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What we do with our CPF money is our business.

Tuesday, September 8, 2015


This blog post is in response to a comment by a reader: here.

The CPF is a topic I blog about frequently and regular readers would know why I consider it a cornerstone in my retirement adequacy strategy


I have also shared how we could essentially get the government to help part pay for our retirement, taking back our own money at age 55 in the process.

I have also shared how we could have the government pay for our medical insurance and, ultimately, our hospitalisation bills.

I think if people are willing to keep an open mind and meditate on what I have shared, my own experience included, they will see that what I have shared is viable.

I also have readers who wrote to me to say that after reading my blog, they put what I shared into practice and they are amazed by the results after just a couple of years.

Of course, the government might not tell you why the CPF is good the way AK has told the story. Maybe, they should.


Anyway, here is my reply to the reader:


Hi Victor,

I supposed you are responding to Mike's comment but I will kaypoh a bit.

I think if the government should return all CPF money to CPF members at age 55 and then tell them that they are on their own from then on, it is risky to trust that most CPF members will be prudent with money. Notice I did not say "all".

Actually, most people are not even interested in improving their knowledge in personal finance. 

This is the honest truth which is also why blogs like mine have so much lower traffic compared to blogs on some other topics such as lifestyle or humour, for examples.

Then, we would also have very cautious people who decide to simply lock up their money in fixed deposits. If interest rates remain relatively low, they will deplete their funds relatively quickly. They won't get an income for life in their old age.

What about giving people a choice whether to withdraw all their CPF money at age 55 or not? 

I think this is a popular suggestion but, once again, it goes back to the question on whether we can trust people to be prudent with money, specifically, those who choose to withdraw all their CPF savings.

Could it become a case of the prudent paying for the less prudent in some years down the line?

If the government allows CPF members to withdraw all our CPF savings at age 55 and then say that what we do with the money is our own business, the government is throwing caution to the winds.


For the sake of the fellow Singaporeans who are financially more prudent, I would rather that the government err on the side of caution.

Do you think the government should let all CPF members withdraw all their CPF savings at age 55?

Related posts:
1.
Get free medical insurance in Singapore?
2. If I had done this, I'd have hit the min sum too.
3. How to upsize $100K to $225K in 20 years?
4. CPF: A simple case of so near and yet so far?
5. An annuity proposal: A Case Study.
(Yes, CPF Life is an annuity too.)

"What? You want satisfaction? Well, then, why stop at taking back our own money? Isn't it more satisfying to take the government's money (legally)?" From:
A lot of money in my CPF-SA...

41 comments:

jason said...

If govt allows the option of giving ALL the CPF monies back to them at 55, its really asking for trouble - even the most steadfast/prudent individual would be tempted and possibly make not so prudent decisions at that point in time. It will work best on case by case basis - but what can make the exception is yet another issue........better to just slap it on everyone that only a certain percentage is allowed........

victorlsl1 said...

thank you for your kind reply. guess there will be many opinions out there

AK71 said...

Hi Jason,

I am going to go one rung higher in my comment here.

From an investor's POV and I am speaking for myself here, it always makes sense to have some investment grade bonds in our portfolio. For me, I think of it as something that helps to smooth out the performance of my investment portfolio. These bonds should be steady performers and I think of my money in the CPF as the bond component of my portfolio. A better investment grade bond, I cannot find. Well, not now, anyway.

However, I am not sure how many people think like me although I have a feeling that people who think like me might be form only a small minority.

AK71 said...

Hi Victor,

I am very sure there are many opinions available and as long as they are well thought out, I would like to hear them. We should all be interested. The CPF is our money, after all.

AK71 said...

I would like to say that the minimum sum and, later on, CPF Life's monthly payout based on this minimum sum might be barely enough for lower income Singaporeans. It is definitely not enough for higher income Singaporeans.

The minimum sum is logical for lower income Singaporeans. It is illogical for higher income Singaporeans. In fact, the rich should have a higher minimum sum than what is now required. This would be just.

Unfortunately, the CPF is designed more to help the lower income Singaporeans even though most of them don't know it and continue to be in the dark for whatever reason.

This is my response to this:
"To arbitrarily impose a minimum sum (currently is $148,000) across the board for all Singaporeans is illogical and unjust. Those earning $1,000 to those earning more than $10,000 also subject to the same minimum sum simply doesn’t make sense at all."

