Comments, opinions and an occasional ramble
Bad idea for CPF to become a pension/investment fund
Ong Kian Min (Tampines GRC) argued in Parliament for the CPF to become a pension/investment fund in Parliament. His intentions are good, but it’s a really bad idea.
While CPF returns are quite low compared to other forms of long term investment instruments (2.5% OA and 4% SA), at least it represents a stable form of investment for most Singaporeans. The risk involved in parking one’s retirement nest egg in CPF is probably as low as parking money in a fixed deposit. It’s perhaps the most risk-free option compared to things like stocks, unit trusts, investment funds etc.
While Ong Kian Min is correct to say that high net worth individuals will not be satisfied with such levels of returns, I think we ought to think about whether low net worth individuals are willing to accept the risks involved in the CPF becoming an investment fund. True, the returns would be higher if the CPF becomes an investment fund, but the risk of losses for all Singaporeans becomes higher too. I believe that Singaporeans are too risk averse for the CPF to become an investment fund.
The government cannot guarantee 8 – 10% returns because it’s too expensive a business. And, it will be a huge political mess if CPF as an investment fund make negative returns. Singaporeans will surely bay for the blood of the government. I don’t think that it is wise for the government to take such a risk. If the individual buys into an investment fund using the CPF OA and loses money, he has no one else to blame but himself. If the government invests the entire CPF account of Singaporeans and loses money, it will have to bear the responsibility of the loss and the political fallout will be incalculable.
If the CPF is to transform itself into something greater than a POSB, I rather it become a comprehensive and trusted source of financial advice from independent financial advisors. The idea is that the CPF Board offer personal financial health assessments, investment advice, insurance advice etc. The CPF board therefore becomes a competitor with the private sector, with the only difference being that the CPF board is not selling financial products and offering financial advice at the same time. The CPF Board would not have the vested interest of pushing sales, so it can dispense more reliable advice to Singaporeans. This can only be good for Singaporeans in general because the private sector financial advisors would have to shape up their services, else they will lose customers to the CPF Board. The idea is somewhat similar to how the government forced the ISPs to improve their offerings through Wireless@SG.
By offering only independent advice and not getting into the actual business of investing CPF funds, the government can help Singaporeans try and achieve a higher return on their CPF and private savings without running the risk of being blamed for any losses in investment. True, some people may argue that if the CPF Board dispenses bad advice, people can still point fingers. However, all the adviser needs to do is to make clear that there is no compulsion to follow the advice, and suggest people to seek second opinions from private sector advisers if they are not sure if sound advice was given. It’s definitely better than trying to directly invest CPF monies of ordinary Singaporeans. It’s not easy to beat the market all the time, so better not take such a big risk.
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about 5 years ago
What I trying to say might be a bit out of point. But these is something about CPF.
Actually i feel that a person CPF can be his pension under a following circumstance:
They don’t use it to buy their HDB flat
Many ppl might be thinking what am I trying to drive. Almost every Singaporeans are using their CPF to buy their flat. Becos when you find that you have finished paying your loan for your flat you might find that your CPF is kinda dry. you might be like 40++ years which is at its risk for most ppl in their career. I will suggest that CPF will be just purely be saving and don’t allow ppl to use it to buy HDB. At the same time HDB should be subidsized a bit more. So at least when Singaporeans retired or get retrench when they can withdraw their CPF, they will have some form of money for their children for studies or any other thing. One more thing i wish to emphasis is, CPF should be made in away tot beat inflation. (But I don’t think is possible)Talking about investment, I think investment should be individual becos not everyone can take high level of risk. I agreed with what Aaron said. Since now you can use up to 70% of your CPF for investment. (correct me if i’m wrong.) So I think at least it give ppl a choice whether they wanna take such high risk or not. Hope I’m not way out of pt.
about 5 years ago
Hi Raymond,
Perhaps you are right. If people don’t use their CPF to buy a flat, most should have enough for retirement. However, public housing in Singapore isn’t cheap. If we don’t allow the general public to use CPF, it’s going to be tough for the middle class to afford housing. Imagine having to cough out another $400 – $500 per month per person in cash for a flat. That’s quite alot of money for those whose take home pay is around $2000 – $3000.
