Britain Votes to Leave While Britons in Singapore Choose to Remain—But At What Price?

In the aftermath of Brexit, Britons working in Singapore are choosing to remain here for a longer period. So how will this impact their retirement savings?

Britain Votes to Leave While Britons in Singapore Choose to Remain—But At What Price?

20 Sep 2016 by  Francis Ball & Dimitris Efthyvoulou

When UK voters chose to leave the European Union, British citizens working in Singapore found themselves in a contrasting situation. Those who had plans to go home are now looking to extend their stay as they await clarity on the political and economic implications of Brexit. 

As a result, fewer British citizens want to return home in the next 12 to 24 months and are instead looking to stay in Singapore for the next 3 to 5 years. While the dip in the British pound makes this appear like a pragmatic course of action, what is the price of choosing to remain in Singapore? 

Singapore citizens and Permanent Residents contribute up to 20% of their monthly income to the Central Provident Fund (CPF), while employers are required to top up an additional 17%. The CPF was initially established as a mandatory retirement savings plan; however, it has evolved to also be a source of financial support for health care, home ownership and higher education. However, the same benefit is not provided to foreign employees—and in Aon’s 2015 Retirement and Financial Wellness Survey for Singapore Employers, we found that 3 out of 4 employers don’t offer any retirement benefit to foreigners.

Let’s break this down: Based on the limits set by the Central Provident Fund Board, a Singaporean or Permanent Resident employee receives a CPF contribution of up to SGD 38,000 a year. As foreign employees are not eligible for CPF contribution, this missed opportunity translates to a ‘CPF gap’. The long-term financial impact isn’t dire for those looking to remain in Singapore for just one or two years, but with Britons looking to extend stays to three or five years, the CPF gap expands exponentially as compound interest becomes a factor. 

What now?

If you’ve decided to remain in Singapore, there are two things you can do immediately.

1) Get informed. If you’re choosing to stay longer than your company had provisioned for, you may be at risk of being asked to switch your mobility contract to a local one—which could result in a loss of allowances. At the same time, your family’s needs are also likely to change with an extended stay; for instance, your children’s education needs. Have an open conversation with your company on how they can support you during this transition. There may be schemes available that you won’t know about if you don’t ask.

2) Change your habits. You may have been saving enough before, but are you saving enough now to make up for the ever-expanding CPF gap? Think about the lifestyle changes you’ll have to make now, so that your change of plans don’t have an adverse impact on your financial future. 

If neither of these is feasible, you can still secure your future by reviewing your current finances and other investments. Ask yourself:

• What do you already have in place? This could be property, cash savings, insurance plans, or other forms of investments.
• In view of your increasing CPF gap over the next few years, how can you get the most out of your current financial assets?
• What does the weakened the British pound mean for your savings back home, and what can you do about it?

In the aftermath of the Brexit vote, and as a result, your ever-expanding CPF gap, the easy decision to stay in Singapore for longer doesn’t come with easy outcomes. And while these are difficult questions to contemplate, the good news is, you don’t have to do it alone.

Start a conversation with us

If you need help with reviewing your financial goals to enjoy your extra years in Singapore all the way to your retirement, get in touch with us.

Francis Ball & Dimitris Efthyvoulou

Francis Ball is a senior consultant in the Aon Hewitt Wealth Management team in Singapore and an established adviser from the UK. He advises both private and corporate clients, and designs and delivers Financial Wellbeing and Education programmes for Corporates and their employees. Dimitris Efthyvoulou is a senior consultant in the Aon Hewitt Global Benefits Consulting team in Singapore. He coordinates and supports the delivery of multi-country benefit consulting assignments in the Asia Pacific region.

Get in touch
Francis Ball