Difference between revisions of "Financially Vulnerable Seniors"

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(financial capability table (CPF))
(Financial literacy and management)
 
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===Financial Literacy and Management===
 
===Financial Literacy and Management===
====Need to understand the significance of financial planning and acquire financial literacy====
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'''<u>Combating current financial inadequacy</u>'''
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According to the MSF National Survey Of Senior Citizens 2011<ref>https://www.msf.gov.sg/publications/Pages/National-Survey-of-Senior-Citizens-2011.aspx</ref>, among seniors aged 55 years and above,
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* 47.2% would request for more money from their spouse or adult children
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* 41.1% would rely on their private savings
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* Relying on CPF savings or seeking assistance from government agencies and charities were rare, only 0.9% and 0.4% respectively.
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'''<u>Combating future financial inadequacy</u>'''
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 +
According to the MSF National Survey Of Senior Citizens 2011<ref>https://www.msf.gov.sg/publications/Pages/National-Survey-of-Senior-Citizens-2011.aspx</ref>, among seniors aged 55 years and above,
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 +
* Over 90% of seniors were aware of downgrading to a smaller home as a possible funding option, yet only 16.3% would utilise this option. Similarly, close to 90% of seniors were aware of the option to rent out their whole flat, yet only 9.8% would utilise their option.
 +
* Subletting one or more rooms was another option that over 90% of seniors were aware of, yet only 14.3% would utilise.
 +
* While the proportion of seniors who were aware of the lease buyback option was lower at 60.2%, there was a higher willingness (20.6%) to utilise this option.
  
[knowledge]
 
  
 
'''Existing Resources'''
 
'''Existing Resources'''

Latest revision as of 05:05, 31 July 2020

Contents

Definitions and Scope

Financial vulnerability can be defined as the susceptibility to financial distress, where a household is “facing difficulties repaying secured or unsecured debt, have arrears in paying utility bills or rent, and are unable to make ends meet or to cope with unexpected expenses” (Anderloni et al 2012: 284).

According to Anderloni et al (2012), the indicators used to define financial distress can include:

1) ‘Debt insolvency’ indicators such as the ability to repay mortgages, unsecured loans or utilities. One possibility is to use the unsecured debt to income ratio.

2) ‘Socio-economic characteristics’ such as the ability to engage in social activities such as meals with family or friends.

Household Budget required for Basic Standards of Living

In 2019, Ng et al. conducted a Household Budgets Study to understand how ordinary Singaporeans perceive present basic needs in Singapore to be, and to determine the household budgets required to meet these needs.[1]

Definition of Basic Standard of Living (Ng et al., 2019, p. 5)

Beyond housing, food and clothing, it also includes opportunities to education, work, work-life balance and access to healthcare. Participants explicitly suggested that basic needs extended beyond subsistence and ought to enable "quality of life", as well as emphasised maintaining independence and control over one's life.

Household Budgets (Ng et al., 2019, p. 6)

  • Household budgets vary according to demographic of household. Among single elderly households, the total household budget to meet basic standards of living was $317 per week and $1,379 per month. Among coupled elderly households, the figures were $541 weekly and $2,351 monthly.
  • The percentage of actual expenditures on healthcare among retired households largely exceeds those reflected in budgets.Hence, the presumption of good health in this study may severely underestimate healthcare costs as the budgets do not account treatment costs for chronic and major illnesses.
  • The budgets also comprise much larger recreation and culture elements than in actual expenditures, implying participants’ strong regard for social participation needs.

Expenditure Patterns

Expenditure Items

  • Most highly cited items were food, followed by utilities, transport and healthcare (MSF, 2011) [1]
  • From 2005 to 2011, the proportion of older persons citing healthcare as a main expenditure item increased by about 9 percentage points (ibid)
  • Older males were more likely to include housing and car loans in their expenditure (ibid)

Expenditure Patterns in relation to Age

Older persons aged 55-64 years were likely to spend more than older age groups (MSF, 2011) [2]. This trend could be attributed to people within this age group having school or university-going children; as well as the possibility of being part of the "sandwiched" generation who also have to provide financial support to their parents (ibid).