If we are talking about housing and CPF, the better solution is to see how best to release this liquidity. I am on the side of the KTM on this, that is, for people to sell their flat and live in rented housing after retirement. This will free up money for daily expenditure. Of course, if one minds living in a smaller, not as fancy rental housing, then one would have to find more cash to live out the golden years without having to work.
about 5 years ago
The MP’s proposal in and of itself is not without merit. The problem is that he lacked specifics or proposals.
Given that most people start contributing to CPF when they start work in their 20′s, and won’t be able to really withdraw it until they retire a few decades later (with the exception of being able to buy a house)… to allow that money to merely sit and earn 2-3% p.a. over that long period is actually irresponsible and likely ‘money-losing’ in real terms because of:
1) Inflation
2) Equities outperform fixed income in the long term (and the life of one’s CPF account certainly is long term)
Not saying that the govt should then go out and allow everyone to speculate on Shanghai-listed shares with their CPF… but there is a plethora of investment options that can be packaged to cater to the retirement needs of individuals depending on when they expect to be able to retire and be able to withdraw their CPF (typically the portfolios have more equity/risk the further away you are from retirement, and as you get closer it the balance is a lot more towards bonds and safer instruments).
Just in general, allowing people to have more investment options – granted it should be subjected to stringent limits on what you can invest in to minimize risk – is a lot better than locking up your CPF money with very low rates.
about 5 years ago
Actually, allowing one to use the CPF to buy into a primary property is a great idea given the practical considerations of allowing property ownership. More importantly, a home is also an investment which holds value for the most part. So it is merely a transfer of personal savings or equity from one form (CPF investments) to another (real estate).
The alternative of not allowing CPF money to be used for a home, is that many people will be forced to rent before they can save up enough for a downpayment. And rent is an expense where once you’ve paid you will not recover in the future unlike owning a home.
about 5 years ago
The problem is that CPF rules currently allow funds to be withdrawn for a variety of purposes. So it is difficult ( although not impossible ) to invest such funds when idling in the CPF in assets which require a longer term investment horizon – with more volatility – but which should normally yield higher returns. Experience has already shown that the average CPF member will stumble if he invests on his own. Investor education ( or advice as you put it ) has a long way to go. In the meantime, sometime urgent has to be done to help those unable to make appropriate investment decisions on their own by improving the return. For a start the minimum sum which the CF requires each member to set aside should be paid a better rate than the blend of savings and one year FD rate that it now yields. These are after all long term funds which can only be withdrawn at the age of 62. They ought to be be invested in assets which give a better return such as equities, real estate and long term bonds. Other governments ( such as Norway,Chile and even Malaysia ) have centrally managed pension schemes which have generated higher returns than savings or FD rates. Originally the CPF invested members funds in such assets. But perhaps to avoid duplication of effort when GIC was set up this was discontinued and currently CPF invests only in specially issued Singapore Government bonds. However, it does use external fund managers to invest the insurance monies of the various in-house schemes such as HPF,DPF. The assets invested in include global and Singapore equities and bonds. These have earned average returns of probably 6 to 8 % p.a over the years. The minimum sum accounts should pay yields in this range too. On hindsight, it was not so smart a policy move to get CPF members to invest for themselves though this did facilitate the growth of the unit trust industry and was in keeping with the consistent creed of government to “educate ‘ the citizen to fend for himself and not depend on state largesse and “welfare” as far as possible. Government in most instances think it should do the thinking for the nation but it had in this rare instance severely overrated the abilities of the population in this matter.
about 5 years ago
The CPF is a form of indirect taxation which gives the government a large part of money to do investments without actually taxing the population.
Each working singaporean has a CPF account. it would begin when you start in the Workforce. which is lets put it about when you are 20-23 years old. You can only withdraw the money when you are 55-62 years old. Which safely put that the money is “in trust” by the government for at least 30 years?
