Singapore is facing three major challenges including regional competition, an aging population and a restructuring economy, said Prime Minister Lee Hsien Loong in his Labor's Day message on Saturday.

Though Lee was optimistic about his country's economic outlook, he admitted that the emergence of a new Asia with energetic development of cities like Shanghai, Bangkok and Kuala Lumpur is posing competition for Singapore.

Lee announced that the government is looking at privately-managed pension plans and the way of prolonging retirement age to keep Singaporeans financially secure, senior citizens in particular.

He said that his government will adjust work conditions, lay down flexible employment terms, change employers' mindsets as wellas update employees' skills to help Singaporeans stay employable.

As for the restructuring economy, which has made structural unemployment a growing problem, Lee said that jobs are being re-designed to make them more attractive, productive and better paying, especially for the lower-skilled and less educated.

But he ruled out the possibility of making the city state a welfare society, saying it will result in bigger government spending and higher taxes.

He reiterated that the growth rate of Singapore's economy is expected to be 3 to 5 percent this year, which will create more jobs and opportunities for the people.