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We do better managing our savings than the CPF does!

Sunday, June 8, 2014

In the latest issue of The EDGE, there is a very good 2 page write up by Kelvin Tan on the current CPF rate debate. 

For anyone who would like to be better informed, I would suggest getting a copy:

"It may sound easy but beating the OA's guaranteed annual interest rate of 2.5% is by no means an effortless task for CPF members who are looking to grow their savings under the CPFIS.

"Indeed, only 15% of CPF members who sold their CPFIS-OA investments for FY2013 ended Sep 30 made profits in excess of the OA interest rate of 2.5%... 

"42% of these CPFIS-OA investors actually incurred losses in FY2013...

"While it makes sense for savvy long-term investors to invest their excess OA money, some financial advisers advise their clients not to take any risk with their SA money which is already earning decent returns of 4% to 5% a year.

"For risk averse CPF members... they could consider transferring OA to SA...

"Conservative CPF members can also use cash to top up their SA to the prevailing minimum sum ... (and) could also enjoy a tax relief of up to $7,000 per calendar year.

"(Singaporeans) should look at their CPF SA like the bond portion of their overall portfolio...

"In their retiring years, they should look at their CPF Life as their annuity investment, giving them a monthly amount for life.

"I am happy with CPF Life, an annuity that grows at 4% per annum and pays me $1,200 a month from age 65 until my demise. 

"The annuity will form the income floor of my monthly income needs and will help me hedge my longevity risk," says Tan from Providend.

"Singaporeans who generally have little in their CPF accounts should start saving more, do early retirement planning and invest prudently with a long term view to growing their nest eggs rather than demand higher interest rates on their CPF savings."

There are voices of reason which, unfortunately, I think, will not reach the ears of people who need to hear them most. 

With emotions running high, these words could very well fall on deaf ears too.

"As for Singaporeans who have highlighted that other countries such as Malaysia and India pay higher interests in similar pension schemes, my view is that they forget that our Singapore dollar is rated AAA and has appreciated against the currencies of many other countries," William Cai, GYC Financial Advisor. 

Would we be rather making Singapore dollars and receiving 4% per annum in risk free rate or be making Ringgit or Rupees and receiving 6% instead? 

What is our choice?

Update (27 July 2014):


Related posts:
1. "Return our CPF" protest.
2. Free e-book: Retiring before 60 is not a dream.


Unknown said...

Very well said! As you have mentioned before, our cpf OA rates are pegged to SGS 10-year yield rates, without us having to risk price fluctuations of the SGS market.
As for people arguing that in the 70'-80's, Singapore's CPF rate was 6.5%, that period of time was our prime as a developing country. The growth rates were high, so were the changes happening and of course, the risks. Higher risks in the 80's, higher rewards reflected (6.5%). Singapore now, as many developed countries, does not grow at that rate we were experiencing in the past. Hence, i feel the scaling down of CPR rates were reasonable.
I just hope anyone who does not share my point of view, who are against CPF, to not use 'SINGAPOREANS....blah blah blah' to make it sound like most or all of the Singaporeans think that way. Clearly i feel that many Singaporeans are still pro-CPF.

Cory said...

CPF provides the basic safety social net. This money in my view is left untouched whenever possible.

Being risk free and relatively high rate, this provide strong balance portfolio to our funds.

I remember another advantage is no one can touch this fund if you go bust. In that sense there is additional layer of advantage that bond, FD, PS cannot provide.

AK71 said...

The CPF has more good than bad. For sure, it is not perfect. However, I rather have it than not.

I have sent an email to the CPF Board with a link to one of my recent "e-books" to share with them how the CPF has worked for me. The magic that is the CPF is in compounding. Time is required for the magic to work.

So, I hope that the CPF Board could work harder to show fellow Singaporeans that the CPF is a tool which they can use to their advantage before it is too late, before they run out of time and must go to Hong Lim Park for another protest.

Free e-book:
Achieving level one financial security for Singaporeans.

Andy said...

The issue real issue is that ppl are anti-cpf and wants CPF to be scraped. But rather, people feel that the govt should not try to keep holding on to their hard-earn $.

I think Dr Toh Chin Chye describe the situation perfectly.

Toh Chin Chye (Ex-Deputy PM):
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! It is as simple as this, that the CPF has lost its credibility, the management of it. This is fundamental. You were taken by surprise by Medisave. Then they say, "6% of your Special Account will be kept for Medisave and you cannot withdraw that, even if you were to die."

Now I ask the Minister for Health, and I asked him last time, whether his word is binding on future Ministers. Neither will the Minister for Labour's word be binding on future Ministers for Labour. Can any Government or any Minister guarantee that in future years a law will not be passed that will say, "All Special Accounts in the CPF cannot be withdrawn until you die"? Your Special Account now is up to 10%; 6% Medisave, 4% for what? So unless you use the CPF to buy property, your money is in real danger of being kept under lock and key by others, not under your own lock and key. This is the nub of the problem - the credibility of the management, gradual encroachment into the purpose of the CPF which was instituted really to provide for retirement.

Full report of the speech:

AK71 said...

On my FB wall:

RN: Interesting research finding by NUS business school.
2.0 Introduction
The greying population tsunami is sweeping towards Singapore. Whilst only 1 in 12 Singaporeans were over the age of 65 in 2005, by 2030, that number will have increased to a staggering 1 in 5.3 Despite the high levels of savings, the present CPF system will potentially struggle to provide sufficient funds for Singaporeans in retirement due to inadequate returns and in the face of unpredictable and high inflation.

AK: There is only so much putting our money in bonds can do for us. To be fair, however, where do we find risk free bonds that pay 4% to 5% per annum? I feel that the returns are more than adequate in the SA which is meant to help us with our retirement needs. To have full benefit of this tool, max it out as early as possible and let time do the rest. This is something we as individuals have control over. Inflation, we have no control over.

RN: Read: 5.0 An Inflation Protected Dignified Standard of Living For All Singaporeans (RRI).

AK: I do not think that a 5% annual inflation is the norm for Singapore. A couple of years of higher than normal inflation in Singapore due to abnormal monetary activities in the world cannot be used as the basis for an academic paper but surprisingly, it was.

Anyway, I have always said that the CPF is our basic safety net. I have always said that it is not enough to depend on the CPF to meet our retirement needs. We need to plan ahead for retirement and the CPF is an integral part of any plan. It is a fail-safe.

For people who do not plan ahead and think that the CPF is all that they need or if the CPF is all that they have, they might have to go for another protest in Hong Lim Park in future.

AK71 said...

On my FB wall:

AK: As for the SA portion, this is what I have been saying all along. We should think of voluntary contributions (and pay less income tax in the process). We should think of growing the SA faster so that it will grow itself faster (and do it sooner than later). If we do not yet have $40K in our SA, top up or transfer OA to SA to have that first $40K in our SA. It will compound at 5% per annum.

