Thursday, January 19, 2012

Retirement Age and Retirement Planning

As soon as we settle into working life we start to look forward to retirement - that great day when we can leave work for the last time and be free to enjoy our golden years. For most people, this happens at the birthday after you reach the government retirement age. Some people are lucky enough to have the financial security they need for early retirement.  In either case, some form of  retirement planning will be required.  Retirement planning basically involves finding out the age that you will retire at and working towards saving enough money so that you will be able to live comfortably without drawing a salary when retirement comes.

The Retirement Age Act

In Singapore, the Retirement Age Act determines the minimum age of retirement. A person can currently retire the day before their 62nd birthday. This may change in the future, and as the average population ages the retirement age is likely to increase like it has in other countries. In some parts of Europe the retirement age is as high as 67 currently.

Employment Contracts

The employer should give the employee advance notice of their retirement unless their employment contract explicitly specifies it. It is also unnecessary for the employer to give any retirement benefit unless it is in the contract.

Employers do not have to retire an employee once they reach retirement age. If both are happy, then they can continue to work for as long as the employee remains fit and able to perform their duties.

Wage Reductions

To help companies in Singapore continue to employee older people, it is legal for them to reduce the wages of employees over the age of 60. This can be a straight salary reduction, or a reduction in any other employee-related costs such as bonus, benefits and pension contributions.

This can lead to experienced people losing up to 10% of their salary as soon as they celebrate their sixtieth birthday. Luckily, employers cannot just base the reduction on age alone, but must take into account other reasonable factors. These can include the employee’s ability to perform their duties fully as they age.

It is important to remember that the 10% is a maximum reduction and can be taken off in one chunk or in several smaller deductions. This allows the employer to effect a gradual reduction to the employee’s salary over a period of time.

Working after Retirement Age of 62

The Singapore Retirement Act does not allow for compulsory retirement at the age of 62, and neither does it stop anyone continuing to work beyond that age if they want to. Anyone who wants to continue working should arrange it with their employer. Re-employment after age 62 is also probably going to be a norm in the future.

Other Exceptions

Some fixed-term employment contracts are immune from the Retirement Act. People on these contracts can continue to work as normal and then retire at the end of the contract. A notification exists to the Retirement Act that specifies which people are exempt.


Retirement usually marks the end of your "paid" working life, and for many people it is something to look forward to. Others love work and try to continue working for as long as they possibly can. Whatever your views, it is important to know the laws in your country concerning retirement so that you know what are the likely scenarios (e.g. pay cut)  when it is your time to retire.

"How to retire in Singapore?" is perhaps a question that is often on people's minds.  For some people, it might even involve drastic moves like moving to a cheaper country to retire (read: Retire in Philippines).  Well, if you are interested, you can also read some of my thoughts about retirement and let me know what you think.

1 comment:

  1. The Singapore Retirement Act does not allow for compulsory retirement at the age of 62, and neither does it stop anyone continuing to work beyond that age if they want to stop from working.


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