In this 30 years they offer a low interest rate of 2.5%. Therefore within this period of 30 years the government’s fund manager’s need to only make a return of 2.5% so within this period lets say you do not always make money and substain a minimum loss and within one of the years you make lets say 12 to 15 % which is very likely unless the fund managers are hopeless. The government makes a gain in their revenues which is definately not publicised.
In the case where a citizen purchase a flat and use CPF to pay, the government earns on 2 ends. 1 if it is a HDB housing loan, it earns 0.1% interest. Moreover the money goes directly to government coffers and not into the withdrawal amount at the end. So it is a direct taxation.
Have you seen the latest indicative prices in the HDB Ballot system? you will notice an increase of at least25% in the cost. Do you think it is a true increase or a government effort to speculate?
Just 2 cents of words.
about 5 years ago
Francis,
I think the government’s aim in offering such low interest rates is because of their idea of what CPF should be, that is, savings for retirement. What the government is aiming to do is perhaps just to guard the savings against inflation. The rest is left up to the individual to decide what other forms of investment they want to do.
about 5 years ago
Kilroy,
I’m not sure if the government actually wants to be so proactive in managing the retirement funds of Singaporeans. There are merits of course, but I’m more for a less paternalistic government. I think individuals should be responsible for their own retirement. This is esepcially so in the future, when most Singaporeans would be educated enough to handle their own business.
Technically speaking, the CPF is enough for a really asture retirement lifestyle, and I think it’s a perfectly fine baseline as it is. However, to go above that baseline is not the responsibility of the government in my opinion. The government can provide a bare minimum safety net (as a matter of compassion), but the rest should be up to the individual to aspire to reach the desired level.
about 5 years ago
Rowen,
The government doesn’t earn on 2 ends. If you take a HDB loan, it cancels out the CPF OA interest rate. There’s a net of zero to the government. Of course, we can question whether does the government earns only 2.5% return. Over the long run, I would think the government earns more than that. My question is, and nobody has yet to answer is that, can ordinary folks stomach lossess over several years when there’s a recession, even though there’s the promise of high returns when the recession is over? Not everyone has the stomach to wait it out, so the government takes the lowest denominator approach by just making CPF a secure form of investment that guards against inflation, and not anything more than that.
about 5 years ago
Aaron:
“….While CPF returns are quite low compared to other forms of long term investment instruments (2.5% OA and 4% SA), at least it represents a stable form of investment for most Singaporeans. The risk involved in parking one’s retirement nest egg in CPF is probably as low as parking money in a fixed deposit. It’s perhaps the most risk-free option compared to things like stocks, unit trusts, investment funds etc…..”
Granted that there is little market risk, there is still a risk to the potential retiree when opting for low-risk returns. The risk of inflation overtaking the low yields (leading to a negative real rate of return), as well as the very real risk of having insufficient savings to sufficiently finance your retirement.
In addition, the CPF is effectively an investment fund. The member’s funds are used to purchase Singapore Govt Bonds, which because the Government has consistently run surpluses, is not used for Government spending. So what does the Govt do with this? There is an extremely high chance that most of these excess funds go into GIC and Temasek for the investment of our foreign reserves.
We are getting bond returns for hedge fund and private equity risk. As Rowen has mentioned in an earlier post, this is an indirect form of taxation, which is arguably regressive in nature as well, since the poor will most likely have a greater proportion of their net worth tied up in CPF).
about 5 years ago
As an add-on, the risk of failing to meet your retirement savings goals or outliving your retirement savings is that you might end up having to eat dog-food in your old age (or maybe not even that in Singapore, since even pet-food is expensive here!) or end up being homeless. Not a very pleasant thought.
about 5 years ago
Hi Wanderingshark,
I note all your points and I agree there are lots of benefits of CPF being an investment fund. But you didn’t answer me as to whether you think Singaporeans can stomach the volatility of hedge funds and seeing negative returns on their CPF savings in some years, despite a possible overall increase in average returns?
