Summary: Introduce a compulsory pension scheme

What does this hope to achieve:

Citizens are able to retire sustainably without relying on government
funding
How can this be achieved:
The government of Salusia will set up a joint-initiative with a private
bank for this scheme, where citizens will need to allocate a certain
portion of its income to the bank every month as mandated by the law
to do so for every citizen.
In order to prepare citizens for this introduction of pension scheme, the
government would introduce campaigns to raise awareness and
educate the public on the necessity of such a scheme; by reducing the
funding needed to support the aged in the country, more of these
funds could be used to create jobs, build new infrastructure and
improve the education system in Salusia, while allowing each
individual to retire comfortably.
This is a long-term strategic initiative which will only bear results when
the current working class of the age between 20-35 were to retire.
Parties involved:
Government, Private Bank, Individuals

2.
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4.

Benefits of this recommendation:

1. Instead of setting up the initiative altogether by the
Government itself, it would be better to let it run by a
corporate bank instead as they would have the expertise to
manage the savings much more efficiently than others
would.
This could help to reduce costs by the Government if they had to invest
on this initiative all by themselves.
By making it compulsory, everyone would need to contribute to their
own retirement funds without draining on the governments resources,
thereby achieving the goal as mentioned above.
A joint-initiative might help quell unease as citizens who are initially
worried about corporate banks defaulting, would know that with the
Government involved in this, they would definitely be able to get their
money back. As such, citizens would be able to gain the best of both
worlds, with a more efficiently managed pension scheme by the bank
while having a peace of mind knowing that the government would step

in in cases of contingencies.

FAQs:
Who will be in charge of this scheme?
Clear boundaries would need to be set up regarding this; as it is a joint
initiative, the bank and the government would be in control of different
aspects of the scheme. The government would primarily be in charge
of enforcing the scheme, setting up controls in place such that they will
not exploit confidential information given to them by the government,
while the bank is primarily in charge of determining interest rates and
projection of expected pool of funds for the population.

1.

2.

What are the disadvantages of using this scheme?

A joint initiative might actually be more costly to implement instead as
there would be more coordination involved. Yet, we believe that this is
not a matter of contention as long as there are clear boundaries set up
and an explicit understanding of each partys role and responsibilities.
The Government of Salusia would also be concerned of sharing of
confidential information with the bank which can be exploited for their
own commercial reasons.
1. Yet, this is a necessary cost which the Government
should factor into consideration and based on a costbenefit analysis, determine if the benefits of
outsourcing the management of pension scheme to
an external party would outweigh the costs of such
potential security breaches and exploitation of
confidential information. Should the government be
uncomfortable with the proposition, an alternative
can be considered where a separate entity can be set
up by the government to run this completely on its
own.
2. There have been cases where governments have
teamed up with banks to run certain investments or
programs
such
as http://www.afdb.org/fileadmin/uploads/afdb/Docu
ments/Publications/Power%20Africa%20Initiative
%20Brochure.pdf, which suggests that such a
collaboration is indeed possible.

Given that this is a long term strategic plan, the government should
also set up a clause stating that after an initial 5-10 years should the
plan be unsuccessful, then an exit strategy can be made such as
buying over the pension scheme arm of the bank (at a certain price or
premium) so that it is now a government agency.
Who is the target of this scheme?
As it is compulsory, all citizens would need to contribute a portion of
their income to the scheme. By calculating the inflation rate and the
required amount of retirement for the average citizen, an allocated
amount (for example, 20%) can be determined.
For those without formal employment, they will not be automatically
registered with this scheme but to ensure that they too reap the
benefits of the plan, there will be an opt in scheme where they can
choose to deposit the minimum amount needed for every citizen in
order to hit the post retirement amount. As right now, the retirement
works on the basis that you can continue to live in a lifestyle based on
your last drawn salary, which is a proportionate basis. This is only
possible to be estimated if the citizen has a formal employment which
draws a certain amount of salary every month. Yet for those who dont,
the arrangement is that they can opt in to the scheme and as part of
the requirements of the scheme, they would need to deposit a
minimum sum every month in order to have the required savings
amount of SL$200,000. This is independent of how much income they
earn informally. They can opt to put in more than the minimum
amount, but cannot place less than that.
How long will it take for this new scheme to be implemented?
It will take approximately 1 year to get this scheme to be finalised and
implemented. To see the actual benefits from this scheme, that will be
two-three decades later when the current working class were to retire.

