Different types of retirement system globally

I read an article recently that says “30,000 people in Japan turned 100 this year and the economy can’t keep up“.  To summaries, it is an global issue that although more diseases are found and the viruses are getting more resilient, people are living longer because of medical advancement.

All we need is a search in Google and they are multiple articles on longevity today and we also realized the new generation to feed the old are getting smaller and smaller. Thus, retirement is a serious concern for government globally.

There are two ways to work out s social system for retirement.

One is a defined contribution plan which the employer, employee or both make a regular contribution to fund the participant’s retirement. If this sounds familiar to you, it is because that is how the CPF in Singapore works.

Another is a defined benefit plan where a certain amount of money is paid regularly to the person. Most pension plans falls into this category where the amount to receive depends on a person’s contribution history or it can be based on the amount determine by the state.

While many Singaporeans complain about how bad is the CPF system, on the other side of the globe, we have another group of people complaining about how lousy is their pension fund. It is a big risk in country’s that run on pension schemes now and unless they take a pain to revise the system, else it will cannibalise their own economy system in future. In fact, OECD warns of growing risk of pensioner poverty.

I am not promoting the CPF and neither I am against it. My point is regardless a country runs which social system for retirement, it will be an issue in the near future  because of the two main problems – Longevity and Low-birth rates.  Unless we are comfortable with what is deem “Basic retirement needs” determined by a third party, else let us plan our own retirement needs.

 

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