Oct 5th, 2007
Compulsory annuities give the rich spare change in twilight years?
Email This Post
Print This Post
I wasn’t expecting to comment further on my main bugbear with the CPF changes but a letter published in Today Online changed that. It was a letter by Dr Vincent Chia who pointed out some statistics that the government should take note of.
I have not had the time to verify whether the information cited by Chia was true but it is certainly plausible that it is the rich who can expect to live longer compared to the poor. Overall life expectancy might be increasing to 85 and beyond but who are the ones living to such ripe old age? According to Chia’s letter, epidemiological data from America and Britain has shown privileged groups enjoy longer lifespan.
Chia even cites a local study which shows that in 1999, “43.5 per cent of the old-old (defined as aged 85 years and above) live in HDB four-room or larger flats. In comparison, 29.1 per cent of old-old Singaporeans live in HDB three-room flats, while the remaining 11 per cent live in HDB one- or two-room flats”. The figures add up to 83.6% and the missing percentages are probably those who live in private housing (Census 2000 housing data put the percentage of Singaporeans living in private housing to be around 12%).
It is possible that in future, increasing numbers of those age 85 and above will come from upper middle-class and above, and these folks have the ability (in theory) to take care of their themselves. These are the folks who are likely to live longer as well. So, it could be likely that the nice sounding “longevity insurance” could end up benefiting those who are more well-off.
Of course, this is not the main basis on my objection to the annuities issue (see earlier entry) but it is interesting food for thought that the rich (million dollar ministers, wealthy bankers, lawyers and doctors) are more likely to live long enough to enjoy an extra few hundred dollars of spare change every month while the poorer folks find themselves in a permanent resting spot in a columbarium. 
Loading ...
Mean-testing will be introduced to fix this. You don’t get a cent even when you are 85 if you are rich.
It is no surprise with rising medical cost, and the rich being able preventive medicine and the best doctors, what do we expect out of this.
Aaron Ng, do you have an email, at86 (disgruntled singaporean) sent me a few good research papers on CPF - I can forward to you if you’re interested. One of the main causes of insufficiency identified by many academics is the low return on minimum sum. It is a mystery to many why the govt doesn’t want to allow for higher returns on this instead it uses the money itself for higher returns. I still find this very hard to swallow.
You’re right on the compulsory nature of the annuity. NMP Siew point out that not only is it compulsory…once it is there the increment is also compulsory like the GST.
Lucky,
You can use the contact form on my blog to get in contact with me (click on the Contact Me link at the top of the page). I will respond to you and then you can forward me the articles. I don’t want to post my email publicly because of spam issues.
The compulsory nature of the annuities issues raises bigger question s. Is the CPF is an individual’s savings or the state’s money? If the money is the property of the individual, isn’t compulsory nature of annuities akin to a form of tax? And now that the government can “tax” people for longevity, does it signal the start of other “taxes” to come, such as compulsory heart disease and cancer “insurance”, since more and more people are having such diseases?
More food for thought.
sarek_home,
Means testing will raise an interesting problem. The poorer folks won’t support the scheme because they are unlikely to live to 85. The richer folks will support the scheme because they live to 85 but are excluded because of means testing. So who is left to support the scheme?
Lucky,
It is at82 la. Not at86
Aaron,
Yup you are right. The scheme doesn’t work at all. Mr Low TK proposal for a longevity fund for poor S’porean funded via the budget is the best replacement scheme for the lousy annuity scheme.
The upper middle and upper class get to eat well and receive better healthcare so I should assume they would have a greater chance of living to ripe old age.
Expecting the PAP to help the “poor”?
Come on, you are talking about a party that has a philosophical attitude that being poor is your fault and by extension don’t deserved help.
I don’t want to sound big headed but I have always thought the CPF as it was and still is being implemented would ultimately have the unintended consequences of benefiting or not have any impact on the well off. Under PAP this is probably not a bad thing, if not, an intended consequence.
This is not an argument against compulsory annuities. What Chia said is not new, researchers know this for a long time already. Chia didn’t say compulsory annuities was necessarily bad because of this. One simple way is to tweak the amount of premium paid according to income - the rich pay a higher premium since they are more likely to receive the payout. The fact that different people have actuarially different odds of getting a payout is not an argument against insurance.
