We have previously seen that Singapore is considered one of the ‘smartest’ places in the world and considered how this might tie in to our goal of Building Ireland's Smart Economy. We also saw that we may be getting smarter with the introduction of a 50c per item prescription charge.
This will see the introduction of a compulsory system of pension savings in 2014. Singapore introduced a system of retirement savings in 1955 and this has evolved into The Central Provident Fund. While initially established to provide savings for retirement the CPF has evolved into a system that provides and savings and investment across a range of areas:
- Home Ownership
The total contribution rates to the CPF are around 35% of gross earnings (20% by employees and 15% by employers). The contribution has an upper limit and also the rate drops with age. Around 6% of earnings are allocated to the Special Account which is used to fund retirement. A presentation I gave on the overall CPF system with particular emphasis on the health savings is available here.
The proposed contributions to the Irish retirement scheme is also 6% of gross earnings (4% from employees and 2% of employers). One of the biggest issues to be addressed before the system can be introduced is getting the IT infrastructure in place. The website for Singapore’s CPF gives an excellent template. See here.
The CPF was established in 1955 and has been improved and expanded slowly since then. The system of health savings through the Medisave accounts was not introduced until 1984. Who knows, maybe in 2043 we will be even smarter and have introduced our own system of medical savings accounts.
Constantin Gurdgiev has some great questions on the proposed scheme. I do not know how they will be addressed in the Irish system. From what I know of the Singapore model I have tried to provide answers to his questions based on their system. These answers are available here.
We must wait to see how they will be answered here but I would hope that Gurdgiev’s conclusion that this will just be an additional tax (on private sector workers) will be proved wrong.Tweet