As for the issue of inflation overtaking low yields, perhaps it’s better to peg CPF interest at a certain percentage above inflation?
about 5 years ago
My point is simply that
a) since contribution to the CPF is mandatory and the bulk of CPF funds are really long term in nature ( certain amounts can be withdrawn for housing etc but the core portion such as the Minimum Sum can only be withdrawn at age 62)
b) anecdotal and other evidence exists that demonstrate that the majority of Singaporeans are not investment savvy ( I do think you are too optimistic in assuming that those who are educated will know how to invest prudently – trust me it is not that easy )
c) the government has the infrastructure and resources to invest for the long term – wasn’t GIC and Temasek set up for this very purpose – or can easily delegate and appoint professional fund managers to do so which incidentally, CPF is already doing
government has an obligation and duty to ensure that yields on CPF balances are commensurate with their long term nature. Otherwise it is inequitable and no different from the commercial banks paying you low interest rates on your savings and FD and using the funds to lend out or invest for much higher returns. But then you are not compelled to put your money with the commercial banks.
Sure it may be argued that by centrally investing the funds on behalf of members government is assuming investment risk and may have to top up poor investment returns in some years but bear in mind that CPF members have no choice but leave their money with the CPF ( other than if they were to withdraw them for investments chosen by themselves or for housing etc ). If government is not prepared to do that then it should scrap the CPF scheme altogether and allow individuals to do their own retirement planning and saving or permit the employers to set up privately managed pension schemes. Personally I think the former is not advisable for the earlier reason I mentioned which is that few Singaporeans are competent enough to DIY. But the latter suggestion is certainly workable.The returns on some of these schemes which made sense and were permitted when CPF contributions rates were much lower have generated returns of 8 – 10 % p.a, Those fortunate enough to have participated in such schemes established by the MNCs ( Shell, Esso, Castrol, Nestle and even SIA ) can confirm this.
The original purpose for establishing the CPF is laudable – to help the people to save for retirement. Unfortunately over the years it has strayed from this noble objective as it was expedient to use the CPF to “facilitate and execute” certain desired initiatives on government’s part e.g mass home ownership, pacification of possible outcry on reformation of public transport ownership, re-invigorating a moribund stock market, co-payment of medical costs. The freeing up of CPF funds for purchase of public and later private housing and even commercial properties and to keep interest rates on CPF balances linked to HDB mortgage loans probably fueled to the home upgrading frenzy and contributed to overheated property markets in the past. In effect part of the CPF membership ( those who did not take up HDB loans or only amounts below their permitted limits ) were subsidising those who borrowed to the hilt from the HDB. This was a policy blunder which unravelled only in later years when the property market crsahed and many were saddled with negative net worth . Sadly, this “tinkering” with the CPF continues. It has in more recent years been used as a convenient , easy and blunt tool to “decrease” business costs. As far as I know no other government in the world running state social security schemes has done anything similar. If I am wrong, my apologies…
So to summarise, it is not question whether government should be paternalistic or otherwise. It is a problem that they have allowed to fester and which they should solve. ..
about 5 years ago
Hi Aaron:
I don’t want to pretend that I have the solution to CPF, but I have identified (or rather, others smarter than me have already identified) some of the problems inherent in the CPF.
I’ve attempted to summarize some of these points on my blog, and tried to put my own spin on things.
I think that Singaporeans should be free to make their own investment decisions, but be provided with the appropriate tools to do so.
The high cost investment options (the last time I looked, unit trusts have ~2.0% sales loads, and more than 2% annual expense ratios – even the CPF ones!) available to the average CPF investor do not help. They are paying a 2.0% annual tax on their entire portfolio to these financial firms!
I speak from the point of view of someone who has access to cheap mutual funds, and is quite frustrated at the lack of these options in Singapore.
I agree with you that Singaporeans need to be better educated (and not by the financial industry – that would be like asking the wolf to guard the sheep!) about financial literacy.
I am strongly against any thoughts of turning the CPF into a pension plan, where the money is invested on behalf of the members. I am for individual accounts where members contribute and invest their own money. They just need better options, and better knowledge of how to do so. The figures released by the CPF board indicate that Singaporeans who do invest their CPF have done badly.
The use of CPF as a macro-economic tool (e.g., changing the employer contribution rate as an means to stimulate the economy), is also at odds with the stated, primary aim of the CPF, which is to ostensibly help Singaporeans save for retirement.