DY: If 40k in sa, can compound at 5%? 5% of 40k? The 60k thingy => +1% ah?

AK: First $20K in OA and $40K in SA get 1% more in interest payment. So, yes, the first $40K in our SA will grow 5% every year.

DY: Aiyah. then should have transferred earlier... I thought the 60k includes the medisave portion too! lol

AK: Desmond, I transferred OA to SA religiously in the first 4 years of my working life. People are always amazed when I tell them how much I have in my SA and how my SA is growing organically now to meet the increase in minimum sum annually.

Time is required for the CPF to do its magic. I hope the CPF Board can impress this upon people at Hong Lim Park and encourage greater financial prudence.

Recruit Ong said...

I can see u are very pro-establishment. why do u see the need to email CPF and tell them how good it is or tell them what they already know? lol

& why are u so concerned over a tiny weeny protest in sanitised Hong Lim garden?

CPF is just the tip of the iceberg to larger deep seated problems like lack of civil liberties, a system of undemocratic politics & institutions, an inept ruling party in decline, & lack of accountability & transparency that keep it in power.

when wages have stagnated especially for the low income for nearly two decades, there is no planning ahead as they live hand to mouth & the CPF is all that they have! while ppl like u with the luxury of fat passive income castigates them for not able to plan & save? Oh the hubris! Hahaha!

AK71 said...

Hi Andy,

Yes, the evolution of the CPF has attracted plenty of debates. I suppose if we want change, we will have to join politics or support politicians who will bring about such changes.

I know I do not have the power to change the system and, so, I try to play the game to the best of my ability. :)

AK71 said...

Hi Ong,

My motivation for emailing the CPF Board is to encourage them to work harder to show fellow Singaporeans that the system as it is now can work to their benefit. The tools are there for them to utilise to have a more secure financial future.

We can help the CPF to help ourselves.

Of course, there will always be those who are less fortunate and I have said before, many times, that the system should be more forgiving in certain cases. :)

Ana said...

I transferred some funds from OA to SA about 10 years ago. Between 2000-2005, I had no cpf contribution as I didn't work.
Assuming I had $20k in OA and $20k in SA in 2004, and interest rate were 2.5pc and 4pc respectively, there are no contributions nor withdrawals since.

10 years later, my OA will have $25.6k, and SA $29.6k- that's 28pc and 48pc increase over 10 years.

In the 20th year, assuming interest rates unchanged, OA= $32.7k, SA=$43.8k.

Recent Corporate bonds from SMRT was paying just above 3pc for 10 years. Because the funds in cpf ARE NOT PAP"s money, and the people"s, there are strict rules on what can be invested.

Cpf funds are invested only in fixed income papers rated single A and above.
No equities:; nothing else.

With interest rates this low, 2.5pc and 4pc, without the minimum investment sum of $250k (to invest in many of the corporate bonds), I think it's good.

Maybe Roy and friends - instead of talking and sprouting wrong facts - should suggest concrete measures on how to obtain higher interest rates in today's environment.
There are always higher interest rates - like >10pc from Indonesian bonds-- is that the direction he wants?

Kelvin Lim said...

I believe comparing the CPF annual returns with market returns (by products of similar risk) will not . And I also agree that majority of retail investors seeking higher returns will not succeed in beating the 4-5% return.

Yet this does not answer the bigger question the government should shoulder a greater level of risk/burden in order to ensure that CPF provides adequate amount for retirement. This is despite the fact that the dismal income replacement ratio by Singaporeans may be caused by a multitude of other factors.

This may probably be a public policy question.

AK71 said...

Hi Ana,

Thank you for weighing in on the topic. A voice of reason. :)

It is easy to criticise but to offer constructive criticism is not so easy.

Unfortunately, to stir up negative sentiments on the ground, constructive criticism is not required. :(

AK71 said...

Hi Kelvin,

I am all for a higher risk free rate. I see a 6% interest rate on the first $40K in the SA as not particularly onerous on the government. :)

Of course, if we could have a 5% risk free rate for anything above $40K in the SA, I will be applauding.

However, bearing in mind that if the motivation is to help Singaporeans with lower income and lesser savings, then, a higher interest rate on only the first $40K in the SA would be a right thing to do.

AK71 said...

For anyone who is wondering what is Income Replacement Rate or IRR, you might want to read this:
Young working Singaporeans, you are OK.

Recruit Ong said...

AK -
It is easy to criticise but to offer constructive criticism is not so easy.
Unfortunately, to stir up negative sentiments on the ground, constructive criticism is not required. :(

Things have already moved beyond constructive criticism stage. For yrs the ppl have been sounding out the problems on the ground, there was never any shortage of constructive criticism & alternatives. But did they listen? was anything done? LOL
to still harp on & on about constructive criticism will just make ppl more pissed off.
Once the trust is lost, it will be near impossible to regain, especially when u are still paying lip service to the ppl. And it will be entirely PAP's own doings so dont blame the ppl or naysayers.

Unknown said...

Hi AK,
Correct me if I am wrong to say that for the low income earners, they may never hit their retirement in comfort. this is because they are in a job that will never pay them enough to meet inflation.

below is just my thoughts:
That is one of the main reason why their CPF is and will never hit the Minimum Sum (every time it increases).
For these people, the govt has other schemes in place to help them. the thing I don't understand is why all this talk about CPF?
Roy and his friends know that CPF's inadequacies. Why did they not talk about all the subsidies and help the govt is giving the poor and under-privileged?
by focusing on CPF, they have made a strategic move to 'discredit' the govt. very smart and very dangerous of them. becos what they may do will endanger all Singaporeans if not handled properly by the govt.

Ana said...

I don't see myself as pro establishment, but after dealing with several govt agencies (as well as observing the modus operandi of WP/ NSP/ etcetera), I did note that the govt does not treat cpf funds lightly - thus they have strict criteria on how it can be invested to ensure the principal value does not get eroded with price volatility.

There is a lot of confusion re GIC, Temasek vs CPF. They are not the same, and GIC and Temasek does not have access to CPF funds. So, while GIC or temasek might have make double digit returns on some of their investments (eg Astra), these were not done using v

Ana said...

...using reserves.

Honestly, WP etcetera have put me off in recent months. Very. And that's from someone who was supportive of WP etcetera in 2011.

Since 2011, WP etcetera have Been all talk. Their suggestions sound good and popular, but all socialist in nature (eg selling hdb at low px, not welcoming foreigners). Look, the govt has restricted foreign workers in 2012 because WP etcetera claim that there are many Singaporeans who want to work but their opportunities are snatched away.
Then tell me why every single business is facing shortage of workers?
Even my condo has stopped hiring security guards and automated, because these folks are totally irresponsible despite increased pay.


But my point is: Roy and friends are just sensationalising the situation with a lot of WRONG FACTS & NO OTHER CONSTRUCTIVE AND CONCRETE SOLUTIONS.

AK71 said...