Sometimes, people make bad financial decisions and those decisions have consequences. Don't blame it on the system.

AK71 said...


Vernise Tan:
I spoke to 2 colleagues who are traveling with me, they felt that CPF is their money and govt give only 2.5% is very little compare to the money govt male using our money in CPF the interest paid is too little.

ASSI AK:
I think the argument put forth by some parties that the government should share the higher returns made by GIC in good years is only half the story. What about the lean years when GIC doesn't do so well? Would CPF members be ready to get less than 2.5% in those years?

As investors, we know that there is a difference between bonds and equities. If we want to have greater returns during good years and are willing to accept lower returns during bad years, invest in equities. CPF members could use a portion of their CPF-OA savings to invest in equities.

People often mix things up and because most people are not investment savvy, they get even more mixed up because of what some parties are proposing.

1871e1fc-10c3-11e5-a794-7f9fad27c9b8 said...

this CPF thing is giving me headache :)

i would say wholesale changes r nt palatable to everyone,
so minor tweaks can/shld be accommodated.

Let me give u another pt of view.
suppose u r single income parent, paying house, hit the CPF AHWL,
but u still contribute to CPF leh... u wish u can get hold of that CPF.

or maybe the kid neber study hard, want to go overseas for education,
or local education but not within that list... or wanna do part-time study how?

or just wanna give the kid (going to marry young but wanna buy house but bo
lui for downpayment)

etc etc reasons u can think of. Or maybe like CSJ, wanna buy some ice cream
for his kids.

i m fairly sure they know 4% is higher than bank interest.
if they think financially, confirm "bao jiak" put in CPF, maybe they r
just not financially savvy enuff (or desperate leow) to think of other
means and they see CPF $ there, so maybe they want the $ to be returned.
i dun know.

one other pt (nt relevant) but i think i just anyhow ham tam...
PM Lee says 500M into CPF, me one of them, (I listen to AK mah, bad AK bad AK).
so we make gov pay $20M interest "extra" (dui bu dui). Assume per yr, for 5 yrs,
(until the next gov change this), thats 20M, 40M, 60M, 80M, 100M, ... 300M over
5 yrs, right? and this is catered to the "rich", i.e. pple get extra to tebak
into CPF lah... if no such scheme, would u have done it? I bet no... can
this 300M (over 5 yrs) to be used to help the poor... at times i wonder, r
we depriving the poor of some $? (that's y i scold AK first leow)

or even use this "interest" saved to ensure the poor (a definition maybe < 20% of
MS) can have their cake and eat it too? by this i mean, keep 40k in the CPF.
mthly payment, if pass on (b4 the age break even pt or whatever they call it),
give them the 40k - (whatever they have withdrawn). then their bequest would
be higher... although i dont know who is it going to help, but that will allay
some fears of never seeing their $.

(can borrow ur pot? borrow LSS's phrase : heng ah, i bo blog)

No need to publish lah, just my thot.

Solace said...

Hi AK,

I believe in our chit chat session which result in a guest blog, i have shared that by topping up S$7,000 into SA, the total return is = Tax saving (3.5% - 11.5%) + Interest (4%).

To me this return is not to be taken lightly. Having investing in equities for a few years, i definitely won't look down on this method of investing.

In fact if i take 7 % tax saving and 4 % interest to be a total return of 11%, isn't it like beating 10 years average return on STI index. I cannot guarantee that i can perform this well on my own year after year.

Plus it compounds automatically.... in equities investment, i have to think of my way to reinvest my dividends and capital gains for compounding to work.

AK71 said...

Hi tree,

I must publish because:

1. It is damn good comment. I enjoyed it a lot.

2. If I don't publish, I cannot see the whole comment. If you had a blog, you would know what I mean but heng ah, lu bo blog!

ROFL!!!

AK71 said...

Hi Solace,

Good stuff. I have shared this on my FB wall to:

1. Provide ASSI FB followers some food for thought.

2. Generate some discussion.

Thanks so much for always providing such thoughtful comments and guest blogs. :)

victorlsl1 said...

if you were the "CPF minister", what would u change? Should there be more flexibility? for example, I think if there is option for full withdrawal. there could be interviews or direct yearly disbursements within 10years for all the money? just thinking

gagmewithaspoon said...