Monthly Income minus Expenditure

After deducting expenditure from income, approximately 1 in 5 older persons aged 55 years and above had zero balance, and this figure increased to almost 40% for those aged 75 and above (MSF, 2011) [3].

Target Population: Financially Vulnerable Seniors

[identify target group and define who is included or excluded in this category: you want to get it just right: not too broad that it includes those you may not want to include, and not too narrow that it excludes those you want to help. You might be too exclusive: e.g. defining ‘vulnerable’ seniors as ‘low-income’, but you may want to include those without family support. Therefore, you may want to define vulnerable as ‘poor and/or with low family support’. You might be too inclusive: e.g. ‘latchkey kids’ may include those who have working parents, or those with serious behavioural problems.]

Client Segments

Financial vulnerability can be caused by unsound borrowing or lifestyle choices, low income or wealth levels, adverse events such as job loss or the absence of life or accident insurance policies enable households to manage risk (Anderloni et al 2012: 286).

Because of this broad scope of causes, we adopted an inclusive definition of financial vulnerability and targeted financially vulnerable men who are aged 40 and above, which might include but are not limited to low-income, unemployed, intermittently employed, retrenched, those with a high debt-burden, divorced, have high gambling debts or are bankrupts.

Low-income single men (aged 50-64)

These men are currently not captured by any key social services, and either do not see the relevance of social services or are reluctant to come forward to seek help. They are currently employed in low wage work, and therefore may not qualify for social services. These men would become the next generation of older persons in a decade’s time. There is little understanding of how this profile of men currently manages their finances and do financial planning for their future retirement.

Many financial planning professionals we talked to think that the low-income will be uninterested in financial education because they do not have enough money. Therefore, trying to reach out to the lower income group via a financial literacy programme will likely be a challenge.

Singles: There are currently 61,506 resident households aged 50-64 with no family nucleus, and out of these, 43,499 are single person households. (see Table 11, ‘Household Structure’ http://www.singstat.gov.sg/publications/publications-and-papers/cop2010/census10_stat_release2 )

Low-income: The number of single person households earning less than $1,500 per month is 21,918. If we include those who are not working, this adds 45,655 persons for a total of 67,573 (see Table 40, ‘Monthly Household Income from Work Per Household Member’ http://www.singstat.gov.sg/publications/publications-and-papers/cop2010/census10_stat_release2#sthash.c9sPsQfB.dpuf )

Low-income men in transnational marriages (aged 40 and above) There has been a rapid increase in the number of Singaporean citizens marrying foreigners. Between 1999 and 2012, the proportion of marriages between citizens and non-residents has increased from 16.1% to 39.4%, among which close to 80% were between Singaporean men and foreign brides (Singapore Department of Statistics 2012). In 2008, 77.3% of the men who married non-Singaporean women are those with post-secondary or lower educational qualifications. Although there is no data available with regard to the specific nationalities of the foreign spouses, a regional categorisation of the foreign spouses in the report (National Population Secretariat 2009) has shown that more than 95% of foreign brides come from within Asia (countries of origin include Malaysia, China, Indonesia, Vietnam and most recently, Myanmar). Given the financial burden of supporting a family, it is important to understand whether and how such families manage their finances and the possible challenges they may face.

Older persons susceptible to financial abuse or mismanagement by family members

Financial abuse is a form of elder abuse that includes making improper use of an older person’s property or money without his or her knowledge or permission (Smith, 1999) and can include forgery, stealing, forced changes to a will, transferring money or property to another person, withholding funds from the older person, and the failure of others to repay loans. It can also include the misuse of enduring powers when a trusted person (usually a family member) is legally appointed to manage the financial affairs of an older person, whose frailty is increasing and can no longer manage their own affairs (Bagshaw et al. 2013).