Er Bart, how would increasing the premium of, in your words, the “rich” help when those with actuarial odds that are not favourable to benefit from a payout? I mean if Mr Poor is to die before the payout point, the fact that Mr Rich pays more ain’t going to benefit Mr Poor anyway.
How do you draw the line between the rich and the poor? What about the well off (i.e. neither rich nor poor)? Who is going to be responsible for drawing that line, the CPF, the annuity provider, social scientists? Can you imagine the administrative nightmare that would be?
For that matter if actuarial odds are the determinant of an individual’s potential ability to benefit from a draw out, then should it not be the case of discriminating by actuarial odds than someone’s wealth?
So the bigger question is whether the annuity in the form as it is proposed is indeed able to resolve the “ageing time bomb” question. Is it going to cause more problem than it solve? Is this proposed scheme likely to equitable, in particular, helpful to the poorer members of the society.
As I have eluded to in my earlier reply here, I have my doubt that the PAP administration care about helping the poor given its currently ideology. What I suspect is the PAP real motive is to avoid drawing from the state coffer to make up for any short fall, which could easily be covered given the reported, if it could be believe, surpluses or even purely from the economic growth cycle.
Thus all these debates about whether compulsory annuities is nothing more than a smoke screen for some wider PAP agenda that we are no privy to or can only guess from.
Hi Tan,
No, it is quite simple actually. If the rich pay their acturially fair premium, it means that the poor will pay a lower premium for the longevity insurance, at a rate that reflects their odds of getting the payout. The point of insurance is not that the individual is better off only when he gets the payout as I have noted in my previous post, it is about removing risk. Differential premium is easily doable. Note that in income taxation, the tax rates are levied at a progressive manner anyway.
The test is not whether PAP cares about the poor or not. It is about whether the policy makes the people, including the poor, better off.
Bart, you are talking about a compulsory schema. If I was voluntarily buying my own insurgence, I can assess my annuity risk and then decide if it is worthwhile. With a compulsory scheme, I have no choice to opt out, then what is the point of my paying into a scheme that I have very low chance of benefiting. So basically, lower premium don’t help.
Hi Bart,
What you say isn’t wrong. But that is a highly inefficient approach because of following reasons.
1) Rich are more likely to manage their $ better, it is very likely they will be able to generate higher returns with their $ compare the the annuity scheme. Since the rich are going to outlive the poor why make them pay for something that lower their welfare?
2) Isn’t it better to tax the rich via higher luxury tax, income tax or even casino tax to pay for the pension of the poor? Given that it is only $300 per month I don’t see why this cannot be done!
at82, You are precisely right. The annuity scheme is so inefficient and, in my opinion, it is one of those typical PAP one size-fits-all scheme that serve no one.
Like you said the rich will be able to manage on their own that the scheme is nothing more than an irritant, unless the premium is raised to an unbearable level. Whereas the well-off (neither rich nor poor) will find such a scheme to be an opportunity costs — i.e. money that they may be able to get better returns or use for something more worthwhile. As for the poor, it could be money that will be needed to possibly survive.
(a) If it was the intent was wealth distribution, then why don’t just say to the population: we are going to take the CPF of the rich and possible well off and just give it to the poor. Simply call it a tax or as the Brits call it — National Insurance. Quite clearly, the PAP can’t do that because after all this years of telling not to emulate the “bankrupt” western pension system, that would tantamount to admitting that the whole CPF scheme was a shamble.
(b) The so call rich that you find in Singapore are either not Singaporean or, if they were, would be terribly upset if Taxes were raised and leave the country. So mucking around the CPF avoids having to expand the tax base.
PS: I once did an empirical research in Singapore on the rich, some of my data were based on my British (Ang Mor) were sent to work in Singapore, and they told me that it many of the rich based on Singapore do not contribute much to CPF. For example, many rich are either self employed or owner of businesses or overseas tax exile, who make their money abroad, who do not contribute to CPF. If my research is correct, than raising premiums on annuity won’t expand the annuity pool anyway.
Bart,
I do recognise that this is not an argument against annuities. It’s just a possible side effect which can make people really angry. And politics is not just economics, no? If everyone can be “rational” (whatever that means), politics have no place in society.
As for making the rich pay extra premium, I think at82 and Tan Ah Kow has already pointed out all that I wanted to say. I just want to add that if the government was willing to raise premiums on annuities for the rich, then why did the government not lower GST and increase income tax but rather, they did things the other way round! Your suggestion of making the rich pay extra seems to operate on the logic of progressive taxation. Sure, it might not be much money to the rich folks but who likes to be discriminated because they are rich?
