Case Analysis and Overview of Solutions

Lack of Savings
No Compulsory Pension
Illiquid Assets
Scheme
(citizens unable to sell off
(only 22.3% have min.
assets to get min. sum for
sum for post retirement
retirement)
life)
Introduce a compulsory

Solution

pension scheme:

Government

Set up joint fund initiative with a

private bank, specifically for this
savings
scheme,
Salusia
Provident Fund (SPF)

1. Government will pass law to

make it
2. Raise
awareness
necessity to
of the Fund
compulsory
forof
individuals
through
save SPF
Campaigns (see Lack of Awareness
slide below)

Benefits

Rising Cost of Living

(weak currency has
caused high inflation of
6.2%)

Retain control of
scheme but able to
save costs as scheme
is outsourced to
private bank

Citizen

Private Bank

1. Individuals would
allocate a certain
portion of their income to SPF,
and bank in
return, has to provide interest income
from the monthly deposits made

Quell unease of
citizens who might
be hesitant to
deposit money in
corporate banks

Achieve post-retirement
sustenance in the long
run as the younger
generation can fund their
own retirement

Lack of Savings
No Compulsory Pension
Illiquid Assets
Scheme
(citizens unable to sell off
(only 22.3% have min.
assets to get min. sum for
sum for post retirement
retirement)
life)
Introduce an asset buy-back

Solution

scheme:
Eligibility:
Scheme is only eligible for those aged 58 and
above, who live in urban areas and do not
meet the minimum savings requirements of
SL$250,000
Urban areas have been targeted because:

Benefits

Cost of living in urban areas are higher

More cost-efficient to target urban areas as
such properties are more likely to be resold
in the market
Those living in rural areas would likely want
to pass on their assets (such as land and
house) to their family members since
agriculture is their main source of income

A quick-win
strategy to preempt the
incoming silverage tsunami in 5
years

Rising Cost of Living

(weak currency has
caused high inflation of
6.2%)
Duration:
Scheme will be phased out
once the compulsory pension
scheme has successfully
implemented for some years
Implementation:
Retirees would be relocated
to an area which has a
lower cost of living
Educate citizens through
campaigns regarding the
benefits of this scheme

These assets can be

sold off and part of
the initial
investment can be
recovered

Targeted only to those

who lack the retirement
savings and will be most
in need of government
support

Lack of Savings
No Compulsory Pension
Illiquid Assets
Rising Cost of Living
Scheme
(citizens unable to sell off (weak currency has
(only 22.3% have min.
assets to get min. sum for caused high inflation of
sum for post retirement
retirement)
6.2%)
life)
2. Peg compulsory pension schemes
Solution1. Introduce floating exchange rate:
Set up a range to ensure that
exchange rate remains relatively
stable (within that range) as
adopted by Singapore
Benefits

Prevent exchange
rate from weakening
too much such that it
leads to inflationary
pressures

interest rates to inflation rate:

Monitor inflation rate and make
adjustments to interest rates

Prevent high
inflation rate from
eroding future value
of savings by
pegging to inflation
rate

Both of these
schemes will ensure
that citizens are
able and willing to
save more as a
result

Lack of Healthcare
No Systematic Medical Insurance
Scheme

Lack of Awareness
Solution
Actions
Objectiv
es

Target

Methods

Mode of
campaign

Incentive
s
Funding

Health Promotion
Committee (HPC)
Raise Awareness

Health Promotion campaigns to raise

awareness about:
- Importance of medical insurance
- Government initiatives to support citizens
- Mandatory Medical Insurance Coverage
Young
Senior
(MMIC)

citizens

citizens

Use part of their salary

Use part of their
to buy medical
personal savings to
insurance for
buy medical
themselves
and their
insurance
Countrywide:
Advertisements
on TV,for
Radio,
families
themselves
Internet, etc.

Raise
Funds Fund to
Health Promotion
support:
- Senior citizens
- People below poverty line
who cant afford
the MMIC
Millionaires,
philanthropists,

corporates, celebrities, etc.

Raise Funds for Health
Promotion Fund
& support Health Promotion
campaigns

Rural Areas
Philanthropy events
Urban Areas
Campaigns at local
National fund-raising
Internet, phone
clinics
events
marketing
Village leaders as
Get celebrities to
Talks in schools,
role models
support TV/Internet
universities and
Roadshows, events
campaigns or Volunteer
companies
Volunteers,
programmes in rural
Signboards on bus &
Companies
enjoy double
Campaigns
are
simple
to
understand,
creative,
fun
counsellors
areas
trains
tax deductions for
Offer
free health
and goodies especially in
Posters
at bus checkups
stops,
donations
rural areastations
Total budget: $30M
Source of funding: Heath Promotion Fund, Government Funds

Lack of Healthcare
No systematic Medical Insurance
Scheme

Lack of Awareness
Solution

Mandatory Medical Insurance Coverage

Provider: Health Promotion

Committee (HPC)

