In a bid to extend support for older workers in the aging island nation, Singapore’s Prime Minister Lee Hsien Loong announced in his annual National Day Rally speech yesterday that retirement age will be gradually raised to 65 from 62. The re-employment age, where employers must offer work in the same organization, will rise to 70 from 67.

The measures come as the current leadership prepares to hand over to a new generation in the coming years.

The statutory retirement age will go up to 63 in 2022, and eventually to 65 by 2030. The re-employment age will also go up from 67 now to 68 in 2022, and eventually to 70 by 2030. Also, workers cannot be dismissed on the grounds of age before they reach the retirement age. Employers must also offer eligible staff work up to the re-employment age but with the flexibility to adjust contract terms.

As per the proposed changes, the higher retirement age in 2022 will apply to those born on or after July 1, 1960, and the higher re-employment age will apply to those born on or after July 1, 1955.

These changes also come amid a rise in Singapore's life expectancy at birth which stands at nearly 85 years, meaning that about half of Singapore residents can now expect to live longer than that, said PM Lee.

"We are healthy for longer, we live longer, but we don't want to spend more years idle in retirement. We want to stay active, engaged, feel a sense of worth and purpose... Also, many of us want to build up bigger nest eggs for when we eventually retire," he said.

PM Lee added that the Government will take the lead as a major employer to raise the retirement and re-employment ages in the Public Service in 2021, a year ahead of schedule.

In order to help businesses to help adjust to these new arrangements, a support package will be announced by Deputy Prime Minister Heng Swee Keat in next year's Budget.

In addition, the PM also announced changes to the CPF contribution rates. Currently, they begin to taper down from 37 percent after workers turn 55. PM Lee said the rates for those aged 55 to 70 will be raised gradually from 2021 until those aged 60 and below enjoy the full CPF rates. The rates will begin to taper down after 60 and level off after 70.

The measures build on the support the current government already is giving to older citizens, including S$6.1 Bn ($4.4 Bn) it set aside this year for a fund that includes subsidized health care for those in their 60s. The government believes that higher retirement age will encourage workers and employers to invest in upgrading skills and adapting jobs for older workers. Raising the re-employment age enables to give companies more flexibility to reset work terms such as salary and job scope to deal with business uncertainties. These measures come on the back of fear of a global recession as well as increasing trade tensions between its two biggest trading partners, US and China. As the debate over whether there should be retirement age in companies gains momentum, Singapore’s step to raise it is another move in a positive direction.