Hi All,
Lets briefly talk about GST, the poor did get a higher offset package I believe. And workfare was also for them. But this is another issue, so let’s not muddy it with annuities.
You guys raised valid points, one policy or another, there are always tradeoffs. But the principle of risk-sharing is highly sound. Many academics have criticised the CPF system for years because of its lack of risk-sharing element. But let’s wait till the details are out, what the premiums are like, what are the exempted groups etc (in 5 months’) before we engage in this topic again.
Aaron,
Kindly not tell me what reality is or is not (like you did in your previous post). And also not tell me about politics’ place in society. If you want to write about how people are angry, sure, why not. I can understand and do appreciate the need for these blogs.
But to pass off poor analysis as a reflection of political mood is shabby, poor excuse for badly considered posts.
Both of us are not politicians (unless you claim to be a one, in which case I would refrain from any further comment at this site). So let’s just debate on the merits of the case as it is presented to us. Try not to impress on me what politics is or is not.
Bart,
Thank you. Then please kindly not tell me what being intellectually consistent is (like you did in your previous post). As much as you don’t like ad hominem remarks, neither do I. It’s not the first time you’ve done that to me (and of course, others as well). As for your charge that I analyse poorly, all I can say is that it is very obvious to me that we are talking from two different perspectives but you insist on imposing the superiority of your perspective to demonise my opinion. I do not come from the perspective of an economist (and I’m sure there are economists who will disagree with you so maybe it’s not just a matter of background in economics). What I am really angry about is that you appear to ignore that you are informed by perhaps your education and life experience but you do not recognise that, insisting that the opinions of other people miss the point just because they have opinions resulting from their own education and life experiences. I can perfectly accept that people have bias but I do not like an attempt to conceal the bias in the name of “objective” debate. Apologies if I have a strong humanities bias in making this argument but that’s a significant part of my background.
Some people spin a lot of numbers to make decisions. When using numbers, they only care to make sure that they will get winning numbers. It is exactly this mindset that giving $290 is enough for our older folks, after doing their sums. According to our good government, profit and welfare do not mix.
.
Numbers masked the real agendas behind our government policies. If you listen very carefully everyday, it is numbers that you hear.
.
Now, numbers can hurt you too.
Aaron,
I apologise if I have caused offence.
Bart,
Forgive me for saying this. When you make statements like:
You guys raised valid points, one policy or another, there are always tradeoffs. But the principle of risk-sharing is highly sound.
It sound kind of glib and the kind that brings the American phrase: dah!
It’s like saying, making sure that there is enough air for human to live is a sound principle.
Coming back to the issue of the annuity policy that is being proposed, and in my opinion already a done deal, the crux of the issue, in my opinion and others may disagree, is why go the annuity route? Is the annuity approach the only way out? Why aren’t other options put on the table?
Especially, when the bigger question of what is CPF for has not been clearly addressed. So details about premium rates are irrelevant at this point. Unlike many criticism of the CPF, my criticism of the CPF is not so much whether it is lack risk sharing or not. My criticism is that it has such a mismash role that it is hardly surprising that ended up in the state it is today. To me the annuity thing is another jumble mix into an already mismash pot.
As you can tell from my tone, I am no fan of the PAP but I am not against the notion of “intervening” or more accurately make policy changes. My peeve, is that the kind of policy changes seemed to lack carity.
On the issue of CPF, I repeat the question again, what is it for? A saving scheme? A pension scheme(1)? A wealth distribution macroeconomic instrument? A macroeconomic instrument for “national development” i.e. providing cheap source(2) of money to build infrastructure?
Only when this question is answered than can any rationale “economic” — i.e. appropriate policy instrument — argument be made. For example, if the CPF was a purely saving scheme, than it becomes clear that the role of the government ought to be to try to optimise on the return on investment or if not, may be not take on this role at all and leave it to the private sector (in the UK, you have this scheme call ISA, which basically, make saving worthwhile by not taxing). If it was a wealth distribution scheme, say intended to distribute from the rich to the poor (i.e. like those you find in Nordic countries) then make it so.
