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What to do if we don't trust the CPF system?

Friday, June 23, 2017


I have been sharing quite a bit of stuff on Facebook regarding the CPF in recent days. 

Nothing new, really. 

They are mostly conversations with readers on stuff I have blogged about.

I shared how I grew my CPF savings and also why it is an important part of my overall retirement funding strategy. 

I have also shared my numbers to exemplify the magic of compound interest.

Of course, we know that there are people who do not believe in the CPF. 

This is nothing new.

I am constantly amused by the reasons put forth as to why we should not trust the CPF system.

People are free to trust or not to trust. 

Hey, I am not dogmatic. 

Don't believe me? 

OK, you happy can liao.

What do we do as investors when trust is lacking? 

Avoid investing any money.

For example, I no longer invest in S-chips although some of them might have fantastic looking numbers.

I used to. 

Remember China Minzhong?

I simply don't know if their numbers are bona fide.

Don't trust the CPF? 

Don't top up. 

Don't make voluntary contributions.


Wait a minute.

How do I know if the companies which I do invest in have bona fide numbers? 

What if their books are cooked too?



Is our country financially sound? 

Is the government going to default on its obligations?


Don't ask me lah. 


Hey, do you believe in feng shui? 

The late Mr. Lee was asked why did he want his house demolished? 

AK is trying to change topic, right? 



You really want to know? 

These posts might interest you then:
1. Do better than the CPF?
2. Worried about retirement adequacy in the right way?


Spur said...

I used to know some people who tried to circumvent the CPF system by having their company registered in some tax haven like Cayman Islands or BVI, paying minimal local salaries, and transferring the bulk of the company's profits & revenues to those overseas tax haven banks. Once in a while, monies will be transferred to the employees' local bank accounts as "gifts".

The official minimal salaries meant minimal CPF and zero personal income taxes.

Net-net not sure how workable it was as I believe a different set of corporate taxes apply for companies who "repatriate" their earnings overseas. Basically depends on the amounts of earnings, and the differential between the various tax rates as well as CPF rates etc.

Anyway that company no longer operating here. So I guess it wasn't worth the efforts & the risk. Hahaha!!!

I suppose there are many who don't trust or believe CPF and govt.

At the same time, many (if not all) also don't believe in lifelong slogging to survive. This being the case, then everyone should adopt attitudes, behaviours, methods to cut short that lifelong slogging.

In today's reality, CPF is just a small part of that equation. As you say, there are many roads & highways leading to Rome. :) :)

AK71 said...

Hi Spur,

CPF forms a cornerstone of my retirement funding strategy. I doubt CPF Life would cater for 100% of my funding needs when I turn 65.

Having said that, whatever I have done in the last 20 years is geared towards having an option for a more substantial amount to withdraw from my CPF account at age 55.

So, although I have said that the CPF is a cornerstone, for the more frugal, it could be more than that. :)

AK71 said...

Reader said...
Again about CPF monies.
I think we cannot remove this doubt about our CPF monies management and the books were never transparent to us.
Just something said can be quite true how cpf monies affect 4 groups of people in SG....

1. Ah Kow is a Malaysian from Penang. He came to work in Singapore and became a Permanent Resident. After decades of working in Singapore, he COLLECTED his CPF SAVINGS and returned to Penang to retire comfortably in a bungalow with a Mercedes car.

2. Li Ning is a student from China sponsored by the Singapore government to study in Singapore. She was given a living allowance and free education from Secondary One to University. After graduation, the Singapore government employed her and asked her to be a citizen. She declined, continued working for 5 years and went back to China for a better-paying job (as people who can speak English are valued in China, thanks to sponsorship from Singapore) after collecting her CPF SAVINGS.

3. John is a New Zealand (Kiwi) citizen. He was employed as an English teacher and got his permanent residency after just three months. He worked for ten years and COLLECTED his CPF SAVINGS and went home to buy a bungalow and a Volvo car.

4. Krishnan is a Singapore Citizen and worked as a technician until he was retrenched as the boss employed a cheaper foreign talent. Then he became a taxi driver and found he could not renew his taxi licence unless he paid money into his CPF. When he was 55 years old, he found he could not withdraw his CPF SAVINGS. When he reached 65, he found that the CPF Board only refunded him $500 a month of his own money for his living expenses. Then they told him that he has to pay medical insurance premiums from 1st November this year or be thrown into jail.
A nation betrayed

AK said...
A couple of readers sent this to me too.
I will only say that if you don't trust the system, then, avoid if you can. ;)

AK71 said...

SG John:
See lah, see lah...already told you...when you talk CPF, you are assuming every damn thing won't changed, unknowing day, policies can be changed again, eg. the magic number 55, as promised by dad, changed by ah son, don't know ah grand son will do what later?

I have no trouble accepting changes which are reasonable. ;)

AK71 said...

Winston Wee on my FB wall:

CPF has benefited a huge majority of Singaporeans including myself, in terms of helping to pay off my house and providing a monthly sum after my retirement.

In any scheme or policy, it is meant to benefit the large majority. There will always be some, who for some reasons or other, fall through the crack. There will be some who will take issue from a rather narrow perspective.

It doesn't take away the fact that CPF has met its main objective of providing housing for Singaporeans and some financial support after retirement. You hv to look hard to find a better scheme elsewhere in the world.

AK71 said...

Chris Lim said...
When the CPF is run by trustworthy organisation and people, I will agree with what you have stated about CPF being the only bond investment we need and shall do.

However an article, "880,000 pensions hit by Japan investment scandal", I read years ago boggles my mind till today. I also remember reading about how Temasak lost big chunk of money somewhere which I cannot recall now.

I wonder if my concern is too far-fetched?

AK said...
If our portfolio size is billions of dollars in size, the acceptable margin of error in dollar terms is very different from if our portfolio is millions of dollars in size.

As investors, big or small, if we are right 6 times out of 10, we are considered good, so the famed investor Peter Lynch said.

Anyway, Temasek Holdings does not invest with CPF money.

AK71 said...

Global economic growth and booming share markets helped Temasek Holdings hit record numbers last year, but it warned that near-term risks are on the horizon.

The investment firm reported yesterday that its net portfolio value hit a new high of $308 billion in the 12 months to March 31 - the first time it had exceeded $300 billion, and up $33 billion from a year earlier. Its one-year total shareholder return was 12.19 per cent.


AK71 said...

Junda Huang says...

Indeed, a fake news article by straitstimesreview was very popular some time ago and shared widely, claiming Temasek has lost hundreds of millions and hence CPF monies are gone.

When I pointed out the simple fact that CPF monies were not even handled by Temasek but rather by GIC, all sorts of conspiracy theories and accusations came up 🙄

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