Descripti
on &
objective

Target

MMIC: Cover basic healthcare services by public hospitals, compulsory for all citizens
Young citizens are encouraged to buy joint insurance coverage to cover for their
parents.
Aim: All senior citizens and more young citizens to be medically insured with at least the
Mandatory Medical
Insurance Coverage.
Senior
Young
Employed

Distributi
on
channel

citizens

citizens
Employer on
behalf of HPC

Informally/un
employed

HPC Office and Affiliates

HPC Office and
Affiliates
Paid by personal
Paid by Medical saving
Automatically deducted from
savings
account
employees income in SPF
Medical saving
Subsidy
Free MMIC
account
account
- For elderly above
- For elderly
Buying thru
Incentives
- For all senior
poverty line but
below poverty
employer,
to promote
medical
citizens
have below min.
line
employees enjoy:
insurance
- Favourable return
saving sum
- Proof needed
- Premium
- Used for medical
- 50% premium
(e.g. income
discount
bills and insurance
subsidy Total budget:
statements)
- Tax deduction
$265.8M
Estimates:
Funding
Subsidy: $89.3M
Population: 63.3 million
Free MMIC: $176.5M
Senior citizens: 8.3% of population
Source of funding:
Below min. saving sum (cant afford healthcare) :
Health Promotion Fund
67.6%
Government Fund
Below min. saving sum but above poverty line:
34%

Lack of Public Funding

Existing High Income Tax Rates

Budget Deficit
Solution
Purpose
s of
Fund

Implementing GST @ 7%
Decrease Budget
Deficit/
Pay off National Debt
Infrastructure to attract
investments and create
more jobs

Source of
Fund:
Consumpt
ion

Amount
of Fund

Fund Healthcare &

Saving Initiatives
Education
Reach &
Advancement

Consumption as Percentage of GDP

Consumption = GDP Investment (Domestic and
Foreign) Government Spending- Net Export
GDP
Investment (SMEs contribution)
FDI (net)
Government spending (Average of Latin American
Countries)
Export
Import
Consumption

SL$
100%
(36.20%)
(2.70%)
(14.74%)
(70.30%)
75.40%
51.46%

Long Term
Development

Healthcare
Infrastructure
South American
Country
Argentina
Bolivia
Brazil
Colombia
Venezuela
Chile
Paraguay
Uruguay
Ecuador
Average
*Source:

Government
Spending*
15.50%
13.90%
22.00%
16.70%
12.20%
12.40%
12.10%
13.80%
14.10%
14.74%

http://data.worldbank.org/indicator/NE.CON.GOVT.ZS

Available Fund
from GST on Consumption

GDP
Consumption (51.46% GDP)
Available Fund from GST (7%
Consumption)

Invest on
Tourism
Industry

SL$ billions
1523.3
783.82
54.87

Fund
Distributio
n

Budget Deficit

(i) Decrease
Budget
Deficit

Current Budget Deficit

6.2% GDP

Aimed Budget Deficit by

2020

4% GDP

Reduction of Budget
Deficit

2.2% GDP

GST Fund Distribution

GST Reimbursement

(ii)
Reimbursem
ent for the
poorest 30%

Income shared by lowest

30%

8.6% GDP#

GDP

SL$1523.3b

GST Rate

7%

Reimbursement for
lowest 30% ,
assuming no saving

8.6%*1523.3b
*7%

Argentinas lowest 30%s share of income:

8.60% GDP.
(Argentinas Gini Index: 43.6, similar to Salusas
41.4)
Source:
http://cedlas.econo.unlp.edu.ar/eng/pantalla.php
?seccion=special_studies&idP=134
Budget for Healthcare Initiative
(from aforementioned plans)
#

(iii)
Healthcare
Initiatives

Campaign

SL$0.03b

Subsidy + Free basic

healthcare

SL$0.27b

SL$ billions
Available Fund from GST
Reduction of Budget Deficit
2.2%*GDP

54.87

Surplus from GST

GST Reimbursement for the
lowest 30%

21.36

Budget for Healthcare Initiatives

Amount available

(iv) Savings
Initiatives

33.51

9.17
0.3
11.89

(v) Long
Term
Development

Timeline
Implementation
2015

Asset
buybac
k

2030

Increase healthcare spending to 2% of GDP

Increase FDI inflow to 4% of GDP
Maintain GDP growth at 4-5%
Service-sector makes up 30% of economy

plannin
g

fundin
g

Floatin
g
Exchan
ge rate

Increase number of people

with min. saving sum by
10%
Increase typical saving rate
by 10%
Reduce number of
people above 58 years
old and have below min.
saving sum by 75%

Increase savings
per capita by
20%

Percentage of senior
citizens have MMIC:
urban area (75%, rural
area (50%)

75% of
population
have MMIC

Reduce inflation to 5%

Health
Promotio
n
Committ
ee
MMIC

2020

2017

GST Fund comes in

Reduce budget deficit to
4%
Fund other initiatives

GST

SPF

2016

Expected outcomes

Successful campaigns
nationwide
Health Promotion Fund $5M

plannin
g