CPF Life – A Critical Analysis
September 21st, 2009 | 
Author: By Damon Yeo, Business Correspondent
The new CPF Life (aka the National LIFElong Income Scheme) is an overhaul to the entire CPF system and a change in the wamy CPF is providing for all its members. It will mark a massive shift of principles and ideology which Singaporeans had gotten used to after its inception in 1955.
Before the new scheme, CPF is simple. You earn a salary and CPF safeguards part of it for decades, so that you can enjoy the enforced savings upon retirement. What you have earned throughout your working life is yours alone to enjoy when you reach the CPF-determined retirement age.
With CPF Life, the landscape changes entirely. Every CPF member, upon reaching 55, is shoved into a scheme where everyone gives up part of the CPF money that is put into a pot of funds. This monetary pot will eventually provide for every member for as long as he/she lives.
Despite the marketing efforts by the CPF Board (source: MOM), there is no denying that this is significant change. The question to be asked here is – why is there such limited public consultation for such a policy change? The government is again shoving stuff down our throats and insisting that they are “good for us”. Singaporeans have no choice but to swallow diligently.
There are always two sides to every coin.
Yes, the scheme somewhat solves the issue of ageing population faced by the government. With our life expectancy increasing, we will have a growing pool of elderly who survive well into their 80s.
Under the old scheme, this group of elderly will stop receiving monthly payouts as their CPF accounts had run dry when they reach 85. If they are unsupported by their offspring, they may become a strain to social welfare services, healthcare services and society.
From a public expenditure point of view, this scheme is a win-win for the government as long as the scheme is running at a surplus i.e. the pot of accumulated funds is always more than the amounts it has to pay out (highly paid actuarial analysts would have ensured this through complex projections and calculations). In the long run, the financial burden of supporting the elderly is passed on and then shared amongst all Singaporeans.
On the flipside, there are several main drawbacks of this new scheme.
Without CPF Life, most people will receive a monthly income (depending on the individual’s Minimum Savings balance) for 20 years, until the age of 85. The new scheme will enable those who live past 85 to continue receiving monthly income. Hence, anyone will only benefit from CPF Life if he or she can expect to outlive his peers by at least 6 years (national Life Expectancy is about 79).
The scheme does not protect its members against inflation. Monthly payout amount is fixed at age 65 and will remain the same throughout for the rest of the person’s life.
Inflation was 6.5% in 2008. Let’s say that 2008 was one-off because of record oil prices and assume that Singapore’s economy will move closer to developed countries.
Inflation should be about 3.5% for years to come. At this predicted rate, prices will double in about 20 years hence halving the real value of this payout over the same period of time.
CPF had defended not linking payouts to inflation by stating two blatant assumptions:
Firstly, they state that “if we (Singapore) experience a period of higher inflation, nominal interest rates are likely to go up too” and hence we will receive “bonus” payments from CPF LIFE payouts.
There is absolutely no basis to suggest that interest rates on CPF accounts are or ever will be held in line with inflation. To illustrate this, interest rate for Ordinary Account in CPF had been held constant at 2.5% since mid-1999 (source: CPF), while inflation had swung wildly from -0.4% to 6.5% over the same period of time. (source: singstat)
Secondly, CPF said that “with inflation, the value of your property is likely to go up”, thus shielding you from the effects of inflation. House prices do form a significant part when calculating inflation but to suggest that the inflation will drive house prices up is simply twisting logic.
Singapore’s economy is highly driven by imports and exports so it is highly possible to experience a sustained period of inflation without house prices going over the roof. Also, ever-increasing house prices are never going to be sustainable and an asset bubble can never be a good thing for the economy.
Because this is a national scheme, no one is allowed to opt out of the scheme (apart from some extreme exceptions). Once onboard, no one is allowed to withdraw from it unless it is on medical ground or one is leaving Singapore and West Malaysia with no intention on returning. This area is left somewhat vague to the benefit of CPF – they will of course ultimately decide if a person can withdraw from the scheme or not.
The only “choice” available to CPF members is between varying levels of monthly payouts and if one wants to bequest anything to his/her offspring. Once a choice is made, CPF will not allow it to be changed.
The rigidity of this scheme for its members is designed to protect CPF from uncertainties it may ever need to deal with. For the scheme to be sustainable and profitable, CPF needs as many people as they can get to be in the pot.
Understandably, CPF was not set up in the first place to assist the poor. However, CPF Life further accentuates the rich-poor divide of the country. To be eligible for this scheme, a person needs to have at least $40,000 in their Minimum Savings (MS) account by the time they reach 55.
A CPF-published brochure states that at least 60% of its members will have at least $67,000 in their MS account by 2013. It goes no further to state the percentage of Singaporeans who will not be able to join the privileged group of people protected by the CPF Life scheme because of poverty.
All said, perhaps it is only reasonable for more Singaporeans to hear both sides of the story and be allowed to make an informed choice whether to be in the scheme or not.
Other articles by Damon Yeo:
>> DBS and a series of ‘unfortunate events’
>> Sale of Chartered – An Anatomy
>> 3rd most competitive natio in the world and what it means to the average worker
About the Author:
Damon is a proud graduate of Nanyang Technological University in 2004 with a degree in Accountancy. He is currently working in the finance department of a UK Bank. He is also a regular contributor at redsports.sg.
Posted in 
There is a mistake.
The payment after 65 is NOT fixed.
It varies.
Check this out with CPF board.
Most pensions scheme works like you described. But not the CPF life.
The payment after 65 is not fixed.
Like or Dislike:
0 
0
It is also not true that if you take out everything from CPF you cannot return to Singapore.
You still can as a tourist but you cannot work in Singapore.
That’s all.
Like or Dislike:
0 
0
There is no protection that CPF life will make a fair/targetted return.