Hi Ong,

To me, I feel that the government has done a pretty good job with the CPF. For sure, they could do better. We can try to do better always.

Obviously, there are people who feel that the government have done a terrible job and that CPF money has been mismanaged.

If all we are left with now is a lot of anger leading to nothing but emotional outbursts, how can we arrive at a solution that will address all issues at hand? Or do we rejoice when we see anarchy?

I have provided my take on the matter together with how we could try to make the CPF work for us. I think that my approach is one that is responsible and viable.

Anyone is free to disagree but don't just disagree for the sake of it. Please provide a viable alternative plan.

Although you might think that I am pro-establishment, I am not. I am rational. If anyone has an idea which will solve all the concerns of every stakeholder, I am prepared to accept it.

gagmewithaspoon said...

thanks for the really good post. i am starting to get afraid of what is happening to Singapore. This CPF issue was not very well handled at all and only served to make people more unhappy. CPF has a lot of good points - it is tax free, you take care of your retirement needs, it is a very safe environment, it is useful tool during financial crisis to discourage laying off of people. For those who say that they rather manage their own money, sure, by all means, you can use the OA for property or shares (after a certain sum). For those who complain that the lower income will never meet the minimum sum, then the solutions is to improve that person's wages, not to scrape this CPF system. For the uncle who wants to be able to use the money to buy a property for his daughter in australia, please be careful - your daughter may not be supporting you when you are old. not because she doesn't want, but maybe she never factored in your retirement into her expenses. This is not about being pro-establishment. It is about riling the public up against a very neutral and helpful system and using it to slam the ruling party.

AK71 said...

Hi Julian,

I think for people who are rational enough, it is easy to see that our CPF savings will never be sufficient for our retirement purposes unless we lead a very Spartan lifestyle. Whether we are allowed to withdraw all our savings in a lump sum or have to be paid a monthly annuity income, money from our CPF savings will not be enough.

I believe that a solution lies in educating the public to be financially prudent first and followed by a greater degree of financial literacy so that they know how to prepare for their old age.

There are tools out there which are available to the public but if they are not made aware of these tools and if they do not know how to use these tools, the government has not done its job well enough.

As for people who are stirring up negative sentiments on the ground, I hope they will remember that if there should be anarchy in Singapore, there will be no winners. Unfortunately, anarchy is probably what some people are hoping for.

AK71 said...

Hi Ana,

I would like to contribute more money to my SA, if possible, to enjoy the 4% risk free rate for amount above the first $40K. However, I am not allowed to do so. I am told that I have hit the maximum allowed.

So, I cannot have more of my money safety compounding at 4% per annum. I cannot enjoy income tax relief through a yearly voluntary contribution of $7K to my CPF-SA.

I think the fact that contribution restrictions exist shows that the CPF is not recklessly accepting funds and that they want to be sure that they are able to deliver on those promised returns.

Some think that the CPF is a national Ponzi scheme. I have not come across a Ponzi scheme that would limit contributions by their believers.

Cory said...

Rule has to be change to adopt to new situation. It doesn't make sense to bind ourselves. Draw all money and lose them all at 55 ?

The fundamental principle i believe is about sustainable retirement. Not ?

AK71 said...

Hi gagmewithaspoon,

Cute nickname. :D

Like you, I am worried. There is a lot of anger and almost everyone is talking about the protest now. Many are actually supportive of withdrawing all their CPF money when they turn 55. Maybe I shouldn't be but I am a little surprised.

Now, I can only hope that things do not turn any uglier and that a compromise could be reached.

Perhaps the best way to solve this is through a national referendum on the matter.

The financially prudent and literate amongst us will still do OK without the CPF minimum sum. It is the rest that we should be worried about.

Recruit Ong said...

AK, why do keep labeling some ppl as stirring negative sentiment on the ground? know that peaceful public protests are part of legitmate feedback process & a channel of constructive criticism too.
i dont think u understand this democratic concept very well leh.

u know it is ok to defend the establishment or being pro pap. One shld not need to apologise for it or hide the fact. :)

For being rational, can i ask who did u vote for in the last general elction?
becos u see the pap govt only started to pay attention to the problems on the ground AFTER it saw a clear slide in its vote share. So if one thinks the current initiatives and rethink rolled out by the PAP are good, then the RATIONAL thing to do is keep voting for the opposition! Hahahaha!

AK71 said...

Hi Capricon,

I am glad it has worked out well for you. Your CPF-SA money will grow organically until you hit retirement age and the magic of compounding will probably result in you meeting or exceeding the minimum sum with ease. :)

As long as we stay gainfully employed, yes, we will continue to make contributions to the CPF SA but these are not as significant as I would like them to be. ;p

Recruit Ong said...

hi gagmewithasoon, i find your post a contradiction.

on one hand u say "For those who say that they rather manage their own money, sure, by all means, you can use the OA for property or shares (after a certain sum)", on the other hand u warned about "For the uncle who wants to be able to use the money to buy a property for his daughter in australia, please be careful - your daughter may not be supporting you when you are old."

what is the difference between the two? Both are using their own money what. Why it is ok for the first case, but need to "warn blah blah" for the second case? Why the sudden nanny state mentality?

i say keep the system simple like it was in the past, do not make it so complicated that ordinary ppl have problem understanding. Worse, dont cherry pick examples and use them to justify raising withdrawal age and minimum sum which are in essence are seen as keeping the ppl away from their own money.

AK71 said...

Hi Cory,

For the financially savvy, if they are made to withdraw all their CPF money at age 55, I don't think we need worry.

I am worried about the rest of the population...

If every CPF member is financially savvy, then, there is no need to worry. Hence, my continual nagging on the importance of education.

Recruit Ong said...

Cory - Rule has to be change to adopt to new situation. It doesn't make sense to bind ourselves. Draw all money and lose them all at 55 ?
The fundamental principle i believe is about sustainable retirement. Not ?

Hi Cory, why the nanny state mentality that ppl will lose them all at 55?
do u think someone like AK47 will "lose them all" at 55? lol
This is the kind of logic that pisses ppl off leh hahahahaha!

Yes, rules have to change to new realities, but also address the fundamental problems of worsening income inequality, stagnating wages, rising cost of living, and lack of accountability & transparency of public institutions.

AK71 said...

Hi Ong,

Even with peaceful public demonstrations, negative sentiments can be whipped up. They are not mutually exclusive.

For sure, I applaud the opposition for forcing the PAP government to reflect upon matters and to address the many problems in the country. We must give credit where credit is due.

However, talking about whether we are pro establishment or not is hardly constructive.

So, if you have a solution that will address everyone's concerns with regards to the CPF, please share. This is with reference to my earlier reply to you. ;)

AK71 said...

Hi Ong,

"... why the nanny state mentality that ppl will lose them all at 55?
do u think someone like AK47 will "lose them all" at 55? lol"

Er... Don't cherry pick examples. LOL. ;p

Yes, there are many issues at hand that need addressing. I feel that the CPF protest is just the tip of the iceberg.