Also doesn’t help that 75% of CPF savings go towards housing, which doesn’t leave much left for retirement savings. This is also likely to be higher for the average Singaporean, since the average figures for more affluent Singaporeans will tend to skew lower.
Singaporeans just have to be educated on what exactly they need to retire, and make their choices accordingly.
Its very clear that we are not saving enough. For example:
Say you need $12,000 of income per year, during your retirement (of say 30-40 years). According to most financial planners, you would need 25x that amount in investment assets to ensure that you won’t run out of money before you die. (and this is assuming 4% real rate of return). This works out to be about $300,000.
According to figures released by the CPF board in 2000, only 1% of CPF contributors above 55 years of age have balances above that.
The only way to reach this level of savings, IMHO, is the magic of compound interest, along with sufficient returns on investment. Otherwise its dog-food for you and me!
about 5 years ago
Kilroy,
You brought out a number of interesting points. With regards to points (a), (b) and (c), I ackonwledge that they are all valid. From an economics standpoint, the government should be giving out rates that commensurate with long term returns. But my point wasn’t really about that. Nor is it about the government taking investment risks off the shoulders of ordinary Singaporeans.
As we all know, we hold elections in the short term, not long term. CPF is a highly political issue. I think most Singaporeans are rather risk averse, so when the economy goes through a cyclical bad patch, people will panic if the CPF returns start dipping badly. You can imagine the political consequences if elections happen to fall in such a period. And I think no political party, PAP or otherwise will want to run this risk. You and I can understand the cyclical nature of the economy, but I think we are in the minority here.
This is why I think the government rather play another role, or at the most, declare special bonus returns when times are good.
about 5 years ago
Wandering Shark,
Yes, the problem with the CPF is that most of the money gets tied up in housing loans. Add in the fact that there’s a $4,500 cap makes me more doubtful of CPF’s purpose of providing for retirement (well, I mean providing something more than “dog food” :p ).
For a more in-depth discussion of CPF, I recommend an excellent piece at Singapore Angle by The Void Deck for your perusal if you are interested.
http://www.singaporeangle.com/2007/01/cpf_and_the_middle_class_crunc.html
about 5 years ago
Aaron
You are spot on in that for political reasons government prefers not to take the investment risk where the CPF is concerned. But is it not already taking similarly “large’ risks through investments by Temasek and GIC. These are the peoples’ money, it is not the party’s. I am disappointed that no real answers have been provided to questions as to whether there has been proper due diligence carried before such big “bets” were made. Mere assertion that this has been done is not enough. But not to digress, I think government has a fiduciary duty to ensure that appropriate returns are rendered on funds that they have mandated should be under their custody. This has not been the case. This is possible only if the CPF monies are more actively and centrally managed. It is naive to think that this can be universally achieved by the individual CPF member with more investor education etc. Capping transaction fees on CPF authorised funds amounts to just applying bandaid to the problem
about 5 years ago
kilroy,
People don’t really see that it’s their monies when Temasek and GIC invest. In a sense, the source of the money is from the people, but it has become the government’s monies after the process of taxation. Nobody can really claim that they own $XXX of Temasek and GIC. However, people more or less know exactly how much money is there in their CPF. This is why the situation is so much more sticky politically.
Now I would like to return to the idea of duty. Is it the state’s duty to ensure a high return on CPF? The state can very well not have CPF, but will people not clamour to ask the government for help when they mismanage their own money? If that’s possible, I think the government rather not intervene. It cost resources to intervene as well. Then if the government become too paternalistic and actively invests CPF monies and chalk up a loss in some years, people are going to cry for the government’s head. It’s really like a rock and a hard place to me.