Summary: Introduce an Asset Buyback Scheme

What does this hope to achieve:
To achieve post-retirement sustenance for the incoming silver-age
tsunami.
How can this be achieved:
According to the case, in 5 years time, there will be a silver age
tsunami; a large number of people who will retire yet have no
retirement savings to help them. As such, we categorised this group of
individuals (aged 58 and above) according to those who have sufficient
savings to tide over, and those who do not. For those who do not, we
further categorised them according to the location where they stay
(urban or not).
This scheme would specifically target those who are aged 58 and
above, do not have sufficient savings AND live in urban areas. For this
group of individuals, they can choose to resell their properties to the
government and they will then be relocated to a cheaper apartment at
an area with a lower cost of living. These cheaper apartments can
either be existing, or a separate plan can be rolled out as well to build
low-cost apartments for these individuals. There will also be campaigns
so as to educate the public regarding this scheme and to make sure
that the individuals who will be affected know about this scheme and
could apply to be under this scheme.
This plan will eventually be phased out in 5 years time, once the silver
age tsunami is over.
Parties involved:
Government (a committee will be set up to oversee this), Individuals
Benefits of this recommendation:
1. This is a scheme which targets those who would most be
affected, namely those who are about retire and without
sufficient savings and are living in an area which is too
expensive for retirement as well. Instead of making this
available to everyone, this scheme will be made less costly to
implement.
2. This scheme will directly solve the problem of the silver age

tsunami.
3. Also, these properties which are bought are in the urban
areas, which mean that these properties are more likely to be
resold as there will be a greater demand for them. As such,
the initial costs put into place to implement this scheme can
eventually be recovered.
FAQs:
Why are people in rural areas not targeted?
This is because this scheme is made not to target everyone who is
about to enter the silver age tsunami but those whom will be most
affected. We made a highly probable assumption that those living in
rural areas are most likely involved in agricultural activities, which
means they would need their properties in order to continue farming.
There is also a strong tendency for farmers to pass on their estate to
their children as well as they would most likely be involved in farming
too.
1. From a demand perspective, we view that people in rural areas
will not be as receptive to this idea anyway.
2. From a cost perspective, these properties are not likely to worth
very much as well given that there is a lack of demand for such
in rural areas. This means that the amount recovered will not be
sufficient for them to retire comfortably anyway, while losing
their primary source of income generating tool, which is their
land.
3. From a social perspective, people living in rural areas are often
more conservative as well, and more family oriented, which
suggests that retirement is not as much of an issue for them
since they are likely to be taken care of by their children.
They will be, however, covered by other schemes but it is our group
belief that the people living in rural areas are actually much less
affected by the lack of retirement savings than the ones living in urban
areas.
What is the duration of this scheme?
The duration of this scheme is likely to last for about 5-10 years so as
to anticipate the incoming silver age tsunami, after which initial
pension funds scheme would have taken its effect as well, where more
and more of these people can rely on their own pension funds to retire

instead of having the government to buy back their assets.

What are the disadvantages of this scheme?
It is likely to be costly to implement this but we believe that these
costs can be ultimately recovered. The alternative of not doing this will
be to provide welfare benefits to them, which would have been even
costlier and have no chance of recovery.
A detailed breakdown can be found in the later section where we
discuss how we would use the amount collected by GST be used to
fund our initiatives, including this.
Yet, this has been adopted by many countries around the world and
has been proven to be an effective method to preempt the silver age
tsunami. Singapore is one of them: A report done by NUS: Monetizing
House Equity to Generate Retirement Incomes.
However, there will be other social considerations to make such as the
fact many elderly people will choose not to relocate because of a
strong preference to continue staying in the house they have been
living for many years. One way to solve this will be to through
campaigns, where awareness and education can be raised such that
they understand the benefits of such a scheme will ultimately benefit
them more. The other is to ensure that the relocated place is elderly
friendly enough for them to make the decision to relocate more
palatable.