The Seniors: What can Budget 2023 do for them?

There is no doubt that the old-age support ratio is affected. The baby boomers are ageing and the working population is low due to low fertility during the birth control era.

One way to resolve this issue is by increasing the population that is providing the support. Obviously, it's very difficult to increase the working population speedily, except by inward migration. We can increase our working population by getting a lot of people to migrate to our country and start being productive. This is indeed what Singapore has been doing since the early 1990s. There are essentially two methods of increasing the working population via inward migration. The first method is promoting inward migration for the long term. The immigrants (foreign talents) are granted citizenship or permanent residency status. One issue with this method is that eventually these new citizens/residents would become seniors needing societal support as well. Another issue is the social discomfort and divisive rift between the ‘new’ citizens and the rest. The other method is through transient workers. They would increase the nation’s productivity without creating the need to care for them when they get old.

The reality is the population needs to be somewhat evenly distributed. Hence, the best way of handling it is to increase both the current working population by inward migration and to increase the future working population by increasing the fertility rate among residents and citizens. Singapore has been trying to do that but (maybe) a bit unsuccessfully. According to the latest data from the Department of Statistics Singapore, our current fertility rate is 1.12. The required Replacement-Level fertility rate is 2.1. A fertility rate below 2.1 would actually mean the population could decline without inward international immigration. The chart (Chart 2) displays the decline in Singapore’s fertility rate.

Another possible way to manage the old-age support ratio is to reduce the number of people that need support. How can we do that? One way is by increasing the retirement age. Another way is helping your elders to not be dependent on others, maybe by encouraging savings and encouraging them to be active in the mainstream economy. For instance, encouraging seniors to become entrepreneurs or encouraging active employment post-retirement.

A beneficial way to look at the ageing population is not as a burden but as an opportunity. If we believe that seniors make a homogeneous group of people, then it will be a perfect market having over 20% of the population as a homogeneous set of people with homogeneous needs and wants. The ageing market is, however, not a homogenous group. Their needs vary, but great opportunities exist. Hence, we have geron-entrepreneurship. Gerontology is the scientific study of old age, the process of ageing, and the unique issues faced by the elderly. Geron-preneurship is the study of gerontology and entrepreneurship.

There is a tendency to think that the ageing market is focused on healthcare and eldercare. This is far from the truth. Most seniors have a self-perceived age much lower than their actual age. Studies have shown that many seniors do not like being referred to as frail or old. Baby boomers regard themselves as dynamic and energetic. It would be better to reach out to the seniors’ self-perceived age rather than their real age. Today's seniors live longer and desire to live independently; therefore entrepreneurs should be looking at solutions to help the seniors live independently.

Entrepreneurs should be clear about which category of the ageing population is targeted to understand their needs and the marketing techniques and tools to adopt to meet such needs. Generic marketing tools could also be used for marketing to seniors. It is how the message is transmitted to the seniors that matters. For example, a popular marketing technique is creating a sense of urgency to rush consumers to make a decision. Such a technique might not go well with seniors.

We suggest segmenting the seniors into the following four broad groups:

1. Young-old (55 to 75 years old)

With Perceived Age Below 50

This group could be keen on more active holidays and travel options, products to make them look and feel younger, and health supplements. This group is a reflection of healthy living. This group today does not feel old. They still want to enjoy life and pamper themselves and their loved ones.

A possible special segment is the single young-old. The ones who never married, widow(er)s or divorcees with no children are customers in the silver market who do not need to provide for children or grandchildren. They have money to spend and are not concerned about leaving a legacy. They would have drawn a will and probably have a lasting power of attorney (LPA) arrangement in place.

One possibility is experiencing loneliness and the need for companionship. This has given rise to many opportunities like senior dating sites. They would also desire to be part of a community, creating opportunities for senior housing condominiums and estates.

2. Old (75-85 years old)

This is the group that starts feeling old and starts looking at eldercare and health products.

3. Frail-old (over 85 years old)

This group needs special medical care. There is increased demand for homes for the aged. There is a need for training specialists in palliative care for this group.

The ageing society has indeed led policymakers to tweak policies. An ageing society creates a large pool of citizenry who are consumers but not producers. The costs of upkeeping these non-productive seniors have to be borne by someone. Ideally, the cost is borne by the seniors themselves through their savings/investments/retirement funds. This would require policymakers to relook at the Central Provident Fund (CPF) and the retirement accounts. One policy has been the continuous increases in the minimum sum held back in the retirement account and the delayed age for withdrawals. The retirement age has also been extended and is likely to be extended further in the near future. This prolongs the earning power of the seniors.

Seniors who lack the funds to support themselves would become a financial ‘burden’ to society unless their family members take care of them. Policymakers applied nudging techniques by promoting family values and being filial. This was reinforced by the Maintenance of Parents Act (Cap 167B).

Policymakers should consider exempting post-retirement age seniors from paying income tax on employment income but not total income tax exemption. The exemption should only apply to earned income. We already have a precedent in lower CPF rates for those aged over 55. This could encourage senior citizens to stay longer in employment. The continued employment of seniors would make them feel engaged and could prove useful for their mental well-being. To exempt business income could lead to abuse by businesses being registered in the seniors’ names.

The exemption of seniors’ employment income from income tax could prove to be the appropriate nudge for continued employment of seniors post-retirement. This would allow seniors to be financially independent. The seniors will not be a burden on society but an integral part of it. In fact, the employment could be advantageous for the seniors’ mental well-being and their sense of pride, creating a community of seniors that are ageing actively and meaningfully.