Hi there, a personal story as to why i support the CPF. My friend has a sibling who has depression. Her parents have spend a lot of money supporting her, treating her, and giving in to her whims of moving out, going on holidays, going for alternative treatments (mediums, western, chinese, TCM), going for further studies (local and abroad) . A mother's love knows no boundaries. If not for the CPF, i am afraid that my friend's parents would have also given this depressed sibling all their retirements funds. It's no one's fault. its a sad tragedy but CPF helped this family and my friend, who is thankful that she is not saddled with providing in addition to help for her sister, her parent's retirement.

also, i think majority of singaporeans are not financially savvy, especially the older folks. my uncle nearly bought mini bonds back then, and he would have if he could have purchased with CPF. My discussions on online forums for mummies on stocks, investments usually have no responses, but discussions on branded bags usually have a very thorough discussions.

of course, i am only a drop in the ocean so my views could be completely biased. but just saying! i am for the CPF, just use it to our advantage.

i admit, the drawback of CPF is, the people who need money now the most, actually need the CPF monies the most. The people who don't need money, actually already don't need the CPF scheme. what can be done? more education on finances and money. that's why AK71 is doing us a big favour with his blog!

AK71 said...

Hi Victor,

Oooh. Hot potato. I wouldn't want to be the Minister in charge of the CPF. That would be either the Finance Minister or the Manpower Minister.

When the IPS Forum on the CPF happened last year (and I have a whole series of blog posts dedicated to the Forum; the link to the blog posts is found in the right side bar of my blog's full web version), DPM Tharman and Minister Tan Chuan Jin were the guests of honour.

There is one thing I would like to see and that is for the CPF Life monthly payout to be inflation adjusted on a yearly basis. How it could be achieved is something for someone else to work out. ;p

AK71 said...

Hi GMWAS,

Thank you so much for sharing the story with us. Much appreciated. :)

Yes, in fact when the "Return Our CPF" protest took place in Hong Lim Park, led by Roy and HHH, some of the reasons why people wanted their CPF savings back at age 55 were quite troubling. One of them wanted to give the money to his daughter to pursue a degree in Australia, for example. CPF money is meant to help fund our retirement, people must remember this.

I know that it is quite sad for some CPF members who were looking forward to a "windfall" at age 55 only to be denied the satisfaction but I would urge them to cool down and think why things are the way the are. Think if the changes are sensible and in their interest.

If these people don't have any savings and really need to withdraw their CPF savings at age 55, does it mean that they might have to continue working till age 65? Then, they would be able to get a more significant monthly payout monthly for life from CPF Life.

I am seriously concerned that there are so many misconceptions about the CPF. I am very concerned about how such misconceptions are being circulated online and offline. They don't help to educate. They help to stir negative emotions in people who are already feeling uneasy and suspicious.

I have seen some of these websites and, seriously, Chee Soon Juan et. al. cannot say that there is no freedom of speech in Singapore, for better or worse. -.-"

Farhat said...

Hi AK71,

What is important is that if the Government cannot give the money at 55 they should at least start the monthly retirement fund for people from 55 onwards and not from 65 which is the case now. At least that would make people more interested in putting money in CPF.

what do you all think?
Farhatullah

Mao Mao said...

Hi AK,

I hope you can spread awareness of Finance Minister Tharman Shanmugaratnam's rally speech at this YouTube link: https://www.youtube.com/watch?v=rHCWsCrYwO0

Please fast forward to 08:20 minutes, he talks sense about the dangers of opposition party's proposal of every child and elderly getting $300 payouts monthly.

AK71 said...

Hi Farhatullah,

We have to understand that CPF Life is an annuity that will pay us an income for life. From 55 to 65, the money in the RA will accumulate for 10 years which gives CPF Life the ability to provide a more meaningful monthly payout.

Based on the current minimum sum, this monthly payout is about $1,200 a month. I think you will agree that this is not a lot of money. If we were to withdraw small sums periodically before 65, when CPF Life kicks in at 65, the monthly payout must be smaller.

In my open letter to the PM last year in June, I asked that the possibility of allowing some CPF members to micro tap their CPF-RA from age 55 to 64 if they are really short of money. However, I also said that we must do this:

"Explain to them the consequences of micro-tapping over the longer term and try to find better and socially more responsible solutions to their problems so that they are resolved permanently."

