SINGAPORE — The seeming inevitability that a greying and shrinking Singaporean population will result in heavier taxes was called into question yesterday, as several economists noted that retired Singaporeans can draw on their Central Provident Fund (CPF) savings which they have “pre-funded” themselves through their working years.

They also argued that the impact on working adults from the old-age support ratio — the proportion of retirees to working adults — therefore, is different for countries such as the United States, which have a “pay-as-you-go” social security system where current receipts are used to pay current benefits paid to retirees.

In the Population White Paper, the Government had noted that the old-age support ratio will fall from nearly six working adults to one retiree now to just a shade over two to one by 2030, if there are no new citizens to make up the shortfall from declining birth rates. Taxes would also have to be raised eventually to fund the needs of a greater proportion of elderly Singaporeans, it had added.

But yesterday, at a panel discussion on the White Paper organised by the Economic Society of Singapore (ESS), economics professor Walter Theseira argued that the old-age support ratio only defines the number of retirees relative to working adults. And because the Republic has the CPF system — with the Medisave component taking care of healthcare needs — the Nanyang Technological University academic said the assumption that more taxes will be needed when retirees form a bigger proportion deserves closer study.

For instance, 2010 figures showed that 64 per cent of healthcare financing came from private sources — one of the highest around the world — while the Government’s budget going into healthcare was among the lowest in the world, he said.

However, Dr Thia Jang Ping, who is Director of Economics Division at the Ministry of Trade and Industry, highlighted that a lower old-age support ratio, even if the retirees are financially well-off, will still impose a burden on society because there will be fewer workers to meet the demand for goods and services.

“(One) may have S$1 million in the CPF when he retires ... but he will still go out to the market to demand goods and services (in) nursing, healthcare, F&B ... Somebody has to deliver the goods and services that his money can buy,” said Dr Thia. “Without that, what will happen? It will lead to an erosion of his savings because he will have to pay a lot more for (those goods and services).”

Other panellists, such as Institute of Policy Studies Adjunct Senior Research Fellow Manu Bhaskaran, National University of Singapore psychologist David Chan, and ESS Vice-President Yeoh Lam Keong, also wondered about the number of immigrants Singapore needed to keep the economy growing sustainably by noting that retirees in the future will be healthier and more skilled.

This was a point internationally-renowned demographer Wolfgang Lutz had made last month when he questioned whether the impact of Singapore’s current Total Fertility Rate is as serious as it is made out to be.

Said Mr Bhaskaran: “Yes, there are economic implications from the demographic trends, but I do not think they are as alarming as they seem.”

Mr Yeoh contended that workforce growth should settle to around 0.5 per cent annually, once small and medium enterprises here have restructured successfully and improved their work-rates. He added that because of the already big population base that Singapore has, even “relatively modest” workforce growth could result in a population size that would be “seriously deleterious to social well-being”.