In the real world, any government will have to confront all these issues head on. But to me the problem with the way the PAP approach these is to rush through (i.e. which is often mistaken for being “efficient” government) policies and when unindended consequences occur rush through another, thus piling problems on top of the old one. The CPF being one and is now being to show signs of eruption.
(1) It is worth pointing out that there are two kinds of pension scheme operating in the UK (final salary scheme — in Barts’ phrase defined benefit) or annuity based penson scheme (in the UK these are essentially private pension scheme or in Barts’ phrase defined contribution). The most notable universal defined benefit schema in operation in the UK is the National Insurance scheme. In this case, the risk, to the government not individual, is being or rather should have been mitigated by transfer funding between younger and retiree generations. There are also non universal scheme operated by private companies but it is becoming rare. Private companies scheme is again based on future, loosely speaking, “profit” to meet current pension liabilities. Generally, an annuity based scheme is most suitable when dealt at an individual level because the payout terms can only optimally be assessed individually. If you try to impose it as a universal scheme, generally, speaking it would be a nightmare for the provider to assess risk — here I mean risk to the provider of the scheme not risk to the individual not getting his/her payout. So in such scenario, the provider would want to avoid paying out to the individual as much as possible.
Ok technically, CPF does not lead money to individual to buy flats. Rather it is HDB and, lately, private institutions. So it could be rightly argued that CPF is not a national development fund. But one could argue that it is indirectly a national development fund for if this money was not allowed for buying flats, it would not have been available for HDB. Especially when CPF don’t have to pay interest on money drawn to buy a flat, this means opportunity cost is passed from institution to the individual.
Tan,
Let’s stick to the thread in this post, which is whether the CAS scheme benefits the rich more - which I say would not be the case if the premiums are charged differently. For other issues, do write a post and direct me to it. I would be happy to drop some comments. But here, let’s stick with the current post. We cannot possibly discuss all of Singapore’s problems in one single entry.
Bart,
On your point:
Let’s stick to the thread in this post, which is whether the CAS scheme benefits the rich more
My simple answer is: for people with net worth of above $10 mil, which I define as rich, MY OPINION is CAS scheme would benefit the rich however much you vary premiums. That is because: this category of people do not contribute much to CPF because their basic pay will not be high but they could be getting high non taxable income source (i.e. CPF is calculated on a percentage of basic pay not Net Worth).
On your point:
But here, let’s stick with the current post. We cannot possibly discuss all of Singapore’s problems in one single entry.
Note in my last post, I did not proposed solving all of Singapore’s problem. My last post is directly relevant here: if the rationale behind the CAS scheme was not addressed then all this argument about premium is largely moot. Until and unless some clarity is established on the role of CPF, you would not be able to even begin working out the “economic” optimal benefit of the CAS.
Let me summarise my point again.
(a) If the CAS was meant to be a old age pension scheme than fine, the premium should be reflected on the basis of actuarial risk (i.e. from an provider perspective risk that it may have to payout and from an individual perspective risk that it may not payout). So should policy makers err on the side of provider or individual subscriber? If it is on the basis of actuarial risk then you will get a situation where a Mr Rich and a Mr Poor paying the same premium if both are assessed as having the same actuarial risk.
(b) If the CAS was also meant to include an element of wealth redistribution — i.e. hence the need to vary premium by wealth regardless of actuarial risks — this seemed as, at82 and others pointed out, highly inefficient way of doing so.
Everyone,
The CAS is easily understood but not easily accepted.
Just the other day over lunch, one friend commented that
he paid extra for insurance because one of his parents had heart
problems - why should he pay the same amount for annuties.
…and so on…many different cases…exceptions etc. I doubt the scheme when announced can address many of such issues.
Annuties have been offerred by insurance companies for a long time. The take up rate is very low and never popular. Now it is going to be made compulsory for everyone…it is hard to stomach the fact you’re forced to buy an insurance product you never would have bought volunteerily.
Given our income gap, it would have been justifiable to use taxes collected from corporations & richer individual to form a pool for those who get to 86. …or to fund it with returns from GIC, returns we were denied because they forced a lock up on our CPF money which would have been logical and just.
I’ve heard many speak about this annuities and very few supporting it. Many wonder if this is still a “govt for the people” or Singapore Inc a business that care more about its own fiscal position to the detriment of the people - even taking care of 85 year old, they are not willing to do.
deleted
Bart,
I apologise if I’ve sounded offensive as well too. I can see the logic behind many of your arguments but since I have been informed by a background different from yours, I’m not going to be easily persuaded. I think it works the same way for everyone else engaging in the discussion on this topic.
