SINGAPORE - A pension system that allows for withdrawal of funds for housing and medical uses is keeping Singapore from a better rating among Asian economies when it comes to preparedness for retirement, a report has found.
Manulife Asset Management's Retirement Preparedness Indicator report released on Wednesday classified 11 countries and territories into three broad categories.
Singapore faces "favourable conditions" on the matter, together with China, Malaysia and Thailand.
Those facing the "most favourable conditions" were Taiwan, Hong Kong and Japan, while Indonesia, South Korea, Vietnam and the Philippines faced "challenging conditions".
The report considered conditions that affect the ability of each economy to provide for their ageing populations, such as gross national savings, coverage ratio, average income and net pension wealth.
Jill Smith, senior managing director at Manulife Asset Management Singapore, said the Republic has many factors in its favour.
"With Singapore's high levels of accumulated wealth, a well entrenched culture of savings, a highly developed financial system and a reasonably strong coverage ratio, our report shows that in many ways it is in good shape to provide for its retirees."
However, Singapore faces specific challenges that can threaten that ability.
Chief among them is that members can withdraw funds from their Central Provident Fund (CPF) accounts for housing and medical purposes.
Ms Smith acknowledged that this was paradoxical, given that the CPF system has helped investors boost their wealth by using their savings to take advantage of Singapore's surging property market.
"However, there are concerns that giving people the option to withdraw CPF money for non-retirement purposes risks putting savers' formal pension pot in jeopardy," she said.
Indeed, the withdrawal of CPF funds may reduce the pension wealth of individuals within the country to 2.2 times average annual incomes, Manulife said.
This compares with Malaysia's 6.4, Thailand's 9.1 and China's 14.6 times.
The report said Asia is facing challenges from a greying population and noted that Singapore has one of the fastest-growing elderly populations in the region.
Singapore also has the fastest-declining elderly support ratio (the proportion of working-age people relative to retirees) among the economies analysed.
Manulife said the government recognises the issues over CPF, increasing the amount to be set aside for long-term pension provision, and encouraging the take-up of private pension plans. Ms Smith expects this trend to continue alongside measures to encourage more corporate pension plans.
Manulife is not the first to express concern about the pension system here. Mercer also highlighted worries about Singapore's system last month, particularly its sustainability.
Commenting on Mercer's report, Acting Manpower Minister Tan Chuan-Jin said on Wednesday that many international indexes are designed with European models in mind, which place emphasis on a universal basic pension.
This means studies like Mercer's disregard unique components of the CPF system here, such as the Ordinary Account, and how they contribute to retirement adequacy.
To assure Singaporeans, Mr Tan said his ministry had commissioned an independent study that "factors in the uniqueness of our CPF system".
The study, to be released later this week, will show that young Singaporeans entering the workforce today can save a reasonable level of income in their CPF for retirement, as long as they work consistently.