Wednesday, May 21, 2014

CPF Is Broke

The hot topic of the day is Central Provident Fund (CPF). When the CPF was first started in 1955, both employees and employers had to contribute 5%. Over the years, the rate was gradually increased until it reached 25% in 1985 for both parties. Surely one of the highest compulsory savings rates ever - 50 cents in the kitty for every $1 earned -  ensuring a secure nest egg for a comfortable retirement. It's turning out to be a rotten egg, all sulphurous and foul smelling.

Member of parliament (MP) Inderjit Singh inadvertently touched on one source of the stench, "If we use less for housing, we will have more for retirement". Investing CPF monies in property makes sense only if the asset enhancement model works. But like all investment plans - including CPF Investment Scheme–Ordinary Account (CPFIS-OA) and Special Account (CPFIS-SA) funds going into insurance, unit trusts, exchange traded funds (ETFs), bonds and treasury bills, shares and gold - the game is all about risk versus reward. No one guarantees the pot of gold will still be there after the upturn and downturn cycles. You need more than a pinch of salt to swallow the property agent's snake oil, that rentals will always cover the cost of the bank loan.

Civil servants at the CPF board who were not comfortable stashing the money in biscuit tins or under the matresses knew they had to generate at least interest income to pay out to the citizens when it was time to collect, which used to be age 55. Never underestimate the power of the compounding rate.

MP (Chua Chu Kang GRC) Zaqy Mohamad is proposing an investment-linked plan managed by the CPF board to pool the investments from different members and provide higher returns. But the Monetary Authority of Singapore (MAS) is already doling out the CPF funds to investment entities through the mechanism of Singapore Government Securities (SGS). The difference is the quality of returns. Our northern neighbour's Employees' Provident Fund (EPF) declares an annual dividend on funds on deposit which has varied over time, depending on investment results. Recent numbers are 5.90% (2010), 6.00% (2011), 6.15% (2012), 6.35% (2013).

Which brings to mind Chris Balding's observation that, in our topsy-turvy CPF world, risks are socialized while benefits are privatized. Ergo, if the investments do well, the government gets to keep everything above the 2.5-4% CPF interest payment level; if the investments do poorly - as in the Bank of America buy high sell low debacle - tax payers will have to work longer years to guarantee the payment to CPF holders. No wonder the citizenry is upset.


  1. Where is the right sense of proportion, one may ask ? They keep increasing the minimum sum to keep up with inflation but on the hand, they keep all those obscene profits to themselves and in this manner robbed each CPF member to the tune of an average of S$300,000 per lifetime contribution as alleged by Professor Balding.

    I would have thought in the right scale of things, the appointed lawyers should have sue this Professor straight away instead of this young courageous Singaporean whose mistake was to speak out loud for the average Singaporean.

    I am ashamed of myself that I am a coward compared to Roy or even those 17-yr olds who dared to fuck PAP. But who is the greater coward that hides behind their own man-made laws for defamation ?

  2. Haha... The coward only knows how to sue. Like father, like son. But the son not smart. He is being used by his father to cover his ass. If son not PM, father would already be in jail for all the bad.things he done.

    1. You're spot on.
      With the way things are going the son could end up in jail instead and spend the rest of his life cursing his old man or take refuge with Thaksin...a befitting ending indeed !

    2. Can it be said that it is the Father that gives the Son the audacity for whatever deeds he(son) had done and however he behaves.
      The Old Man is like a garbage bag, he will take all the rubbish into the incinerator and free his offsprings of all the garbage and dirt.
      How then can anything be traced?


    4. @anon 5.27pm
      Logical but not a problem if the PAP becomes minority.
      Treat the Old Man like a garbage bag and dump the offsprings along with it into the incinerator....surest way to end all animosity between PAP and citizens.

  3. How had the old fart, his son and daughter-in-law made the CPF broke and can still draw $$$. They are not transparent and they are not accountable to anyone.
    Anyone, except the President, who question them risk being bankrupted by our system of Justice.

    1. The only president who questioned them was Ong Teng Cheong, and they denied him a presidential funeral.

    2. That is because the others are beholden to the famiLee.

    3. Ong did not get an answer either. So father, son, and wife are not accountable to anyone until PAP is thrown out.

  4. If you do your own checking, Singstat last report for Singapore inflation measured by CPI between Mar 2013 and Mar 2014 was 1.2% vs the nearly 5% rise in minimum sum from $148k to $155k for this year. And inflation is far lower than the nearly 9% increase in Medisave from $40k to $43k.

    Those curious can go back every year and check and verify my assertion that the minimum sum increase is always higher than the inflation. Of course they have good reasons, all the smart admin oppicers goal-seek number crunching scholars eg. inflation for me But you know the ultimate reason, don't you? Spread the facts, spread it wide, argue based on facts, don't be emotional, they can only be defeated by sheer hard truths and numbers.

    (here see for yourself on latest quarterly CPI report, the figure is right on top of page 3 of this document::

  5. This Capital-Punishing-Fund is not only broke, is broken.

    PM Lee = Our funds are accountable to the government. I don't believe transparency is eveything.

    LKY = The PAP is the government. The government is PAP.

    There, you have it.

  6. Why not close down GIC, Temasek and CPF.
    And invest the money in Berkshire Hathaway shares?
    We get Warren Buffet as the investment manager for free.

    Instead of you-know-who .... whose investment skill is well known. And she sure does not work for free.

  7. Mr Speaker, I think fundamental principles are being breached.

    The fundamental principle is this. The CPF is really a fixed deposit or a loan to Government, which can be redeemed at a fixed date when the contributor is 55 years old. If I were to put this sum of money in a commercial bank and, on the due date I go to the bank to withdraw the money, the manager says, “I am sorry, Dr Toh, you will have to come next year”, there will be a run on the bank!

    - Dr Toh Chin Chye

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