In Singapore, the Ministry of Community Development, Youth and Sports (MCYS) [now known as Ministry of Social and Family Development (MSF)] has defined elder financial abuse as the “exploitation and/ or misuse of funds or resources. It includes misappropriation of money, valuables or property” (MCYS 2004). More recently, the National Family Violence Networking System (NFVNS) has further expanded on the definition, describing financial abuse as “the abuser taking advantage of the elderly person’s funds or resources, for personal gain. The abuser may exercise undue influence to bring about changes in the making or execution of wills, denying the elderly person access to personal funds, or convincing the elderly to be involved in financial scams” (MSF 2014). Despite having some form of working definition in place, operationalising the definition of financial abuse still remains a major impediment for researchers, policy makers, practitioners and legal experts. Likewise in Singapore, identifying, defining and assessing cases of suspected financial abuse continues to be a challenge.

In recent years, VWOs have seen more cases of financial abuse. Care Corner Project StART (Stop Abusive Relationships Together), another family violence specialist centre, reported that out of the 80 cases of elder abuse seen each year, about half of them involve financial abuse (Channel News Asia 2015). Care Corner Project StART noted a considerable rise in financial abuse cases over the last few years, with about 20 new financial abuse cases in 2015 (The Straits Times 2016). TRANS Safe Centre reported 11 financial abuse cases in 2015 as compared to only two such cases in 2008.

While there is currently no publicly accessible information on the prevalence and cost of financial abuse among seniors in Singapore, many financial planners we have talked to believe that this is a potentially significant issue that goes unnoticed because seniors see it as a personal issue and are often too ashamed to seek help. The problem of financial abuse of older persons by family members is a social problem that is likely to intensify as Singapore’s ageing population continues to rise exponentially over the next 10 years

Size of the Problem

Slightly more than 1 in 4 seniors aged 55 years and above experienced some level of financial inadequacy, the figure increases to about 1 in 3 among seniors aged 75 years and above (MSF, 2011). [4]

The two top cited reasons for financial inadequacy were reported to be "high cost of living" and "low or no income", while a very small minority cited "children not giving enough money". (ibid).

Desired impact for target group

Gap analysis requires an articulation of desired outcomes for a particular policy goal; criteria for evaluating what counts as success; and standards to determine the extent of the success. Only when the goals are well-defined and consensus achieved on the evaluative criteria, can we even begin to set standards. With some accepted standard or benchmark, we can legitimately argue that a ‘gap’ exists when current performance falls below it.

Based on our literature review and interviews, we have articulated what the ideal outcomes could be for financially vulnerable seniors: The goal is to help them achieve financial well-being by establishing an adequate income for life, a home that they can afford, sufficient savings with good returns that is enough for retirement, and the ability to live within their means and avoid debt insolvency. At the very least, financial goals for these seniors should include two aspects: 1) ability to live within their budget, and 2) adequate planning and savings for the future.

Needs of Financially Vulnerable Seniors


Financial Distress

Need to be identified as financially vulnerable before falling into financial distress

Existing Resources

[e.g. existing services or programmes both private or public; relevant policies and legislation]

Gaps and Their Causes

Data from the credit bureau, money lenders and arrears on Service & Conservancy Charges may serve as early warning signals for intervention. However, financial data are either unavailable or sensitive for service providers to obtain due to personal data protections.

Possible Solutions

-Advocate to key agencies to create an early warning system, e.g. moneylenders credit bureau can monitor financial debt for low income as Credit Bureau does for the middle income

-Mandatory counselling before taking on loans


Need understandable information of various community resources that can help with financial distress

Existing Resources

Gaps and Their Causes

Information fragmented and not easily navigable, especially for less educated and those without a wide social network

Possible Solutions

Open collaboration platform to help community contribute useful information on viable options and community resources


Need for emergency funds / assistance in overcoming debt insolvency

Existing Resources

Gaps and Their Causes

Low-income may be financially excluded from banks and have to rely on licensed or unlicensed money lenders with high interest rates

