By Aaron Crawford,2014-05-07 09:38
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Transfers to lower-income families can be categorised into two broad areas:

    ? Government subsidies for their education and skills, and to help them build up

    their assets. These include childcare and education subsidies for their

    children, Continuing Education and Training (CET) subsidies to help them

    improve their skills and capabilities, housing grants, and help in building up

    their CPF assets for retirement.

    ? Support to help them meet immediate needs, including the cash portion of the

    Workfare Income Supplement, healthcare subsidies, benefits for parenthood,

    and other cash benefits.

The estimates below assume the eligibility criteria and the subsidy levels of

    government schemes remain the same as today in real terms.


The total transfers a household can receive through various government schemes

    would depend on the household’s specific characteristics and needs. Hence, some

    households could receive more or less than others.

For the purposes of estimating lifetime benefits, we consider an illustrative

    young family within the bottom 20% of incomes:

    ? Today, the husband and wife are aged 29 and 26 respectively. They both live

    until they are around 80 years old.

    ? They purchase a 3-room resale HDB flat that costs about $200,000 near their


    ? They have a combined income of $1,500 per month. He earns $1000, and

    experiences some real wage growth; she earns $500 from part-time work.

    Over his working life, the husband experiences four spells of unemployment

    (say, for 2 months at a time) and undergoes retraining twice. Both husband

    and wife retire in their mid-60s.


    ? They will have two children; each will attend childcare for four years before

    going through 10 years of school education. One of them will eventually go to

    a polytechnic, the other to ITE, both at 17.

    ? When they retire, the parents enrol in the Lease Buyback Scheme to obtain a

    stream of retirement income from their HDB flat.

    ? The family of four occasionally seeks medical treatment, including episodes of

    hospitalisation (at the same level of incidence as for the general population).

    In her old age, the wife resides in a nursing home for four years.

Total transfers over 60 years

Over the couple’s lifetime, the family can expect to receive transfers (through cash,

    subsidies, top-ups to CPF accounts etc) totalling about $460,000 in real terms (2010 prices). This is more than half of the couple’s expected lifetime income (in 2010 prices). See Annex A for the listing of the various types of transfers.

About 60% of this would comprise Government grants and subsidies for their

    education and skills, and to help them build up their assets. The remaining 40%

    would comprise support to help them meet immediate needs. See chart below.


What is excluded 1. In the last ten years, for example, the

    discretionary special transfers that this bottom 20% household would have The estimated transfers above exclude the following:

    received would have more than offset the total taxes that they would have

    paid (even if the GST rate had been 7% throughout the decade). ? Discretionary special transfers

    ? Government spending on subsidised education in schools and post-

    secondary educational institutions, which all students (regardless of income)

    benefit from.

? Polyclinic subsidies, which all patients (regardless of income) benefit from.

? All benefits received by the two children in the family themselves once they

    complete their post-secondary education. Only the benefits received by the

    parents, including benefits when the children are still undergoing education,

    are included.

? The extra 1% interest on the first $60,000 of each parent’s CPF balance. All

    CPF members benefit from this extra 1% interest on the first $60,000 (on top

    of the interest rate on Special, Medisave and Retirement accounts of 10-year

    SGS plus 1%). Lower-income families, who have smaller balances, benefit


    ? The contribution of government grants (HDB housing grants, WIS and other

    CPF top-ups) to the future value of the couple’s assets (as their HDB flat

    value and CPF savings appreciate). For example, HDB prices have

    appreciated by 3.1% per annum, or 1.4% per annum in real terms, over the

    last decade. Even a modest rate of price appreciation of their HDB flat over

    the next four decades will lead to a significantly higher value, by the time they

    eventually take advantage of the Lease Buyback Scheme. Built into this

    higher value would be the contribution of the initial $80,000 in housing grants

    that the Government gives this lower-income family. The appreciation in the

    value of this $80,000 contribution is however not included in the estimated

    transfers above.