Now, if we are going to talk about all the things which are wrong and which need to be addressed, I have a bunch of things to say as well. Still think I am pro-establishment? LOL

AK71 said...

Hi Capricon,

This is for you:

CPF monies are invested by the CPF Board (CPFB) in Special Singapore Government Securities (SSGS11) that are issued and guaranteed by the Singapore Government. This assures that the CPF Board will be able to pay its members all their monies when due, and the interest that it commits to pay on CPF accounts.

As the Singapore Government is one of the few remaining triple-A credit-rated governments in the world, this is a solid guarantee.

The proceeds from SSGS issuance are invested by the Government via MAS and GIC, just as it invests the proceeds from the market-based Singapore Government Securities (SGS).

No CPF monies go towards government spending. Government borrowings, whether via SGS or SSGS, cannot be used to fund expenditures. Under the reserves protection framework enacted in 1990 in the Constitution and the Government Securities Act (enacted in 1992), the monies raised from government borrowings cannot be spent.



Unknown said...

"do u think someone like AK47 will "lose them all" at 55? lol
This is the kind of logic that pisses ppl off leh hahahahaha!"

I cannot help but to comment on your logic.
I think your association of AK to the whole of Singapore is extremely far-fetched. If god had really created us as equals then you are most probably right...
Unfortunately, all of us are different. But all of us want to be financially independent (I hope).
To want to be financially independent, a person will need many attributes (especially for a normal individual with tertiary education). Ask yourself:
Can you live a simple life like AK when you have as much as him(no offence AK)?
Can you read and try to understand all the financial books that he had read?
Can you be humble even when you have made your 1st "pot of gold"?

AK71 said...

Hi Julian,

Yikes, I am not sure that I am worthy of the glowing assessment.

I am just a regular guy with weaknesses. We all have our own poisons and mine could just be different from yours. ;p

Ice cream, chocolate, corn chips, char kway teow... Some of mine. Quite poisonous if we believe the stuff we read sometimes. Oh, I have my little car too. Wealth destructive stuff!

You are right to say that all of us have different circumstances. We might have different priorities too. So, for some of us, the journey to financial freedom might be longer and more difficult. However, as long as we are all headed in the same direction, we will all get there one day.

I don't know everything and I am still learning new things regularly from my fellow travellers. :)

Recruit Ong said...

AK - Even with peaceful public demonstrations, negative sentiments can be whipped up. They are not mutually exclusive.

So, if you have a solution that will address everyone's concerns with regards to the CPF, please share. This is with reference to my earlier reply to you. ;)

I think u have to ask yourself what is your definition of negative sentiments? :)
When i watch the parliament and see how LHL tries hard to take down LTK, or how some PAP "attack dog" MPs try unnecessarily to grate & put down the other opposition MPs, to me this is negative sentiments and behaviour displayed by PAP members. But no they call it "constructive politics" hahahaha!
as for peaceful public protests, well thats not negative to me at all, but then my meat is probably your poison, so we may have to agree to disagree.

u said "if you have a solution that will address everyone's concerns with regards to the CPF, please share". Well do u have a solution that will address EVERYONE's concern?? :)
Becos the current solution or policy proffered by the pap govt is obviously already not addressing some basic fundamental concerns hehe.

Unknown said...

I too just dropped cpf an email of encouragement. Though it is no fault of theirs that cpf is being dragged into this fiasco.
I feel the ppl in cpf deserve to know that not everyone is against cpf. The importance of having cpf should not be swayed by anyone

Unknown said...

Unfortunately, there exists ppl who would rather the things to get out of hand, since they can't have it. They dun mind it to be destroyed.
All sort of ppl exist in this world.

AK71 said...

Hi Ong,

In my blog and in my comments, I have shared how I have made the CPF work for me. I have suggested that that the methods could be worth considering for anyone who believes in making the CPF a cornerstone of his or her financial portfolio.

I sincerely feel that the CPF is a good and relevant tool that any responsible Singaporean who has the ability should make full use of in his or her retirement planning. It doesn't have to be full speed ahead but just using some of the options available even partway would make a big difference over time.

I have also made concessions that there are people who are less fortunate and who might need a helping hand and that the system could be more forgiving in certain such cases. I am certainly not forcing down my ideas down anyone's throat.

So, generally, I believe I have pretty much addressed the concerns of both the haves and the have nots amongst us.

pf said...

Haha...just managed to catch up on what I missed out.

Actually, someone commented ahead a very good point. With the rules keep changing, I really don't know if I would get to see the money before I die. So, there's the distrust.

CPF has really became too complex for understanding.

Its all about balance in life.

Recruit Ong said...

Julian - Unfortunately, there exists ppl who would rather the things to get out of hand, since they can't have it. They dun mind it to be destroyed.
All sort of ppl exist in this world.

Wow, how u reach such a conclusion is mind boggling, lol
true indeed all sorts of ppl exist in this world, including folks who are inclined towards the hyperbole. :)

hi Ak, i feel u have a lot of faith in the system, something i dont share based on the goal-shifting antics and track record of the ruling party.
So i shall agree to disagree with u on this matter. Have a good evening. :)

AK71 said...

Hi pf,

I do not mind the CPF rules evolving over time as long as it makes sense to do so. Reality changes over time. So, often, to stay relevant, we have to embrace change. :)

Like I said before, unless we have decided to divorce our wife, we must accept our mother in law. Unless we renounce our citizenship, we must embrace the CPF and try to make it work for us. LOL.

AK71 said...

Hi Ong,

Ah, I was so looking forward to you offering a solution from the other side of the fence. ;p

Sure, we can agree to disagree.

amoose said...

I am glad to see some sensible (in my opinion) views on the issue. Was beginning to get concerned that all I am seeing around is negativity, irrational, and emotional "discussions"!

AK71 said...

Hi amoose,

Welcome to harbour ASSI where we try to keep discussions constructive and the tone civil. ;p

amoose said...

Haha! I've been a regular reader of your blog since 2010, but have remained silent all along :X

AK71 said...

Hi amoose,

Ah! A submarine has surfaced in the harbour. I must install some echo sounders in future but that could be expensive. Hmmm... Nah. ;p

2010... Wow! That is a long time ago. Time flies. :)

amoose said...

Now, you know good your "ramblings" are to keep a submarine trailing you since 4 years ago! :)

Unknown said...

People like Ong only exist if they r in company with his like-minded friends. In order to bolster each other's "dissatisfciations towards the govt" but it is never their wrongdoings.

If they cannot win any argument , they will blame it on "this & that of the govt doings". They will always find fault and questions but never any concrete solutions....

Ana said...

I was supporting WP etcetera back in 2011.

Since the landslide GE, I would listen to what WP/ NSP/ etcetera have to offer. At the rallies, they were good , very good. NSP had the young lady, WP had Nicole Seah, even Chee sounded credible.

