Given the percentage of the working population in Singapore comprising foreigners who are not eligible for CPF, close to 50% of the organisations surveyed offer supplementary retirement benefits to their foreign staff.
Have you been saving enough for your retirement? When asked the same question, working adults in Singapore ranked retirement planning as their top priority but an alarming 80% underestimate how much they really need to retire. This was a key finding in Aon's new report, 2021 Trends in Retirement & Financial Wellbeing, completed by organisations with employee populations ranging from five to over 4,000, and based in Singapore.
While retirement support from employers is also lacking, further challenges remain around transparency in group retirement plans’ investment offerings and employees foregoing long-term perspectives to seek short-term gains.
The survey identified three main themes in financial wellbeing and retirement support for Singapore employees.
Trend 1: Financial wellbeing support is the new employee expectation
Close to 40% of employers rank an employee financial wellbeing strategy as their highest priority, followed by emotional and mental wellbeing support. The survey shows that 70% of Singapore employers will formulate or execute financial wellbeing programmes throughout 2021, in line with employee expectations. Companies also view offering a financial wellbeing programme critical in increasing employee engagement and remaining competitive in the talent market.
Trend 2: An increasing uptake of employer-led supplementary savings plans
Currently, 22% of companies surveyed offer Central Provident Fund (CPF) top-up contributions to citizens and permanent residents.
However, close to 40% of the working population in Singapore are foreigners (as shared in the media statement) who do not have access to CPF and are likely to have foregone their retirement benefits in their home countries. To bridge this gap, and to provide equitable retirement benefits to all employee groups, close to 50% of the organisations surveyed offer supplementary retirement benefits to their foreign staff.
Financial services firms are leading in this practice, followed by the technology and the healthcare sectors.
Alicia Brittain, Senior Consultant & Actuary, Retirement & Investments, Singapore, Aon, shared: "The most effective approaches are aimed at changing individual behaviours towards money and savings and providing accessible programmes and vehicles to deliver sustainable change.
"For example, when organisations provide retirement benefits as cash-in-lieu, it is most likely immediately spent and so does not form part of an emergency fund or long-term savings for the employees’ retirement years. Supplementary retirement plans solve this issue and are more flexible and cost effective - and can also offer contributions above the monthly CPF wage cap to increase employee savings."
Overall, a third of organisations in Singapore are prioritising a review of their supplementary retirement arrangements in 2021.
Top 3 supplementary retirement vehicles for non-CPF eligible employees:
Trend 3: Employees in Singapore lack a well-defined default investment strategy
Less than 30% of the surveyed companies in Singapore currently offer their employees an investment choice in their retirement plans, and only 15% of retirement plans have a default investment fund. This leads to employees selecting their own investment funds.
Ashley Palmer, Regional Managing Partner, Retirement & Investments, Asia, Aon, said: "Employers can have a significant impact on how much their employees save by instilling smart habits and healthy money behaviours. The right long-term savings vehicles, effective communications and financial tools will help Singapore’s workforce be more financially resilient in the wake of the COVID-19 pandemic."
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