If you are interested in the open letter, please see:
An(other) open letter to the Prime Minister.

AK71 said...

Hi MaoMao,

We are fortunate to have DPM Tharman as the Finance Minister. :)

Definitely, Reform Party's proposed $300 and $500 a month payouts to children and the elderly respectively have not been well thought out. I hope that people who were persuaded by this to vote for the Reform Party are in the minority.

Julian Chan said...

In life, there r things which u do and it is not entirely right to say "it's ur own business ". One good example is committing sucide is not ur own business, it is a chargeable offense.
There r things which u do and it will have an implication to others in society. People who say things like that r extremely inconsiderate to others living in this country. When cpf is allowed to be withdrawn without considering the life expectancy, it will mean that there is a chance that the govt will need to draw on additional public funds to help them if they become destitute... In order avoid such event, cpf withdrawal age is increased accordingly to life expectancy.... I do not see any thing wrong with what our govt is trying to do...

GK71 said...

Hi AK,

Just to add on to your comments on Vernise's points and Tan Jee Say's proposal of significantly higher interest rate for CPF OA during his national day rally, I really think it is a bad idea to increase the interest rate. Why do I say that? First, the profit made by GIC that is not given to the CPF owners is being used for public spending such as education and infrastructure construction. If the government do as what Tan Jee Say has suggested, they will need to raise tax to makeup for the loss in revenue to sustain the spending. It will therefore be a case of giving you with the right hand and taking back with the left. Worse still, the group of people who will benefit most from a higher CPF interest rate are the rich people who has a lot of money in CPF (such as yourself...) rather than the lower income group. Hence, this will create a bigger income divide in our society.

AK71 said...

Hi Julian,

I like the CPF. I like the idea of having CPF Life. I really appreciate the relatively high interest rates we are being paid by the government on our CPF savings.

I think that the government is being prudent. I also think that the government is encouraging us to be prudent. The government has done a pretty decent job in helping CPF members achieve retirement adequacy and if we take full advantage of this help, we would probably see greater benefits.

There is complaint about goal posts being shifted but I believe that if circumstances have changed and if initial measurements are no longer realistic, then, changes must be made to the system. The problem really is in the way the changes were made and communicated to the people. I think that could have been done better.

I only hope that the efforts to step up efforts to improve communication with CPF members will be more successful than not.

There will always be people who don't understand or refuse to understand. I hope that they will remain the minority and that their numbers will not grow further.

AK71 said...

Hi GK71,

I believe that many people don't understand that the CPF is a national self help institution. It is not a national welfare institution. I had a rather long exchange with a reader on my FB wall and I had to throw in the towel when he kept saying that the CPF is not helping the poor. He couldn't understand that the CPF is not about welfarism.

For lower income CPF members, the government is giving them help by paying out more interest on the first $60K in their CPF OA and SA accounts. From age 55, the first $30K will be paid an additional 1% in interest. The high income CPF members are prevented from disproportionately benefiting from the CPF because there is a cap to annual contributions. The rich are prevented from disproportionately benefiting from the CPF because once their SA hits the prevailing MS, no OA to SA transfers or MS Top Ups to the SA is allowed.

If people are still saying that the government is not trying to help lower income CPF members after learning this, they either have lower than normal intelligence or they are just unreasonable.

I have a simple answer to Tan Jee Say's proposal to have GIC share more of their earnings with CPF members. If the GIC were only managing money from the CPF, they would have had to be very conservative in their investments and probably would not make much higher returns. However, the GIC manages money from the government too. This is why they are able to take higher risks and generate higher returns. Even in years when GIC didn't do so well, CPF members were able to get 2.5% to 4% per annum.

To Tan Jee Say and others like him, if we don't understand the system, we should try to find out more first and not take pot shots.

GK71 said...

Sorry. For Tan Jee Say, what I meant was the proposal he made during his election rally, not national day rally.

AK71 said...

Lim Li Chin:
Dun try so hard . Either the system work for you or against you . Make the best out of it loh

Assi AK:
If people dun understand the system, they cannot make the system work for them. This is why I try and try to get more people to understand the system.