After some time, I realised that all these folks are but noises. To me, they did not seem to withstand the test of time....

Unfortunately, the financial literacy among sg is very low, so they are easily swayed by populist protests- without exercising discretion (rather, unable to).

Unknown said...

I had voiced previously in my decreasing trust in the system. I am not really good in expressing myself but Andy quotation from Dr. Toh Chin Chye really speaks my mind. Pf also mentioning the changing rules and the complexity are causing the distrust.

AK on the other hand mentioned that the rules changes as reality changes and we need to embrace the changes.

So both sides have their reasons for their trust or distrust for the system.

How can we solve this and find a common ground? Firstly both side must try to understand where each other is coming from. From the distrust side, at least for me, I feel the changes are evolving in such a way that it is making our CPF saving become more and more inaccessible to us. True, the intention of the government is good and wanting to ensure us to have a steady income during our old age. But certainly for sure, the changing of drawdown age from 62 to 65, the non-guaranteed of monthly payout which breeds unnecessary anxiety to some due to uncertainties, etc, etc is not definitely help PAP case in promoting the CPF Life scheme.

Government had also published that more and more not able to meet the minimum sum. Have the Government think about why is such becoming a trend and how to stop this? Certainly the increasing of minimum sum is needed to some extent but the need to help citizens reach the minimum sum is also needed. Did not hear much from the Government about helping the people on that. AK do have suggested a way of transferring OA to SA, or topping up SA with hard cash and let the interest do the trick. This indeed is a viable solution and we must thank AK for bringing this up. (Though I do not agreed on using hard cash but that's me :) )

So the Government can start by educating the public on the CPF scheme. In the meantime, they can try helping more to achieve the minimum sum by increasing interest for first 60k(most beneficial for the poor as they are the one who need it most while the rich do not really benefit much), more CPF top up for the poor with under 60k(mean testing might be needed), etc. These are just some suggestions that is open to discussion...

AK63 said...

Came back from a long day, dropped by to see anything new and saw this back-and-forth exchange of words between interested parties, how nice....

Thank you all for providing me with some comic relief before I sleep, I can't help but sniggle, giggle, chuckle, smile and laugh through most of the exchanges....

Firstly, may I request that future comments be void of bombastic aka big aka cheem words in order to benefit some readers who are not of tertiary education aka not highly-educated aka the layman aka the ordinary man-on-the-street aka me, can? Me too lazy and too painful to move my endangered fingers to click google translate every time hor.... Thank you first!

Some of you have weird logic - like cpf means pro-establishment, don't like cpf means anti-pap?!? I like hdb cos I can't afford anything else, I also like cpf cos got no choice mah and I like some government policies too although I voted for the opposition, so what am I? Pro- or anti- ?? I am a traitor to both camps lah.... :p

Some still think cpf funds are sacred and government won't touch blah blah, you all need to come out of that well once awhile and get some fresh air. How do you pass motion if you don't eat? You can't be passing out your innards right? How long can you last passing out your insides without consuming? Of coz your cpf funds are invested by the establishment in order to raise the required funds to pay your interests mah. Think of GICs as the WBs of the red dot. You buy berkshire also wish they would grow for you right? I don't really care what they do with our funds as long as they can continue to guarantee that every single cent is safe aka risk-free.

Some argued that you may die not enjoying this money, but this government has already tweaked the system so that you are already enjoying this money by using it to pay for housing, education and your personal speculations. Of coz you don't see the real money lay out in front of you but it is working for you and at the same time generating interests as it goes on. I don't worry abit if I shall not live to see my money, as long as I can rest well knowing that my family is having a windfall aka like strike lottery if I decide to migrate to another realm aka world aka die lah....

So, for those who love to argue for the sake of argument, or (dis)agree for the sake of (dis)agreement, and those who have nothing better to do than making lots of noise about some things that will never be abolished unless the sun comes out from somewhere else, why don't you use this luxury to think of ways to maximise or cultivate the benefits of the existing rules, laws, policies, boundaries or whathaveyous to better serve you, your family and your future?

Now I can sleep in peace, after saying my piece.... :)

Sanye ◎ 三页 said...

"Make CPF work for you... Top up Special Account to earn higher interest..." Nice advice AK71(now I have to address you in full length since there is another AK63).

Since I have passed the age of 55 I can do this for myself, but this give me an idea to help my children, who are in their 20's and just starting work, to have another head start. Instead of buy them gift on their birthday I can top-up their SA as a gift. Since they are young the compound effect will work to their advantage.

Just thinking aloud and share my 2 cents..... :)

AK71 said...

Hi amoose,

Stalked by a submarine... -.-"

Well, I guess that is better than being torpedoed by one. ;p

AK71 said...

Hi Julian,

I am all for a diversity of views. I think many of us are.

However, when we criticise, we should offer viable alternatives too. There is little point in saying what is wrong (if indeed something is wrong) and have no viable solutions.

Anonymous said...

My take of CPF:

the bads:
1) The changing of rules, is creating anxiety and mistrust among some

2) It is inflexible, and some of the lower income does not benefits that much.

The goods
1) Too many to talk about it.

Going forward, we should address the bad. I agree. But to me, allow full withdrawal at 55 is not an alternative or solution to the bads 1) and 2). I in fact, see it as a greater evil.

One, We allow any tom and dick the option to withdhraw the CPF, can the system still survive? CPF is still a fund, a long term bonds if you like. Everyone for themselves? Sure,some of us can cope fine, some can do better, but really, there is a reason why they stop giving the option to withdraw everything at a go.

AK71 said...

Hi Ana,

I believe that you have hit the nail on the head. Financial literacy level is low for the majority of Singaporeans. At least, from my observations it seems to be true.

Stepping up efforts to educate the public on financial prudence and then financial literacy will go a long way to preventing another protest like the one we saw over the weekend.

This was also why I sent an email to the CPF Board with a link to my "e-book". And because I am non-partisan, the public might give my "e-book" a read and hopefully put in some effort to make the system work for them.

AK71 said...

Hi LS,

I am glad you like my ideas on how we could use the system to help us meet the minimum sum requirement. :)

The tools are there for us to use and it is whether we wish to use them or not. The nice thing about these tools is that they are semi-automated.

So, if we are willing to start them up, they will do the rest of the work for us, tirelessly, year after year. ;)

Obviously, if the tools should have their capabilities upgraded (e.g. 1% more in interest payment for the first $60K), they could deliver more benefits.

However, we would still have to start them up. Otherwise, the tools would just be lying in the shed. :)

AK71 said...

Hi AK63,

I had a good laugh reading your comments. :D

I do believe that your comment has effectively rounded up all the points as well as the pointless and gave them all a spanking. LOL.

Yes, the system is here to stay. There is no point in being pessimistic or even optimistic. It is best to stay pragmatic and ask "How can we make the system work for us?" and if it is such a good system, it will work if we know how. :)

AK71 said...