Ah Kow,
I concur with you that the underlying issue is the nature of CPF and if the nature of the CPF can be clarified once and for all, things will be alot easier. As the Chinese saying goes, if you cut grass and not rid its roots, when the spring breeze blows it grows again.
Unfortunately, I don’t think the government will want to clarify because it will open up Pandora’s box.
[...] & Annuities - Hear ye! Hear ye!: Compulsory annuities give the rich spare change in twilight years? - The Universe Within: Hijacking the Debate? - Yours Truly Singapore: Avoiding two Singapores, [...]
Aaron,
We are likely to get exasperated with each other when we try to bring the points across, like we have done in the past, and would likely to be so in the future. But no hard feelings, really.
Hi all,
I read the exchanges and I just want to share that whatever the govt wants to do with the CPF, citizens can talk till the cows come home, they just do it.
With Bush, it’s “Either you are with us, or you are with the terrorists.”
With PAP, its “Either you are with us, or you must be Stupid.”
I’ve been contributing since 1968. Rules kept changing and I now cannot even use my Medisave to pay for non chronic illnesses.
CPF is just a very good instrument for the Govt=PAP to use other people’s money. I resent the way they insult me with hifaluting doublespeak and denigrating post 55 (age not birth year) like me.
I read Health Correspondent Salma Khalik of ST today- “Upfront: Qualilty of life matters just as much as long life”. It’s indeed a breath of fresh air to see her write, “numbers do not lie” when a Mr Elendrus Osman showed Mah Bow Tan an Obituary Page that shows only 1 out of 32 recently deceased was above 85. A little different from the usual testicles carrying propaganda.
I want to share what I wrote recently in a blog. Here goes.
Thank you.
“Before I Die”
“To a question by opposition MP Low Thia Khiang (Hougang) on whether the Government of Singapore Investment Corporation (GIC) uses funds from the CPF funds to invest, Dr Ng said: “The answer is no.”
“Later he rose to add: “The relationship is not so simple”.
Oops, reminds one of engaging the gear before stepping on the clutch!
I watched a video of parliament and I saw hen denigrating a nation by mocking his own and other MP’s, violating and belittling the intelligence of Singaporeans, insulting uncles like me for being too dumb to handle our finances, saying, “having a fling here, having a fling there”. “Trysts”? I could not believe my ears and eyes! I cannot believe that an overpaid manpower servant that we pay with our taxes thinks so lowly of his fellow citizens! A case of “kurang ajar” or, in the hokien dialect which is pretty popular in parliament now, “kiam kah” or “boh kah xi!
If I remember well, when I started work as a teenager in 1968, I was told by my boss that 25% of my pay will go to CPF. He will contribute 25%. My boss said, “That’s law, don’t worry. Government guarantees you’ll get it all back when you retire at 55”.
On reaching my retirement goal/age of 55, I was shocked that they have moved the goalposts many times since I started work in 1968. My money wasn’t my money anymore. Yes, there’s Special, Medisave & Retirement Account - SMRA - But, “You can’t touch these!” Courtesy of MC Hammer?
To be fair, I received my yearly CPF statements of the changes, but who reads? I did not.
8 years ago I had a heart attack and ventricular fibrillation. I was jobless for 7 years. Lately, I was suspected of having other health challenges and in the past months, I had my share of visiting polyclinics and hospital.
Poor rich! I’m rich enough to have more than $28,000 sitting in my Medisave Account BUT I cannot use it for tests, treatments and medicines in hospitals and polyclinics. Yes, my bills from Changi General Hospital and Polyclinics had to be paid in cash from my pocket.
Oh, they tell me I can only use it for chronic illnesses only and/or if I spend more by visiting the hospital again for an artery ballooning/stent or a by-pass procedure. Or maybe another heart attack and ventricular fibrillation triggered by the agony and heartache of “My Money Sits in CPF but Cannot Use For Staying Alive!” ; “They Use my $$$, Make A Profit, Don’t Pay Back, Then Say I Stupid” & “Not Enough, Want Some More, Force Annuity On My Children!” or “Their Shameless Audacity Is Too Overbearing For Me”.