Possible Solutions

-Credit unions, credit co-ops and other self-help groups (e.g. Mutual Benefit Organisations) that provide better interest-rates and access

-Micro-loans: e.g. kiva.org

-Crowdfunding platform for individuals or emergency needs e.g. giveforward.com


Need for seniors to exercise control over the use of their own financial resources / financial abuse

Existing Resources

Gaps and Their Causes

Financial abuse cases may be significant but under-reported, and especially since take-up rate of Lasting Power of Attorney (LPA) is low

Possible Solutions

Service that engages family on how to manage finances of aging parent, take up LPA etc. (not to use the term ‘financial abuse’ to destigmatize the engagement)



[Insert Need Area / Desired Outcome]

  • Desired Outcome: [To insert]
  • Synopsis: [To insert]
  • Statistics: [To insert]
Existing Programmes Gaps & Their Causes Possible Solutions
Category A
Category B
Category C
Category A Programmes
  • insert
  • insert
Category B Programmes
  • insert
  • insert
Category C Programmes
  • insert
  • insert



Financial Capability

Older persons obtain their income from various sources. Overall, they have been observed to rely heavily on family contributions with limited support from the government (Ng et al., 2019) [2]. Older persons' most common source of income is adult children - 78% of elderly people reported such income in 2011, followed by wage work (21%), and CPF or other annuities (13%) (ibid). Other sources are not very significant, including private pensions (4%) and public assistance (2%) (ibid).

Existing Resource Gaps and Their Causes Possible Solutions
Family


Sustainability

Current rate of reliance on cross-generational family support is demographically unsustainable: seniors will have no or less children to rely on for retirement income as family size become smaller (Ng et al., 2019) [3].


Sandwich generation's stretched financial capability

- Adult children could be part of the sandwich generation who have to juggle twin financial pressures of supporting their aged parents and children simultaneously (NTUC Income, 2019) [4].

- Only 8% of young people today were confident of being financially capable of supporting their retired parents in future, while 47% felt financially unprepared to provide for their parents if unforeseen circumstances arise (ibid).

- 70% were certain they would have to downgrade their lifestyle to care for their parents (ibid).

Wage Income


Inadequacy

- Wage work alone is insufficient to ensure the achievement of budgets for basic standard of living for low-income older workers (Ng et al., 2019) [5] .

- Median monthly work income of full-time workers aged 60 and above in 2017 was $2,000, approximately 1.5 times the budget required among single elderly households (ibid).

- Many older Singaporeans also "retire" to jobs that are different or lower-status that their previously held professional jobs (The Economist Intelligence Unit Limited, 2018) [6]. Close to two thirds of older workers are employed in the three lowest-paying occupations, and 60% of older workers have lower secondary education or less, both in which the median monthly work income ranges from 0.9 - 1.2 times of the required budget (Ng et al., 2019) [7].

CPF Nominal benefits do not account for inflation

- CPF Life guarantees life-time stream of nominal benefits, yet the real benefits will decline at the rate of inflation (Asher & Bali, 2013).[5] As CPF Life members continuously pay the premiums, the resources available for retirement reduces overtime (ibid). There is a need to consider provision of adequate real (inflation-adjusted) income throughout old age (ibid).


Lower retirement income adequacy for women

- Women have a longer life expectancy and require income support for a longer period of time; yet women accumulate less CPF balances than men due to their lower labour force participation rates (Asher & Bali, 2013). [6]

- Annuity premiums are charged based on age and gender, with women paying higher effective premiums than men since they live longer as a group (bid).



Existing Resources

Gaps and Their Causes

No consensus on what is the bare minimum amount of wages required for a person to live within their means, but also save enough for self-sustaining retirement. Without this calculation, we will be unable to determine a ‘basic income’ required for self-sufficiency.