Hi Sanye,

You are a very good father. Your children are very fortunate. I feel happy for your family. :)

AK71 said...

A comment I made on 3 April 2013:

My comment in "CPF or SGS?"

AK71 said...

Hi Mike,

I share your concerns. -.-"

They should:

1) Step up efforts at reaching out to the masses. Effective communication is key here.

2) Give more help to the lower income group. Help should be given to those who genuinely need help.

What are some possible solutions to help the lower income group?

Increase the interest paid on the first $60K in their CPF account by 1%? Allow them to micro tap into their CPF savings without penalty at an earlier age (with clear explanation on what they are giving up if they choose to do this)?

There are options which should be discussed but to have a full withdrawal of CPF savings at age 55? That, I am not so sure. -.-"

Unknown said...

IMO, full withdrawal at 55 is definitely a bad choice. As someone mentioned, the financial literacy in Singapore is really appalling low.

There are some out on the streets calling for this without proper thinking through of the possible impact it might have on the general population. What is worse are there are some(not sure of the numbers by definitely not small, imo) that are sway by such arguments.

Why are they sway towards such extreme arguments? It is the mistrust in the government policy with regards to the everchanging rules of CPF payout. The delaying of the DDA, the non-guaranteed payout is causing such mistrust and anxiety. Hopefully our Government will not increased the base that the minimum sum is pegged to right now(120k of 2003), after 2016 else more will even more unhappy.

Till now, I have not seen much comments on defending this changing rules except for AK mentioning the need to change to be relevant to changing times.

Sometimes I really wonder if the Government who are making these changes actually think about how the citizens might feel when they see it. At least make an effort to explain the reasoning behind such changes and why it is needed. Only recently I do see more articles coming out on explaining how CPF works or CPF Life works. Most of the time, you will only see some "cartoons" in our local papers during the introduction of changes and a yearly short article on the raising of minimum sum.

What I hope to see is the Government putting more consideration to the citizens' feeling when proposing more changes(if it is required). And better communication to ease the anxiety of the people. Distressed citizens are not productive citizens...

P.S. Wonder if the Government really understand the anxiety of the citizen as the current changes are just adding more to it... sighz

ron said...

Let me throw in my share.

It all began when the CPF changed:

1. The draw down age
2. The introduction of CPF LIFE
3. The minimum sum

These changes were introduced because Singaporeans lived longer ( or will live longer )

Previously, the minimum sum could be withdrawn over a period of 20 years from 62 years of age.

To address the issue of living longer, why make things so complicated?

A) increase the minimum sum
B) increase the time to pay out from 20 years to 30 or 35 years. from the age of 65

Anyone who lives beyond 95, should get a medal and the state should celebrate the milestone and offer free support for life.

Straight forward, simple and to the point.

But somehow, there is a group of people who seems to love layering on more& more complex formulas.

This adds to mistrust of the intent.

AK71 said...

Hi LS,

Ignorance is the ground for fertile imagination.

To combat this, education is necessary. This has to be done soon, done well and done persistently.

I also sighz... -.-"

AK71 said...

Hi Veronika,

I was wondering when you might weigh in on this. :D

I have to agree that the system could be simpler. :)

I also get the feeling that much of the mistrust on the ground has to do with the government's shifting of "goal posts". If there could be some form of commitment that there will be no more of such changes, it will restore some trust in the system. Having said this, I am not sure that this is the right thing to do. -.-"

Still, I believe that if the government had done a better job of communicating with the public, explaining clearly the need for change, sentiments could be quite different now.

Unknown said...

In order for the current situation to improve, we need a game changer. lets allow full withdrawal for a start, but the agencies would need to communicate to the people what are the pros and cons from a layman perspective. This gives power back to the people and the government gain back the trust for a start. Do this first and more things can be done later to improve the situation better. I'm not in favour of full withdrawal but it has to be done now.

Unknown said...

Singapore zoro,
I think most of us dun really care how others use their cpf. But in the event there r ignorant ppl who "squander" their cpf. How do u suggest the govt should do?

1: leave them be as they have already been given their cpf. Govt only need to help them according to available schemes and such. Nothing more and nothing less.
2: govt should help them as it is the most humane thing to do. But how to help? Release funds to let them back into cpf and help them get back to status quo? But With who's money? I should think whatever money it is, it has got to be tax payers' money. May I ask, why should I help these people?
3: let them sign a guaranteed (by law) agreement to release the govt and the ppl of Singapore of their situation once they take their cpf? Honestly, will this work? If Singapore govt really forsake these ppl, this govt will be condemn by both voters and the rest of the world....

So zoro, what do u suggest. I do not want to pay for others mistakes. I also will not be envy in the event such ppl becomes rich due to withdrawing of their cpf.

AK71 said...

I think this is a valid concern and one that is on the mind of many financially savvy Singaporeans.

See a reader's PM to me in FB:

I agree there is no perfect system that would gain the approval of all, but more importantly to let the system work to our advantage. For this, I thank u for showing me how to. Have been topping up my special account the past 2 years to let compounding work it's magic.

The way my husband puts it: 'mandatory locking up everyone's monies is for the good of the wise and sensible so that they do not have to be penalized for having to subsidize the foolish in their old age.'

AK71 said...

Ibrahim, 60, “I am old enough to know how to spend my own money, so why does the government want to control my CPF? I want to use it to help support my daughter who is studying in Australia....”

Taken from theonlinecitizen.

Why did you send your daughter to study in Australia if financially it is going to be a stretch? I don't understand. -.-"

Unknown said...

Thanks to Julian for your comments. I have not followed the Roy Ng saga nor am i interested in it. But i'm interested in the bigger picture of things thats is the referendum that AK mentioned. If there is a referendum of releasing the CPF money at 55, it will set in motion something that has not been done in Singapore for many years since independence. I'm a proponent of changes when it is called for to defuse angst and bring focus to a situation that would be a win- win for all. And that's because i do care about fellow Singaporeans. There are many possibilities and consequences that we can probably imagine that may happen but that's a permutation that's beyond my sole ability. Sorry Julian, if u r looking for answers I really don't know as i hardly follow the news in Singapore let alone what the government should do :). But i do know what the vocal minority or majority wants and that include me.

caelitus said...

AK71, the naysayers might say that it is because the government do not create places in the universities for all Singaporeans and take in foreigners.

Without knowing details about his daughter's choice of studies in Australia, it may not be right to comment.

However, I agree with you that we need to be prudent and weigh the cost and benefits. That is one of the hardest thing to master.

AK71 said...

Hi Zoro,

The national referendum was something that I thought would put the matter to rest. It is transparent and since Roy et. al. keep saying about returning power to the people, let the people vote and see what the majority says.

Like you, I also wish to have the tension diffused and trust restored. Unusual measures for unusual times perhaps?

Of course, we can only wait to see what the government would do. Some concessions and guarantees as well as a stepping up in efforts to educate is what I expect the response is going to be.