The system does not work against any CPF member. It is a self-help system. If people don't help the system, the system doesn't help them.

AK71 said...

Must understand why. Once understand why, then, won't be upset liao. People don't understand. When people explain to them, they choose not to understand. Then, they will just have to stay unhappy.

AK71 said...

Seow Joo Chuan:

I think people should understand that there is as much cpf can do. It is insufficient as the only source of income for retirement as it might been used heavily for housing or education. Another prob pple face is the low contribution thus insufficient fund when one reaches 55, unless there is a deliberate move of topping up with cash earlier on as suggested by AK.

Assi AK:

Yes, being sensible would demand that we look at the CPF as a cornerstone in our retirement adequacy strategy and not the entire foundation. Of course, for certain people, it could be more important than others.

Seow Joo Chuan:

Of cos the government could increase cpf int rate further, say 5% for Entire SA acct. That would certainly help alot but not sure if they are willing to do so... =p

Assi AK:

Haha.. I would like to get more interest income too but I wonder if it is sustainable. My guess is that is isn't.
Anyway, best to leave this to people like DPM Tharman. I am pretty happy with extra 1% on the first $60K now.

Christopher Tan:

It is pretty hard to give 5% p.a. for the entire SA. The annualised returns from GIC for the past 20 years based on SGD is 4.9% p.a.

1871e1fc-10c3-11e5-a794-7f9fad27c9b8 said...

orh... u publish... so i just add abit more, sori ah, i didnt noe i so long winded.
add to my prev idea. CPF is a financial decision. Apply financial rules, we get
rational outcome, apply emotion, confirm irrational outcome.

so assume "we" (*looks* @ AK) put 500M into SA, earn 4%, happy.
if we earn 4%, gov need to fork out $ to pay us interest. like i mentioned,
some may feel we deprive 20M (at least / yr) to help the poor.

pple want early withdrawal, cannot lah, gov cant raise enuff cash?

but if we step back, combine all 3, why nt do this?
1. pple A want the $ back, write your story
2. pple B(s) want to earn higher interest, read the story, buy the story
to support at maybe 500 or 1k / slice.
so effectively, B(s) will buy over "annuities" of A(s), the higher bequest
plan.

Its like insurance broker really... A(s) surrender it to B(s).

so keep all pple happy?

1. those want early withdrawal, can/may get their $ back.
this really depends on the collective wisdom of the public.
Like the case, invest in child's overseas education, maybe smart if the child
can earn even more leh?

2. those want to invest, they get >4% (shld be since early withdrawal folks shld
be RA or put a condition to withdraw SA for those below 55).
3. those who feel pple B(s) who deprive poor of budget, now gov dont need to pay
interest on $500M, can have $20M "more" to help the poor.

and of cos, keep B(s) to SGan(s) only... SingFirst lor...

so... 4 outcomes right
0. A live to DDA, payment begins.
1. A havent died, but decided CPF really gd, pay off B(s), all B(s) get a little
upset, but the pay out was gd and B(s) did help A.
2. A die young, bequest distributed to B(s).
3. A dies old, B(s) get mthly payment... all B(s) better hope A dies v v old.

i dun noe the returns achievable or nt, but shld beat SSB, so bye bye SSB.
B entry age to this, shld be < 55. what if lives to ripe old age of 100.
so B(s) monie$ is locked up for 100 - 55 = 45 yrs! but its ok wat... this
shld be "cash", the 7k pple contribute to SA and B(s) get payouts for 45 yrs!

ok, better let DPM Tharman handle, else head bigger than Big Potato.

Julian Chan said...

I think most of the people visiting AK blog r savvy enough to understand our govt's policies especially our cpf.... Really, it's becos we bothered to learn more and hope to reach financial independence even if we r not born with a silver spoon.
I really appreciate n understand our govt even though I may not agree on every policy. My fingers r crossed and I hope for the best... Pap is not perfect but the opposition r much worse.... Replacing a bruised apple with a thoroughly rotten apple is not an option....
If Singapore is big n has lots of natural resources, then maybe it'll still survive with lousy govt.... Without a good, non-corrupt govt is suicidal for our small country.... As our history told us, Singapore was never meant to be 50 years ago, Malaysia was just waiting for us to beg them... 50 years now, it is still the same except Singapore has "some money in its kitty"... But we r no less vulnerable if our govt changes its good practice and prudence... The world is still the same, if u r not strong u will be eaten up... "It's nothing personal, it's just that u r there for other countries to take"...

