With much of their wealth tied up in housing and CPF savings, ageing households need to consider whether they have sufficient financial buffers to weather unexpected shocks, say Duke-NUS’ Daniel Mahadzir and NUS’ Stanley Sia.
An elderly woman with her caregiver. (File photo: CNA/Calvin Oh)
An elderly woman with her caregiver. (File photo: CNA/Calvin Oh)
SINGAPORE: Earlier this year, Singapore released data on household wealth for the first time, providing a more complete picture than household income data alone.
Though real incomes have grown in the last decade, a significant portion of household wealth is held in housing and Central Provident Fund (CPF) savings, especially among lower- and middle-income households. Those two relatively constrained asset pools account for about 90 per cent of total wealth in lower-wealth households, and around 80 per cent to 85 per cent even for a middle household.
If wealth is tied in illiquid assets, an illness or unexpected caregiving duty may expose a financial vulnerability – from immediate medical costs to long-term health expenses and income loss.
The new data tells us how much wealth Singapore households have and also raises an important question: How much financial resilience does that wealth actually provide when longevity can be a double-edged sword?
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An elderly caregiver pushing a senior in a wheelchair up a ramp. (File photo: Calvin Oh)
THE STRESS OF FINANCIAL PRECARITY
Life expectancy at birth in Singapore has risen to about 84 years, among the highest in the world, yet Singaporeans still spend roughly a decade of those years living in ill health. Those who reach age 65, which will be the retirement age from Jan 1, 2029, can expect to live another 21.6 years on average.
An elderly caregiver pushing a senior in a wheelchair up a ramp. (File photo: Calvin Oh)
THE STRESS OF FINANCIAL PRECARITY
To be clear, most households in Singapore are not in immediate poverty or destitution, given high home ownership and mandatory savings. At the same time, a growing share of families report feeling financially stretched.
That stretched feeling does not necessarily amount to financial precarity. But worries about whether they can absorb an unexpected financial shock can still weigh heavily on ageing households.
Financial precarity for ageing Singaporeans often has three features:
First, incomes fall faster than expenses, especially if switching to part-time work or when illness curtails work altogether.
Second, essential costs such as healthcare, caregiving and utilities take up a rising share of the household budget, leaving little room for savings.
Third, there is limited liquid wealth outside the home and CPF, so households have few levers to pull when things go wrong.
Financial precarity has been shown to be associated with chronic stress, delayed care-seeking and poorer mental health. Households that constantly worry about making ends meet are more likely to postpone seeing a doctor, skip follow-ups or default on medication.
INSURANCE COVERAGE AND AFFORDABILITY
Insurance should, in theory, be a key tool to reduce this precarity. Singapore has consciously built a layered system to include MediShield Life as universal basic hospital coverage, CPF LIFE for retirement income, CareShield Life for long-term care, and a mix of voluntary schemes and private products.
The reality on the ground is more nuanced, with difficult trade-offs in coverage and affordability for older Singaporeans.
Premiums rise with age – be it nationalised schemes or commercial plans. Premiums are actuarially determined, with each age group paying for its own expected claims, so seniors pay more because they are more likely to be hospitalised and incur larger bills.
More individuals over 65 years old receive MediShield Life payouts each year compared to the rest of the population, and claims and payouts for seniors have grown much faster than for younger age groups.
Rising premiums become difficult to sustain once people stop full-time work. For MediShield Life, the government subsidises a significant portion of seniors’ premiums and provides MediSave top-ups for Pioneer and Merdeka Generation cohorts to keep basic cover affordable.