Singapore’s Pension System

Singapore’s pension system predominantly consists of the CPF, which has seen steady growth in its net contributions. In 2020, CPF assets rose 8.7% year-on-year to S$462.1 billion, and CPF Investment Scheme (CPFIS) assets grew 3.8%.

Central Provident Fund Benefits and Withdrawals, 2015-2019 (S$ billions)

• The CPF saw relatively stable contributions and withdrawals over the five years to 2020. In 2020, total contributions received rose by 4.2% to S$57.8 billion.
  
  

• In 2020, the CPF saw total withdrawals of S$21.6 billion. Members are allowed to make some lump-sum withdrawals from their CPF from age 55, while the rest of their savings will be paid out as monthly retirement payouts under the CPF LIFE scheme or the RSS. In 2020, a total of S$1.8 billion was paid out under the CPF LIFE scheme and the RSS.
  

Assessing Options Beyond the CPF

Singapore is expected to continue reviewing its policies to improve retirement adequacy, including the feasibility of introducing the much-anticipated CPF Lifetime Retirement Investment Scheme (LRIS), which will be designed for members who wish to invest their CPF monies but do not have the knowledge or time to do so.

While it is uncertain at this stage whether the government plans to outsource funds under the LRIS to the private sector or manage these in-house, the LRIS’s goal to offer a simpler investment option to CPF members through a few well-diversified funds that are low cost and passively managed could mean there would only be a handful of opportunities for managers even if it does outsource.

Opportunities for Managers

Insurance products will continue to dominate CPFIS assets. 63.5% of CPFIS assets continued to be invested in insurance products, such as investment-linked products (ILPs). Insurers typically outsource a portion of their CPF-ILP assets to their affiliated or external managers. Although insurance companies tend to prefer their affiliates, performance matters and there are opportunities for other fund houses to replace their affiliated managers if they underperform. In selecting managers, outstanding track records and performance, as well as client service, are important.

Central Provident Fund Investment Scheme Assets, 2015-2019

Asset managers compete directly with insurance companies in terms of positioning of retirement solutions. More asset managers, such as Schroders and Fullerton Fund Management, have been packaging their new multi-asset income payout products as retirement solutions.

Stocks and direct investments into mutual funds are viewed as the most important retirement products for retail investors ages 21 to 60, while annuities, fixed deposits, and bonds are likely to attract those age 61 and above.