Since nobody wants to employ a sick geezer with a heart condition and other challenges, I am fortunate that a kind soul, having faith, love and trust in me, offered me a sum of money to start a little business last year. I registered a sole proprietorship in ACRA to start the little biz. Another heartache - I was informed that I could not register because I owed CPF Medisave which I did not pay when I was self-employed previously. Unless I pay up, I could not register my little business.
Imagine, I was broke and I still had to top up my Medisave (already loaded with >$28,000) if I wanted a license to make myself productive again. Simple: No Top Up, No License. This is what I know as Uniquely Singapore First World Standard of Whatever!
Another irony: After 7 years of joblessness (due to my health challenges) without paying tax, I made good enough to pay tax again for year ending 2006. I’ve done my part as a citizen, I even did NS in the army from 1969 to 1971. Yes, and my fair share of reservist training for many years too!
“Fend for myself”? I have. I even pledge myself as part of “a united people regardless of race language or religion to build a democratic society based on justice and equality so as to achieve happiness, prosperity & progress for our nation”. As a simple heartlander, I’ve done my tiny part. No worries, I may just jump in front of moving MRT before I bother my busy hardworking government with any problem. Maybe they need their precious time to fix the opposition and plan to buy more votes (or lose less votes?)
Question: What has the Government done for me? Zilch. . . and please don’t do anything. Whenever you do something for the good for the people, you cause me more pain than gain! Eg: PUB increase, 7% GST, Bus fares increase, you-name-it-it-increase, etc. Just don’t hurt my family further by forcing my children to pay for annuity which is another scam to leech from innocent citizens!
On second thought, you may want to upgrade my HDB flat with a “Go-And-Die-Chute” so that sick and old people like me who have outlived our usefulness to the regime can self-destruct by jumping into it. Health Mintster may like this idea as he wants me to die at home so that I will not be a bother or a burden to his money making hospitals. Meanwhile, I’ll enjoy the polyclinic’s webcam!
Based on the video, Mintsters just give us plenty of sarcasm and zero empathy. Just hen talking cock! Another wayang, another day’s work to justify obscene million dollar pay! The more they “strengthen the CPF”, the worse our lives become. To “CPF - Pow chiak, pow ho”, I wouldn’t say, “Mee Siam Mai Hum” but I’d say, “Chui kong, lampar song”.
Please, denigrate us no more and stop treating Singaporeans like idiots! Yes, delay no more! Let us live with dignity. Just because we are peace loving citizens does not mean that you can walk all over us. Trying your luck too far may just change a push to a shove. Yes, even peaceful monks can turn into citizen activists. They are at it in Myanmar!
Do what’s honourable - Simply explain the difference in returns of GIC, Temasek and my hard earned CPF. Come clean with transparency! I may not understand but Mr Ong Kian Min and Mr Siew Kum Hong may help me out.
My problems may have been less if the returns in my CPF had been on par or better than Malaysia’s EPF. Maybe part of the interest that could have been mine has ended up in the purchase of Manchester City Football Club. Am I a co-owner now?
Cheers,
Feed me to the Fish
Feed me to the Fish,
You posted this on my blog too!
Heart attack, joblessness, denigrated by ministers…? Oh I’m sure the heart attack part I’ll definitely get there is an unbroken history of that among the men in my family tree. I just hope the CAS will take into account that fact and give me a discount.
Don’t feel denigrated by our ministers when they show impatience with our ability to understand their wonderful scheme. Just look at Aaron, his a university tutor and he still can’t understand the benefits of annuities…only someone with Phd can figure it out.
Although Singaporeans were for many years the No. 1 workforce in the world with the highest savings rate in the world, it is necessary to work them harder, denigrate them, then make them expendable by importing hoards of foreign workers. The PAP teaches thrift & diligence then they teach humility followed by acceptance of your inevitable fate.
Manchester City is probably money put to good use…put a few bets on them maybe you’ll get some of your returns back.
How foolish of me to talk about numbers when there is a Phd commenter here? I do not even have any proper education. He is quite good with numbers, he works for our esteemed MTI ministry.
“I am a 3rd year Singaporean PhD student and part-time teacher at the London School of Economics (LSE). I am also an occasional research assistant at the Centre of Economic Performance, the research laboratory affiliated to the LSE. Professionally, I am a civil service economist at the Ministry of Trade and Industry in Singapore.
