is no 'pay as you go' state sponsored retirement scheme. The Central Provident Fund (CPF) system is well designed but CPF balances may be insufficient to completely fund the retirement of many Singaporeans.
Paying for medical care and retirement benefits is a practical problem that Singapore is poised to confront in the next few decades. Is it not obvious that nursing homes in Malaysia will provide far better value for money?
Retirement funding will become a recurring theme in the coming few years. The sooner Singaporeans start their own retirement trust the less the likelihood of moving to JB in their 'Golden Years.'
Unless you are moving just to enjoy the pepper crabs.

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