AK71 said...

Hi caelitus,

Someone told me the same thing but there are options aplenty in Singapore. I went to a night school to pursue a diploma in business (which could have led to a degree if I had continued for another 2 years) instead of going away to Australia to study. That cost me a fraction of what it would have cost down under.

Also, I understand that some want to go overseas to pursue degrees in subjects which are not available locally. Being pragmatic, if financially it is going to be a stretch, the idea should be shelved until a later date. Do something available in Singapore first (which probably there is a demand for too).

Not all of us get to pursue our dreams. Only the very lucky or rich get to do it without having to worry about finances.

Unknown said...

Hi zoro,
Maybe a referendum or vote is a way forward. as what AK commented "unusual measures for unusual times".
However, I struggle to understand why our democratically elected govt needs to do that. It seems to me, the number of ppl who donated for Roy's agenda is only a negligible segment of Singaporeans. Why must we go through the logistic nightmare and expensive process of voting for such a issue? Note that in order to have a legal vote, it is going to be expensive. This is not gg to be an only online "play play MQC". And before that, govt needs to lay down the rules of pros & cons of cpf to give everyone the knowledge to vote properly.
Lastly, if another "Roy" comes along with some new issue. R we going to do this voting again? What sort of democratic govt is this? Why do we need a parliament? If allowed, Singapore is like a tribe who will convene every time an issue or bill needs to be passed. We will become a joke to the other country, if this referendum is done or not done properly.
The best way IMO is that these ppl just migrate to countries of their choice and take out their cpf and monies. No one is stopping them.
If they cannot migrate becos they r not "rich" or "skilled" enough since most countries will welcome rich and skilled individual with open arms. That'll mean that even if govt returns their cpf, it will just be consumed faster due to their financial mismanagement. So, with this understanding, they should understand that cpf monies with govt is safer for them. And enjoy 2.5% and 4% interest which they most probably never achieve on their own.
To me, it is just a simple elimination of choices. But to some of these ppl, it is "just return my cpf, U dun have to care what I do with it". But the issue is, a responsible govt must care about it.
Just my thoughts....

AK63 said...

It hurts me every time someone suggested that those who want their cpf monies migrate to other countries. Why?

We are born and bred Singaporeans. We grew up in Singapore. Worked hard to make a living in Singapore. Formed a family in Singapore. Going to work harder to make life more pleasant for our families in Singapore. Our only plan is to retire nowhere else but Singapore. We also contributed our share in helping Singapore grow economically and politically. Just because we ask for our hard-earned cpf monies and we have to migrate??? What logic is that???

Although they are just your thoughts, but they are dangerous thoughts. I shudder to think what if most of the people who are running our government now have similar thoughts like you. What is going to happen next? What other high-handed moves they are going to take?

I am sick but I am not weak. If my country is going to treat its citizens this way, I will not hesitate to help toppling this government in the best way that I can.

This is not a thought, not a threat, but definitely a promise.

Unknown said...

I think u have mistaken my thoughts to be malicious. I certainly do not advocate ppl to migrate just because they want to take their cpf.
But please consider that every action there r pros and cons. If anyone is advocating that "return our cpf". Then that person better give these ppl a solution if "shit" happens. Everyone wants their money back but not everyone knows how to take care of their money. Cpf is a social safety net to help you. Is it right of the govt to allow ppl to Remove it even if it's your choice. Is such a govt really the kind of govt u want?
Lastly, to say things like "toppling the govt", is worse than asking ppl with means and desire to migrate...

AK63 said...

Dear Julian....

If you read my comments carefully, you would know my stand on cpf matters. I don't feel like explaining myself again....

"The best way IMO is that these ppl just migrate to countries of their choice and take out their cpf and monies. No one is stopping them." - This is the opinion you give in your comment, no? I hope you have the whatever to stand by your own opinion....

"i certainly do not advocate ppl to migrate just because they want to take out their cpf." - Then why this contradictory statement? Never mind, don't need to explain further, in case it gets more confusing.... :p

(Sorry for cherry picking.... I prefer strawberries....)

Toppling the government is one of the last options for me and me alone, I did not ask anyone to join me, neither did I opinionate or advocate that others should migrate or not migrate (make up your mind) like what your honorable self did in your comments.... :)

Unknown said...

I do not advocate ppl to leave. but if they want to take their cpf then that is the only way out for these ppl.
Easy to understand? There r choices for these ppl and no one to stop them.

AK63 said...

Dear Julian.... Oh dear....

I've already tried to dissuade you from adding further confusion and contradiction, but no, you have so strong an urge to continue, might as well, I guess....

"....that is the only way out for these ppl", then "There are choices for these ppl...." So, which is which? Never mind, don't bother.... :p

The more you comment the more you sound like a government official. Only the authorities give such high-and-mighty replies to brush aside its people. "There's no other way", "This is your only option", "Take it or leave it", "You want your cpf, renounce your citizenship", very familiar phrases huh?

I believe there is always more than one way out for any problem, situation or dilemma, especially when it concerns a country where its government and its citizens have to work hand-in-hand for the good of all....

Let's make an example using your logic. Imagine this....

This government just finds out that the only way out for them is to lose the coming election and relinquish all power and leadership to the opposition. It is a cold hard reality they must face. Do you think they will just accept this option and wait for the eventuality to happen? Of coz not! They will find other ways and alternatives to get out of this unthinkable situation, I'm sure....

So, if they can think of a way out for them to win the next election, I am very sure they can also think of ways to help Singaporeans in need and come out with ideas to enhance, encourage, enforce and en-whatever that the people are asking for and make an effort to compromise on common grounds. The only thing now is.... Would they?

For their sake, I hope they would, and do not procrastinate coz these are pressing issues which they will feel the pressure of being pressed hard into the wall soon....

Do you still think there's only one way out for those who just want their cpf monies? :)

Cory said...

People who want to draw out the CPF, do not deserve it. Why ? They are probably not savvy enough. See below.

People who are savvy enough to invest, knows when to save, earn and invest. They are not desperate for CPF fund.

CPF is a blunt tool to apply all so that there is some basic amount of protection not only oneself but society at large. You can't pick and choose who can draw or not. Else what fairness ? I am not going to pay more taxes to fund other people retirements.

Unknown said...

Its a sad day...

Telling people that to get the CPF, the only way is to forsake their country. Adding the statement "easy to understand" does not tone down the harsh comment as well.

Commenting that the people who want to draw out their "own" money don't deserve it. So these people don't deserve their own money. I wonder who does...

I do not mind reading alternative views but I do mind reading comments that do not give consideration to others... maybe the commenters feel that the other party do not deserved any consideration. Make me feel I am reading statements from the men whom are high up in their white ivory towers

What a cold, unforgiving society we are living in now... so sad... :(

P.S. Can we have more consideration for everyone, even for those with views that are different from yours. Really will appreciate that.

Cory said...