My research interest is in international trade, industrial location, and transitional economies in East Asia. My non-research interest is in industrial organisation.”
http://personal.lse.ac.uk/thia/
Spyer,
I don’t think you should slam Bart due to his background. I do think that he has a tendency to be very focused on an economics perspective, that’s all.
Dear Aaron,
Sorry if it comes across as slamming, I just wanted to focus on certain facts about the logic behind his comments. I just want to highlight the differences in opinion between the people on the ground and the ones that plan our economy at the national level.
We are having a lot of helicoptor visions. As you have said, we still need to be more human when planning our national policies.
We are always in the big picture but we are not able to see the big picture. I am focused on seeing the differences. Sometimes, people need to know what angle a person is coming from.
We note the differences.
Aaron et al,
For anyone wanting to have a go a formulating or creating investment funds, here is an relatively dummy’s guide. http://www.ssga.com/library/esps/Soverign_Wealth_Funds_Andre_Rozanov_4.27.07rev2CCRI1182371372.pdf
Even if you are not, it is a very good primer to learning about principles about (macroeconomic or “helicopter” vision) fund management. I think this will given insight into what CPF “should” have been and is meant by risk. Note: I am using “should” loosely here as it is important not to be carried away that there is indeed a right solution. What you can take away from that is the ability to understand what seemed to be missing when the CPF was devised.
For those who would like to learn about economic principles relating to real world situation, in other words, hear economists speak in normal English, best place to learn is the BBC. One good thing about the BBC is they have a policy of speak Normal English even for complex concepts. Unfortunately for Singapore listeners, it often relates to UK scenarios but the principles apply in many aspect to Singapore too. I’ll try to find the site and pass it on via this blog, if Aaron permits.
bart
This is one of the reasons why we should not have compulsory annuity
Who needs the $300 payout at 85 most? The rich or the poor? Assuming the hypothesis is correct (that there will be widening life expectancy between people withe different social economic status), Most poor would have died while the most of the rich and middleclass will be receiving the payout. Why should we do this kind of risk pooling when it doesn’t even help the people whom it was intended for? Even if they pay a lower premium using actuarial calculations they do not stand to benefit because they die before they can receive their payment. If you tell me they are lowering the payout l age that is another story altogether. Not only that, part of their CPF is locked away and so they are receiving lower monthly CPF withdrawals. Instead of helping, it is compounding a problem.
Then again why not use the workfare bonuses to buy the annuity instead. These are the people that might need the annuity and after all they cannot withdrawal the workfare bonus for use now.
If you really want to pool risk why not invest part of the CPF and all would benefit. Why buy bonds when we know that if we keep the a fund for 30year we are sure to gain. Correct me if I am wrong.
Then they want to payout $300 every month? One wonders how did they come out with $300 for subsistence. Would you have suggested $300 payout for an annuity plan 30 years down the road? The only reason I can think of is they worked this figure backwards from how much they need to lock in for GIC finacial commitment.
To me the government has lost their sight. They grab onto the reserve so tightly, they forgot it is meant for the citizen. They have went totally off balance. I agree that preserving the reserve is important and certain strategic companies gives us an edge and information that is very important. To sacrifice all for this power might not be worth it. I think we start looking for other ways to survive.
IF you are just giving us the economic perspective then you are too dissociated from the application of economics to improve our lives as singaporean. Risk pooling is good, so it is a good policy without considering why we need the annuity in the first place is not sound in my opinion.
Spyer,
I agree that a person’s background gives an important clue as to how that person’s arguments are informed. It does not necessarily invalidate his argument, though. If time permits, I’ll write my own perspective on knowledge and argumentation this week.
Ah Kow,
You’re welcome to pass me the site when you find it, along with any comments you might have. You can use the contact form on this blog. Just make sure you keep a copy of your text before you hit the send button in case of error. It’s always better to do a backup, just in case.
Hi Aaron
Please consider publicising the online petition to repeal S377A on your site. I know you are no fan of homophobia, and every effort to increase the number of signatures on the petition goes a long way.
Thanks
Jol
[...] on October 8th, 2007. Below is a very long comment posted in the comment section of Aaron’s blog “Hear ye! Hear ye! on 8 Oct 2007. I thought it might be of interest to others, so put it here for more readers to [...]
[...] some possible unintended consequences of compulsory annuities. Bart, one of the authors of the blog Perspective Unlimited, was attacked by another reader for his opinions in my last entry. The attack was not on [...]