Possible Solutions

-Community development and community wealth building instead of individual support will yield more sustainable changes (democratize ownership of wealth, work with system as a whole)

-Work with businesses to ensure they have loyalty to the communities who foot the bill

-Empower employees through worker co-ops, employee ownership, businesses conversions to worker cooperatives (see http://community-wealth.org/)



Employment

  • Desired Outcome: [Important to articulate whether older people SHOULD be working or retired; or that work should be optional instead of necessity. E.g. if we think older people should be employed, we are implying that retirement is a bad thing.]
  • Synopsis: [To insert]
    • Not working and not looking for a job because... (top 3 reasons in order)
      • Males: retired (62.0%), too old/poor health/disabled (27.0%), family responsibilities (5.0%)
      • Females: family responsibilities (35.4%), too old/poor health/disabled (32.4%), retired (28.5%)
    • Reasons for leaving work
      • Long working hours/work too demanding
      • Pay was too low
  • Statistics:
    • Typically confined to secondary labour market, overrepresented in low-skilled occupations
    • More male than female labour force participation
    • Labour force participation rate for population aged 65 and above in 2018 is 27.8% (Retrieved from ILOSTAT database. Copyright 1996-2018 by International Labour Organization.
    • In 2018, older workers aged 55 & over were concentrated in domestic-oriented and trade-related industries. Industries with the largest number of older workers were wholesale trade (e.g. as working proprietors or shop sales assistants), food & beverage services (e.g. hawkers, food/drink stall assistants), land transport & supporting services (e.g. taxi, private hire car and bus drivers), public administration & education (e.g. private tutors, teachers, clerks and cleaners), retail trade (e.g. shop sales assistants, working proprietors, cashiers), construction (e.g. working proprietors, supervisors/general foremen) and cleaning & landscaping (e.g. cleaners).
    • The unemployment rate for PMETs aged 50 & over softened even as their long-term unemployment rate rose. This suggests that while such PMETs benefitted from improved labour market conditions, there remains a group who face greater difficulty returning to the workforce
Existing Programmes Gaps & Their Causes Possible Solutions
Supply Side Measures (?)
  • insert (eg training?)
  • insert
Internalised Ageism


Mandatory training only increases attendance, but not effectiveness


Training programmes do not necessarily translate to tangible benefits for workers and employers


Barriers to training:

  • Cost
  • Difficulty finding relevant courses
  • Conflict with work commitments
  • Self-discriminating based on age, internalisation of ageism
Demand Side Measures (?)
  • Retirement and Re-employment Act
  • insert (eg employer support)
  • insert
Ageism, stereotypes

Poor working environment

Working arrangements

Flexible work arrangements


Terms “retirement age” and “re-employment age” to be relabelled as the “structured re-employment age” and the “optional re-employment age” respectively. The Retirement and Re-employment Act, too, should also be renamed as the Re-employment Act (https://www.todayonline.com/singapore/retirement-re-employment-ages-should-be-pegged-healthy-lifespans-say-researchers)

Category C
Category A Programmes
  • Centre for Senior's CPF Life-Work Programme
    • Runs workshops and talks educating and empowering seniors and mature workers alike to actively plan and manage their work-life transitions, especially at critical age junctions of 55 years (Central Provident Fund withdrawal), 62 years (retirement), and 65 years (payout eligibility age of CPF Life)
  • insert
Category B Programmes
  • insert
  • insert
Category C Programmes
  • insert
  • insert


Need to invest savings for protection of wealth; need to manage financial risks due to accidents or death

Existing Resources

Gaps and Their Causes

-Financial products and services not accessible or affordable to low-income, thereby denying access to reasonable returns for their already limited savings

-It is unclear to what extent low-income are adequately insured, and whether they have enough savings for emergency

Possible Solutions

Form ‘savings groups’ and provide savings subsidies to improve unrestricted, flexible & liquid savings that can be used for emergencies.

Financially inclusive products for the poor:

-Credit unions or credit cooperatives

-Micro Insurance

-Micro Investments (mutual investment self-help group)

Mutual Benefit Organisations (MBOs) for relief of funeral expenses, hospitalisation etc.




