My wish for budget 2006

Here is my wish for budget 2006.

I wish that the finance minister will encourage people to make private savings for their retirement. This is to supplement the Central Provident Fund savings, which has been significantly reduced in recent years.

In many countries, there is an attractive tax relief to encourage private savings. The savings are deducted from taxable income. But, as most lower and middle income earns do not pay income rate in Singapore, this may not work.

In the USA, the investment earnings from the retirement funds are deferred till retirement. Again, this will only work when most people pay income tax.

In all cases, there is a recognition by the government to forego some tax revenue to encourage people to make supplementary savings.

In Singapore, I suggest two possible ways to encourage more people, especially from the lower and middle income, to save for their retirement:

- government to contribute $1 for every $4 of savings; this scheme is similar to the baby bonus, but at a lower rate

- government to issue long term bonds that pays an attractive return that can only be invested by retirement funds; the return can be 1% or 2% higher than the market rate.

We need to have an attractive scheme that will encourage people to save for retirement. It will cost money to the government, but it will benefit the government in the long run, as there is less need to take care of poor old people.