AK71 said...

Hi tree,

Considering a change of career? You could be a novelist. ;p

The SSB could be a good place to park our emergency funds although we have to remember that it is not as liquid an option compared to FDs. Personally, I also prefer parking my emergency funds in FDs as interest rates are rising.

I don't think the SSB is as good an option compared to the CPF-SA for people serious about saving for their golden years. However, the SSB is more liquid than the CPF-SA and in case people do need the money before their golden years, they could break the piggy bank, so to speak.

AK71 said...

Hi Julian,

I agree that regular working Singaporeans have a shot at greater financial security and even financial freedom. Singaporeans are a lucky bunch, generally speaking, but of course the people who form the bottom decile of the resident population in terms of income might need some help. There will always be people who need help but we are again lucky that they form a small percentage in our country.

A Malaysian friend told me almost 20 years ago that Singapore would one day rejoin Malaysia because he could not see Singapore continuing to prosper with such a small population. He is a multi-millionaire and probably still is but in Ringgit terms. In S$ terms, I don't think he is doing as well today. Nonetheless, I hope his words do not become reality.

I hope that Singapore remains progressive and the people remain prudent.

Julian Chan said...

AK,
I agree, the real poor needs more. Actually, govt just needs to be more proactive. Go to these poor instead of waiting for the poor to come to them. Make the process less cumbersome without losing its guidelines to be prudent with public funds.
When the SDP candidate commented of the old patient do not want to get treatment becos of high costs, but this SDP candidate also highlighted to his patient that he is entitled to large subsidies so he'll pay very little at the end. His patient refused becos he felt "he's not a beggar so why should he fill in all the forms"... I fail to understand why this patient felt that way, if u have money and want to get full subsidies then that's bad taste. Why would the poor feel that it's degrading to fill in forms to get your entitlements? I know I would gladly fill in all these forms if I or my family members can get subsidies....
I think the hospitals' social workers should get in touch with this candidate to find out this patient and help him fill in the forms and not delay his treatment.
Poor people must also have integrity and dignity too, do not ridicule them if they come to get subsidies they r entitled to. But if the subsidies r available, the poor should not be shy to accept. It is ridiculous to say "that u r not a beggar so u dun want to fill up the forms to claim subsidies " , regardless of who u r, u need to fill in forms to apply for things, else how does the govt know u need help or not? The subsidies given r from public money after all....

AK71 said...

Hi Julian,

Without saying too much, I will take stories told by any GE candidate with a pinch of salt. I agree with you that the story is rather unbelievable.

I am at the age where I see many senior members of my extended family going in and out of hospitals. Frankly, our hospital staff are very good. They are very helpful in helping us with our claims.

Anyway, DPM Tharman has said that they are going to reach out to the bottom 5% of Singaporean resident working population. He has identified them as most needing help because they make $1,000 or less a month. This is being pro-active and I like the sound of it. :)

Serendib said...

Hi AK,
I agree that CPF is a basically a sound concept and that its better for CPF money to remain in CPF as long as i) people are unwilling to be responsible/take interest in their financial well-being and ii) the costs of financial products in Singapore dont come down (eg there is no cheap annuity products, no cheap track funds, no good retail bonds - except SSB now!).

I would like to see the following changes though:
- guarantee the CPF Life minimum payout sum(I've mentioned this before) - instead of leaving CPF members at the mercy of CPF solvency. In the short-medium term this risk is very low, but for those of us with decades ahead of us, I'm not so sure.
- keep CPF primarily for retirement and future healthcare costs - reduce or eliminate the use of it for housing and education (the latter may be alright subject to repayment within a limited period of time). Of course the former will have major repercussions on housing costs/values. Further restricting the ability of CPF members to withdraw funds (ie less liquidity) will also allow SGSS to be invested for a longer-term in less liquid or more volatile assets.
- keeping with the aforementioned point, the CPF-SA proportion should be much higher (honestly I'd like to eliminate CPF-OA altogether).
- Eliminate CPF-SA Investment Scheme (seriously, nobody can provide a similar risk/reward profile..)
- In return for above points, CPF-SA should provide a _long-term_ return of at least 6%. Now this doesnt mean that CPF-SA balance should increase by 6% steadily every year - but like SSB, should assure its members a 6% return if held for say 20 years.