Ya it doesn't make sense why should one leave the country because we disagree with the policy. Everyone should have their own opinion. Else i would advocate the more we have to stay instead and force the other party to leave. :P

However the whole idea of CPF is to support a "Secure Retirement" so that we will not be a burden to society. Yes it's your own money but is also a national contract as member of this country. To make the pill easier to swallow, the interests given is good enough.

While you are sure you can manage better, not everyone will. And this has to be applied fairly across. If we understand the whole concept, we are doing our part by not being selfish even though we can manage the money better.

I am not so sure how sad can this be.

AK63 said...

It is indeed sad, very sad, since the day this government tried too hard to tweaked the system to benefit the so-called greater good of the country.... :(

It is indeed sad, very sad, that fellow Singaporeans want others to leave just because they want to take out what's theirs from cpf.... :((

It is indeed sad, very sad, that fellow citizens trying to dissuade others from taking out their own monies because they don't deserve it.... :(((

It is indeed sad, very sad, that so many like to impose on others what they think is right and judge others, rather than giving considerations and compassion as fellow human beings who are just trying to survive.... :((((

To all the Julians, Rays, Corys of this little island state, I wish that you will prosper and achieve whatever you set out to do, but during the journey, please open your eyes to see rather than just look, to listen rather than just hear, those little peoples and their voices along the path who are so insignificant and unimportant to you, while taking a break from your marathon, do what you can to help regardless how insignificant to you that help might be, it means a lot to them. Thank you.

Anonymous said...

ai yo! pap bo dai bo ji pun tio shoot!

AK71 said...


1.57pm: The first challenge is financial sustainability. An estimated 85% of US public pensions will go bankrupt in the next 30 years. The next challenge is giving individuals sustainable returns while not exposing them to more risk.

1.58pm: In many schemes, the worker has to choose his own investment plan but bears the risk. In theory, an individual can get more returns, but evidence has shown that the individual underperforms the market. In the US, individuals earned just one-third what the market benchmark returned in the past 30 years.

2.00pm: One risk is retiring when interest rates are low. The pot of money you have will then give you a smaller stream of income for the rest of your years. Many schemes require individuals to convert their retirement funds to an annuity or a monthly payout. But there is often no floor, or minimum interest rate for these schemes. Low market interest rates mean less income.

2.01pm: The CPF scheme is aimed at meeting basic retirement needs. It also avoids presenting risk on taxpayers. The CPF is not a perfect retirement scheme, but it is among the better regarded internationally. It also gives those who are asset-rich but cash-poor more convenient options for monetising those assets.

2.03pm: While the CPF does not give the highest returns, it provides fair returns, one of the safest returns in the world. Few systems offer a minimum rate - 3.5% on OA, 5% on SMRA. The returns are guaranteed by one of the few remaining AAA-rated governments in the world. On top of guaranteed rates, the Government subsidises CPF through the Budget.


Unknown said...

Are we been short change. Just simply invest in a global bal fund unit trust got me a return of some 7%. My personnal experience. 3% more compounded is a big sum.

AK71 said...

Hi Unknown,

We have to compare apples with apples. Returns on our CPF money is risk free. Investing in equities and bonds is not.

As risk free rates go, 2.5% to 5% per annum on the back of a strong currency and average core inflation of 2% per annum is pretty decent.

Can we be sure that we will get 7% per annum in returns investing in a global balanced fund in future, bearing in mind that the last few years have been years of exceptional monetary policies? Marc Faber famously said that the GFC was a once in a lifetime opportunity for us to make a lot of money.

Most people are unwilling and unable to stomach the volatility and the risk investing their own money. They want the good without the bad. Unfortunately, we cannot have our cake and eat it too.

I will be blogging more about the IPS Forum on CPF and throw more light on the matter, hopefully. :)

AK71 said...

Tony Shue says...
Malaysia's EPF gives better returns. 4.5%-8.5%. Last year was 6.9%. And we can keep our money in there till 100 years old. We can do unlimited withdrawals (min RM100, max your entire balance) like ATM. Only need to go to counter and submit form (10 mins). Then EPF direct bank into your acct within 2-3 days. You can also apply for fixed monthly withdrawal (auto bank into your acct) But voluntary deposit back into the acct is limited to RM60k per year.

AK says...
If my savings are in a currency that depreciates against the S$ by 50% every 10 years, a 6.9% interest rate is hardly attractive.

Tony Shue says...
I live in Malaysia and spend RM. S$ is not relevant to me except when I go there a few times a year. Although we can talk about imported inflation blah blah blah. But all things being equal..

AK says...
Being proud of being a Malaysian is commendable. ;)

Tony Shue says...
Since May 9, yes.

AK71 said...

Jack James says...

Yes , EPF has higher interest but the housing loan interest rate is rocket high at 4.5% too .

I am Malaysian , any pro and con , ask me !

AK71 said...

Jack James says...
Forgot to add one more point , Singapore personal income tax is dirt cheap compared to Malaysia . You want to compare , compare until the cow comes home .
It drills down to each individual , what kind of lifestyle you want , that’s it .

AK71 said...

Tony Shue says...
No. This was not the context I was thinking of.

Jack James says...
Aiya ... your context is simple .

1) EPF higher interest rate than CPF . Chopped . It is .

2) EPF can take out every single cents at age 55 . CPF , we can do the same too at age 55 but we have annuity locked for monthly payout whereby EPF doesn’t have .

That’s all .

AK71 said...

Comparing Malaysia's EPF system and Singapore's CPF system superficially, just touching the tip of the iceberg is a waste of time.

Why bother?

AK71 said...

Reader says...

hey AK, just want to point out a very simple reason why Tony Shue's comparison is flawed. If he wants to compare CPF vs EPF and assuming he will be living in Malaysia, then he should compare the following:

1) Leaving your money in Malaysia's EPF (as Ringgit) for X number of years
2) Leaving your money in Singapore's CPF (as SGD) for X number of years, and then at the end of X years, convert it all to Ringgit.

You still end up with more Ringgit probably, if you leave it in CPF, because nothing is stopping you from converting the SGD to MYR. So you are right when you point out that the depreciation of MYR vs SGD is very relevant. It can't just be ignored.

AK says...
When we look at interest rates, we should be aware of both nominal and real rates too.

Unfortunately, many are not as clear headed as you are. 🙂

AK71 said...

Siew Mun Kwan says...
CPF RA is a cornerstone of my retirement where all else fails I can rely on CPF Life annuity payout for subsistence.

CPF is protected from bankruptcy claims and divorces too.

Really a good tool for consistent payouts when you are old, vulnerable and too frail to work.

AK71 said...

Unknown said...
Hi AK, just ignore them (HWZ Forum).
those ppl on EDMW (thread) were siao lang.
In fact, EDMW was pretty embarrassing

AK said...
Some people are just not shy to show off their ignorance.
Well, I am not shy to show off my CPF numbers. ;p

This guy has 800k in his CPF.

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