Any suggestions?
about 5 years ago
All I am saying is that since the state has made CPF contributions mandatory and has also ( for the minimum sum account ) required that it not be withdrawn until the member reaches 62, it has a fiduciary duty to ensure that the funds are invested commensurate with their long term nature and accordingly pay long term returns on these funds. Otherwise it should not impose all these restrictions…
Note that because the funds cannot be withdrawn for a long period, the returns can be smoothened. This is what traditional pension ( and even insurance endowment) funds do . They do not “credit” the full return each year to a member’s account especially in super bull years.
about 5 years ago
Aaron,
on a CPF related but unrelated to issue at hand note…what are ur thoughts on the DPS scheme?
about 5 years ago
Aaron,
The KTM agrees with you that the MP is talking nonsense. The State shouldn’t be doing anything that is not its core business. It’s already trying to do too much in too many things that it has no business in doing (and outsourcing stuff it should actually keep
).
To achieve 8 to 10% returns, it involves risk. It is unfair for the Government to impose this risk on all citizens. Neither does it makes any sense for the Government to under-write those risks. Huh??
At present, people can already invest their CPF monies in financial instruments, so the present system already works. The KTM has achieved 8% returns on some investments (but also lost money on others … if so easy to make money, KTM would be full time investor and not KTM lah!).
If people want to argue that the Government should undertake to under-write the risks, then an easier way to do it is just to give more handouts. Underwriting high interest rates for CPF is absolutely regressive and “rewards” the rich people will lots of CPF more than the poor.
If the KTM has his way, he’s just give to the poor when they run out of money and cut to the chase. Why waste time running around in circles over the CPF? Most people who suggest tweaking the CPF have no idea what they are saying one.
The KTM has been busy, but overall, it seems that the quality of the Budget Debate is quite poor andseems like most MPs dunno jack about what they are saying and are only saying things to look good.
about 5 years ago
Hi KTM,
Perhaps you are right. The rich will only get richer at a faster rate if there’s a high percentage of returns because compounding an already large sum of money increases the compounding effect dramatically. The poorer folks actually still lose out even with a high percentage of return because their ability to accumulate money in their CPF is much lesser.
about 5 years ago
I think the issue is not about democratising wealth. So the fact that those with larger CPF balances will gain more simply on account of their larger balances is totally irrelevant to my argument that there should not be undue “enrichment” of funds “trapped” under legislation in government coffers and when the government is merely the custodian…
Agreed that those with large CPF balances do not really need help in managing their retirement savings in the CPF but to deny those who do need such help simply because it will at the same time benefit those with larger CPF balances is not morally acceptable. Or can government think of other ways to help them short of handouts every 5 timely year…
about 5 years ago
kilroy,
The funds are not “trapped”. People can take out their CPF to invest in financial instruments, or buy property (which may also be an investment preferred by some). Why can’t Singaporeans understand this simple fact?
Let’s talk a bit about the financial/economics aspects of this whole deal. Fact 1: there is a cost/value to risk. There is a whole industry that is all about risk — that’s the insurance industry.
Fact 2: to support interest rates of 8 to 10% involves risk. If the Govt is to promise 8 to 10% interest on the CPF, Govt is bearing the risk on behalf of the people — this involves some form of premiums.
Fact 3: for the people with more CPF money, the Govt will be “paying” more premium on their behalf.
Fundamentally, the whole scheme will boil down to a redistribution of wealth with the Govt bearing the risk for people and the rich getting more. The KTM is of the opinion that if we want to redistribute wealth, then the State should find a more regressive approach. Simple enough?
One possibility is for the Govt to “persuade” DBS or something to set up some pension fund that targets 8 to 10% returns so that people got something to buy…. but those people better know what they are doing.
Given the recent economic boom, any monkey can make money. But the economy works in cycles and we’re likely headed for another downturn in the not so far away future….
Moral of the story: greedy fellas should bear their own risk.
about 5 years ago
KTM
I am referring to the Minimum Sum scheme….that is trapped for sure!
about 5 years ago
Forever? You wish. It will run out at 82. You better be rich or pray you die before 82. See http://kwayteowman.blogspot.com/2007/01/on-retirement-and-cpf-minimum-sum.html.
about 5 years ago
Hi KTM
Today I got nothing to say, coz I sleepy, so I give you a fun fact instead.
Malaysia has a similiar, less complicated scheme called the EPF. It used to have an interest rate of 8+ percent. However, the latest rate is 6.16 percent, which is much higher than the CPF. Opposition politician Lim Kit Siang made a lot of noise in 2003 when the dividend was dropped to 4.25%, lowest in 40 years!
http://www.limkitsiang.com/archive/2003/apr03/lks2272.htm
about 5 years ago
Harlo RSE,
Thanks for sharing.