I know much has been said about GIC's returns being only 4% historically - but keep in mind that GIC has historically been very conservative, until 2013 when it unveiled a new investment framework - covering, global equities and bonds, private equity and real estate. If they cant generate a 6% long-term return from those, then I'd say we need a better run GIC!

AK71 said...

Hi Serendib,

I am not sure if any guarantee on the CPF Life minimum payout changes anything fundamentally. If the CPF should become insolvent, it wouldn't be able to honour any guarantees anyway. So, it could be psychologically comforting but I don't think it does anything more than that.

I do agree that the CPF which is primarily to help fund our retirement should not be allowed to fund so many other things which could derail its original purpose for members, especially if money were to be lost in the process. I would suggest that the CPF money could be used to help fund only one property and that is our home. CPF money should not be used to buy investment properties.

If we are going to allow the CPF to retain a higher degree of liquidity (i.e. for the purchase of our homes), then, I think it is fair for the government to pay less in interest. We could always do OA to SA transfers if we decide that we want more in our SA. Of course, this is subject to a ceiling.

As for paying 6% on the CPF-SA, I had a gut feeling that it would not be sustainable and even with the new investment framework you talked about, there is no guarantee that GIC will generate more than the 4.9% per annum average they have generated in the last 20 years. In addition, we have to remember that GIC does not manage money from CPF only. If they were managing only CPF monies, they would have to be even more conservative.

Like DPM Tharman has said many times before, the CPF is to help lower income CPF members. For those of us who are better off, I think we have to take greater ownership in planning for our golden years and not rely on the CPF too much.

To be socially more equitable, I feel that more resources, if available, should be channeled to helping lower income CPF members.

Potatoish said...

CPF always hot topic :P

Without CPF most of us will not have a roof above our heads. I admit i am one of them who can never afford the down-payment if not for my CPF :D

A nanny state Singapore is, forced savings like this is the only way forward. You see, not everyone is equal(i am serious, we need to accept these differences than to pretend it does not exist) and hence, the government is trying their best to bridge this disadvantage for the less capable but yet these are these are those that are critical and shout at the loudest

CPF withdrawal at 55 years old objectively on the same logic panel as the above discussion on buying our first HDB. Think of CPF as money that can be used for meaningful purpose than a windfall that you can spurge. If you looked at the flip side, for CPF you contribute a certain amount, your companies topping up on top of your contribution and the government gives you a nice interest on it, so now whose money is it anyway? entirely yours?

Regards
JQ

AK71 said...

Hi JQ,

I liked a certain female politician from the opposition but when she shouted "Whose money is it, anyway?" during her rally, I dropped her from my favorite list.

After so many years blogging about financial matters, CPF or not, there is one group of people I have given up entirely. These are people who are ignorant, opinionated and stubborn.

If they are rich, they will manage somehow. If they are poor, well, I hope they win the lottery.

AK71 said...

On my FB wall:

Gabriel Tham:
"maybe the govt shld look at track records. if the person has proven track record of successfully growing their own wealth then can return all cpf."

AK:
"People who successfully grow their own wealth would probably leave their CPF money in their CPF accounts at age 55. Those who are financially prudent and savvy would probably do this."

Potatoish said...

Hey AK,

I am not familiar who ah?

I heard a certain debate on CPF from Ms Chia Yong Yong speech in parliament and i thought she does speak from her heart on issues.

Yup, Lets not scoop it down to coffeeshop talk on the issue of CPF but have a meaningful proper discussion, there is more to it than just withdrawing the lump sum when one hit 55 years old.

PS: AK got 55years old already or not? :P

JQ

AK71 said...

Hi JQ,

My age? I just revealed it on my FB wall. ;p

Who was the female opposition politician? Nicole Seah from NSP. At that time, people said NSP stood for Nicole Seah Party. LOL.

Potatoish said...

oops!! wow so zhun!!! Happy Birthday Uncle AK!!

have a good one even if its an hour more. bless with good health :)

JQ

AK71 said...

Hi JQ,

Kamsiah you plenty plenty. ;)

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