We do better managing our savings than the CPF does!

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):

Source: www.cpf.gov.sg



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

"Return our CPF" protest in Hong Lim Park (UPDATED).

UPDATE (12-12-2016).

State pension schemes in a number of countries are under tremendous stress. We try to look after our old people but in a sustainable way.

A very down to earth message from a reader, JQ, to ASSI's readers:

"Think of CPF as money that can be used for meaningful purpose than a windfall that you can splurge. 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?" JQ
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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.

AK 
12-12-2016
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Anyone who is in favour of the CPF would have to be very brave to speak up in Hong Lim Park today. Some netizens who were at the protest estimated the turnout to be between 3000 to 6000 people! This is truly mind boggling.

The speakers included Tan Kin Lian, Kenneth Jeyaratnam and the now very famous Roy Ngerng. I checked twice to make sure I got his surname right.

There is a whole lot of unhappiness. There is a whole lot of distrust. There is a whole lot of work for the government to do to diffuse this time bomb. 

Yes, I feel that it is a time bomb.

If not handled sensitively and in a timely manner, it could turn out badly. I am sure no matter whether we are for or against the CPF, we do not wish for the country to sink into anarchy. Think Thailand.

Here are some photos netizens shared on FB:

Read a rather sterile report by Channel NewsAsia: here.

"... distrust is something so emotionally charged that it is guided by its own perilous logic and propelled by its own alarming momentum. It has already widened the original disconnect between the PAP and the people into an almost unbridgeable chasm." Catherine Lim.

Read the full impassioned plea by Catherine Lim: here.

Regular readers know what I think of the CPF and how I believe it could work for us. 

The CPF is a good tool if we know how to make use of it.

However, if people no longer trust the system, then, it is almost impossible to even make them listen.

Related post:
Achieving level one financial security.