When you are less sleepy, perhaps you can explain what you think your “fact” tells us? Does it mean that the Malaysian Government is not bearing the risk on behalf of the Malaysians? If the Malaysians do it, we should too? Because?
Does it mean that there is a flaw in the KTM’s logic? 
Aiyah, doesn’t really matter whether it’s none or all of the above. The point here is to have a good discussion.
about 5 years ago
KTM
I think we are not really discussing the same issue. You are rite in that it is not the government’s role to underwrite investment risk for individuals. My point is that since government has locked in a certain portion of the CPF for as long as 41 years ( assuming a member starts working at 21 ) it owes a fiduciary duty to ensure that the yield is commensurate with this long term fund. Do note that the current Minimum Sum is no small amount for the average CPF member…and every 1% in interest helps especially componded over 41 years!
about 5 years ago
kilroy,
I think you need to get your facts right. The Minimum Sum is not locked away at the start. It is locked away only at 55. From 21 to 55, people can invest their CPF money as they see fit (subject to some rules). Once the Minimum Sum gets locked away at 55, it is not 2.5% interest, it yields 4% interest.
If you are arguing that 4% is too low, you might have a case…. but, but, but, people can choose to buy an annuity with a bank or insurance company with the Minimum Sum instead of accepting the 4% interest offered by the CPF Board. As it turns out, banks and insurance companies are currently offering a worse than 4% rate for annuities, so logically, that’s not quite an option either. To ask the Government to offer more than 4% is again asking for the State to cough out money since the commercial entities cannot even match 4%.
The KTM also knows that every 1% interest helps. The KTM is not arguing against you because you really don’t have a real argument other than “give me more” to begin with. The KTM is arguing that if we want to help our citizens in their retirement, more resources should be given to the poor and as such, doing so by artificially increasing the CPF interest rate is not the way to go. If you want to argue that the rich should getting more, be my guest.
about 5 years ago
the malaysian cpf acct what currency?
about 5 years ago
Before a member can use his CPF funds for investment he has first to set aside cash in in his CPF account to meet the full Minimum Sum ( currently $94600 but to be raised gradually to $120000 in 2003 $ by 2013 ). The target is lowered by half if he can pledge a property to the CPF for half the amount. This in effect enables him to withdraw the CPF funds to buy property once he has attained a cash portion equivalent to half of the target . However, the Minimum Sum is not freely investible even when the target is achieved. It can be used only to buy an annuity or be placed as a deposit with a local bank. During the period when it is being built up, and because of the severe restrictions on its deployment once the full Minimum Sum has been accumulated, I consider it is as good as being locked in. If you still do not agree, its fine… I have no desire to argue this further. .
You said that all I am arguing is to “give us more” …yup thats correct! Our long term funds in the CPF are not giving us the higher yields that ought be earned for funds of this nature. It is a request for equitable treatment not a beg for handouts or a thoughtless and avaricious demand…
about 5 years ago
Before a member can use his CPF funds for investment he has first to set aside cash in in his CPF account to meet the full Minimum Sum ( currently $94600 but to be raised gradually to $120000 in 2003 $ by 2013 ). The target is lowered by half if he can pledge a property to the CPF for half the amount. This in effect enables him to withdraw the CPF funds to buy property once he has attained a cash portion equivalent to half of the target . However, the Minimum Sum is not freely investible even when the target is achieved. It can be used only to buy an annuity or be placed as a deposit with a local bank. During the period when it is being built up, and because of the severe restrictions on its deployment once the full Minimum Sum has been accumulated, I consider it is as good as being locked in. If you still do not agree, its fine… I have no desire to argue this further. .
You said that all I am arguing is to “give us more” …yup thats correct! Our long term funds in the CPF are not giving us the higher yields that ought be earned for funds of this nature. It is a request for equitable treatment not a beg for handouts or a thoughtless and avaricious demand…
about 5 months ago
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