     1 Examples of such discretionary transfers over the last ten years include Utilities-Save rebates, Service

    &Conservancy Charges rebates, Growth Dividends, Workfare special payments, CPF Medisave and Post-

    Secondary Education Account top-ups, Opportunity Fund top-ups and GST Credits. The regular WIS payments

    and other ongoing subsidy and grant schemes are not discretionary transfers.


    Annex A

    List of transfers that the family receives


    The family receives childcare and student care Schemes Investments in Skills and Assets

    subsidies, as well as Government matching for their ? Baby Bonus (Children Development

    savings in their Children Development Accounts. Account)

    ? Centre-based Financial Assistance for

    Childcare (CFAC)

    ? Centre-Based Childcare Subsidies

    ? Student Care Fee Assistance Scheme (in

    Primary School)


    The household receives financial assistance for Schemes

    ? MOE Financial Assistance Schemes lower-income families at all levels of education

    ? CDC-CCC NITEC bursary (Primary, Secondary, ITE and Polytechnic bursaries),

    ? MOE Polytechnic bursary which helps to cover tuition fees as well as other ? Interest Subsidy for Tuition Fee Loan associated costs like textbooks and uniforms. Scheme (Polytechnic) ? Edusave top-ups; and occasional Edusave

    Merit Bursaries (that children from the

    bottom 50% of households by income are

    eligible for)

    ? NEU PC (Personal Computer) Plus


     The subsidies that all Singaporean students

    enjoy, that result from government spending

    on education, are not included in the


Continuing Education and Training

    The husband undergoes two stints of retraining Schemes

    ? WTS Course Fee Subsidies (about 50 hours for each stint) while unemployed.

    ? WTS Training Commitment Award He enjoys benefits under the newly-introduced

    Workfare Training Supplement (WTS) Scheme.

    (Subsidies received by his employer for any other

    training stints are not included in these




    When the husband and wife purchase a resale flat, Schemes

    ? CPF Housing Grant Scheme for resale flats they receive housing grants provided to

    (including higher-tier Family Grant) Singaporean households upon the purchase of

    ? Additional CPF Housing Grant for lower-resale flats, as well as the Additional Housing Grant income families of $40,000 provided to lower-income households. ? Interest subsidy for HDB concessionary They also receive an interest subsidy from the loan rate concessionary loan from HDB for the housing ? Home Improvement Programme mortgage. They receive a further subsidy

    subsequently when their HDB flat is improved

    through the Home Improvement Programme.


    The husband and wife receive a portion of their Schemes

    ? CPF component of WIS Workfare Income Supplement (WIS) payouts in their

    ? Lease Buyback Scheme (CPF component) CPF accounts. When they retire, they sign-up for the

    Lease Buyback Scheme and receive a $10,000

    subsidy, out of which $5,000 is used to purchase a

    CPF LIFE Plan. The other $5,000 is in the form of a

    cash grant.

Cash and Support for Immediate Needs


    The household receives means-tested subsidies Schemes

    when they undergo treatment in the public ? Inpatient Subsidies healthcare system (at the same level of incidence as ? Specialist Outpatient Clinic (SOC)

    for the general population), and the wife uses step-Subsidies down care (nursing home and day rehabilitation) ? Nursing Home Subsidies (4 years) and Day services in her old age. This household can also tap Rehabilitation Subsidies both for the on Medifund. wife

    ? Medifund subsidies

    Polyclinic subsidies are not included in the

    calculation of benefits.


Marriage and Parenthood

    When the couple has children, they receive the Schemes

    ? Baby Bonus (Cash) Baby Bonus cash incentive. They also benefit from

    ? Government-Paid Maternity Leave Government-paid childcare and maternity leave.

    ? Government-Paid Childcare Leave

Cash Benefits

    The husband and wife receive a portion of the Schemes

    ? Work Support Scheme Workfare Income Supplement in cash. In times of

    ? CCC ComCare Fund financial distress, such as during the husband’s brief

    ? Cash component of Workfare Income periods of unemployment, the family is eligible for Supplement (WIS) Work Support and assistance from the CCC ? Lease Buyback Scheme (cash grant) ComCare Fund.


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