FUNDAMENTAL reforms to Singapore’s pension system can serve to bridge income inequality as well as revive its public equities market. Continued lack of reforms will worsen the wealth gap and the retirement adequacy of its ageing population, as well as ability to sustain itself as a financial and commercial centre.

Singapore’s equity markets are somewhat dysfunctional relative to international best practices – pension assets are not deployed to support local capital markets but often invested abroad via GIC. Through the 2010s, the equity sector has been plagued by illiquidity, and a wave of privatisation. This global phenomenon is reflected in the stock markets of mature economies – listings on the New York Stock Exchange (NYSE) more than halved over the past 20 years, while IPOs in London fell 20 per cent between 2003 and 2018 – and is rooted in the emergence of private capital as a compelling alternative worldwide.

The moribund equity market not only devalues Singapore’s status as a financial hub and commercial centre, it also worsens the prospects for retail investors to access the wealth creation opportunities available in private markets and in Singapore’s appeal as an enterprise financing hub.

The equity markets of Hong Kong, Sydney, Tokyo, Bangkok and New York highlight the crucial role of pension funds in supporting healthy domestic investor liquidity, as well as their key role in their capital markets. For instance, in Singapore, stocks and securities account for 9.6 per cent of household assets according to government data. Wharton Business School estimates that the equivalent percentage of equities in household assets stands at 10 per cent-15 per cent in emerging markets and 25 per cent-30 per cent in mature economies.

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