Intergenerational transfers

  • Desired Outcome: [To insert]
  • Synopsis: [To insert]
  • Statistics: [To insert]
Existing Programmes Gaps & Their Causes Possible Solutions
Category A
Category B
Category C
Category A Programmes
  • insert
  • insert
Category B Programmes
  • insert
  • insert
Category C Programmes
  • insert
  • insert

Retirement adequacy

  • Desired Outcome: [To insert]
  • Synopsis: [To insert]
  • Statistics: [To insert]
Existing Programmes Gaps & Their Causes Possible Solutions
Category A
Category B
Category C
Category A Programmes
  • insert
  • insert
Category B Programmes
  • insert
  • insert
Category C Programmes
  • insert
  • insert

Need for consumer financial protection

Existing Resources

Gaps and Their Causes

-While the low-income and less educated may not understand their consumer rights, they also do not invest as much (and therefore will not benefit from such protections)

-For those who can invest, MAS regulations on secured loans (TDSR) and unsecured credit (credit card limits, interest rates on money lenders) are policy levers likely to have the most impact on irresponsible borrowing, but this only sets the minimal bar of acceptability so that borrowers do not go into insurmountable debts.

Possible Solutions


Financial Literacy and Management

Combating current financial inadequacy

According to the MSF National Survey Of Senior Citizens 2011[7], among seniors aged 55 years and above,

  • 47.2% would request for more money from their spouse or adult children
  • 41.1% would rely on their private savings
  • Relying on CPF savings or seeking assistance from government agencies and charities were rare, only 0.9% and 0.4% respectively.

Combating future financial inadequacy

According to the MSF National Survey Of Senior Citizens 2011[8], among seniors aged 55 years and above,

  • Over 90% of seniors were aware of downgrading to a smaller home as a possible funding option, yet only 16.3% would utilise this option. Similarly, close to 90% of seniors were aware of the option to rent out their whole flat, yet only 9.8% would utilise their option.
  • Subletting one or more rooms was another option that over 90% of seniors were aware of, yet only 14.3% would utilise.
  • While the proportion of seniors who were aware of the lease buyback option was lower at 60.2%, there was a higher willingness (20.6%) to utilise this option.


Existing Resources

Gaps and Their Causes

Financial planners think that many Singaporeans are overconfident or think that financial literacy is ‘common sense’ but nonetheless do not truly understand or see the longer term implications of their financial behaviour

Possible Solutions


Need ability to make ends meet, i.e. balance income and expenses, spend within means

[short-term behaviour]

Existing Resources

Gaps and Their Causes

-While the mismanagement of financial products or costly borrowing leads to debt for the middle income (data from Credit Bureau), we know less about debt for the low income, e.g. problem gambling may be a cause of debt for a key segment

-There is a special challenge for men, who are culturally more reluctant to seek help

Possible Solutions

Customized budgeting and monitoring support from financial planners who help the lower income


Need to plan ahead; make longer term and holistic financial plans and implement them to achieve life goals

[longer term planning and behaviour]

Existing Resources

Gaps and Their Causes

-MAS survey shows that financial literacy is lower for less educated and low-income group.

-The is considerable doubt amongst financial literacy trainers themselves that workshops are able to change behaviour effectively (especially those that have generic content, are piecemeal or not holistic enough)

-Low-income are unlikely to be able to make longer-term plans if they are already having difficulty making ends meet in the short-run

Possible Solutions

1-Devise a ‘better’ financial literacy programme:

Contextualized and culturally appropriate, meaningful, customized, targeted, holistic & just-in-time


2-Alternative models: empowering, proactive, self-help and peer group based, multi-agency collective impact project (can also include a ‘crowdfunding’ module into this alternative service model)


3-Skilled volunteerism: financial planners can be assets and used in either models


Resource Directory

[insert organization name]

Insert web link

[insert organization name]

Insert web link