Even GIC/TH could not do so, what makes CPF thinks it could.
There is a huge risk that CPF life might take on some lousy asset from TH/GIC while they make a huge profit but CPF life suffered a loss and CPF life can halt or reduce payment.
This is a hybrid scheme to con s’poreans.
We ended up having no accountability, security and reliability in retirement.
Like or Dislike:
0 
0
Just when the whole world is moving towards defined contribution which was our scheme, Singapore is moving towards a reduced/a lame version of defined benefit scheme.
Any ideas why?
Like or Dislike:
0 
0
The administration of a defined contribution scheme is recognised to be easier and our scheme was one such scheme.
Already with such a scheme with the relative ease of administration, we still don’t have enough monies for retirement, the govt think that with defined benefit, they could solve the problem?
Is that credible?
Think for yourself.
Like or Dislike:
0 
0
I don’t see the point of CPF Life. If running out of CPF retirement money before one reaches 85 is the problem, then a simple solution would be to raise the CPF interest rates. It’s that simple. Keep it pegged to the inflation rate. There’s no need for CPF Life.
Like or Dislike:
0 
0
Understand that foreigners leaving Singapore permanently can collect their entire CPF amount. Is this correct? Anyone got relevant information?
If that is correct, then Singaporean citizens are trapped in disadvantage of no freedom of choice. YOU ARE IN CPF LIFE whether you agree or not.
Foreigners and PR will take their money out after 20 years and our buried in our funeral coffins.
WHY IS SINGAPOREANS TREATED SO HARSHLY AND UNJUSTLY OF DEMOCRATIC CHOICES while PRs and even some citizens ( those with dual citizenships like Britain and Australia can renounce Singapore citizenship at right time) can take their CPF savings out when they return to their homeland.
How more RIDICULOUS this gets?
Like or Dislike:
0 
0
litmus test:
is your ministers and MPs in this scheme?
Or they are in this scheme and another MP scheme, minister scheme?
If they are not in this scheme, why?
Also, with CPF life, S’poreans ended up subsidizing S’poreans. Govt got nothing to do.
Please take your monies out and vote accordingly.
Like or Dislike:
0 
0
I’m not sure about ex-sinkees not being able to work in sinkeepore anymore… but I know of this rule: if you’ve withdrawn your CPF and renounced your c’ship, and if you want to become a PR here again… you must deposit all your CPF monies back into your account.
You see the double standards here?? If a foreigner wants to become a PR, no such stupid rule. For an ex-citizen, you have to pay the government a lot of money which is locked into an account you can’t use.
Like or Dislike:
0 
0
There may be hidden clause for such scheme like the minibond saga. I remember Gan Kim Yong did mention in parliament that if CPF has no money, it has no obligation to pay out. It shocked many people with such statements.
Anyway, still remember GCT forcing people to buy singtel shares thru CPF. What happened next, the shares did not add value to our investment and everyone was struggling to sell it when it plunged or hovered around the cost we paid out. That was a scary experiences to many Singaporean.
Having said that, CPF life scheme is simply used to lock our funds so that Ho jin can spend more…all these silly schemes are inter-related and frankly, they do not help the people just like raising GST to enrich the ministers salaries in the name of “helping the poor”. Never be a fool.
Like or Dislike:
0 
0
Well, now we can’t say the government is holding some of our money back.
It’s a win-win. We pay for our old age; not the taxpayers.
Secondly, we have now to think twice before casting our votes.
Our continued payouts will in fact depend on an honest, credible, reliable and strong government.
45 good years. I don’t know abt the others, but for this superb track record I’ll most certainly give my vote to the incumbent PAP.
Like or Dislike:
0 
0
when tested in crisis, the incumbent failed and unaccountable.A lot of people assumed that it is a growth enrichment life, more debt-financed spending and more spending world to keep the economy and more good years ahead.
Well those “old” school of thoughts living in the fantasy land of history were wrong. The world unravelled. Nobody has yet figured out how to manage the economy in the “new” world of less spending, more saving, shrank demand, climate change and carbon reduced world of smaller economy, new industries etc.
It is blind groping in the dark – globally of all governments.
I take my money on my pocket and leave goons to trust history and uncertainty of those claimed smart but found badly wanting in the first test of crisis – WHERE THE RECORD DEMONSTRATED RECKLESSNESS, FOLLOWED BY PANIC REACTION, THEN UNABLE TO RECOVER FAST ENOUGH WHEN GLOBAL FINANCIAL MARKET REBOUND TO UNDERPERFORM AGAIN.
In other words, failed as the crisis deepens, paralyzed as the crisis escalated, panic when the eye of storm blew over and crying when the sun shine and blue sky return (even if of unknown durability now).
I don’t know about others. I TRUST my money in my hands, not of unpredictable incompetent goons whoever they are down the road.
Nobody is wiser than my money in my own pocket!! Trust me, smart foreigners will take their money out and party in Bahamas or Hawaii.
Like or Dislike:
0 
0
If we went to school choice in’t a problem.
We only need to consider 2 factors.
(1) compare bt the government’s (CPF Life) and the market (eg NTUC, GE) – the premiums, payouts, etc.
(2) whether you care for yourself or your children more? if you love yourself most then take the lkat option. Simple.
Now we know where our scholars are. Not those empty who only know one thing – criticise.
My greatest fear if anyone of those charlatans get into my constituency because of his tongue then we will all go kaput!
Btw, I’m neutral. You would have to decide for yourself.
Like or Dislike:
0 
0
//Yip Chee Kiong on Mon, 21st Sep 2009 11:46 am
“Well, now we can’t say the government is holding some of our money back.”
U mean you get to take back all your monies when you are 55?
U mean we get to take back all our monies when we are 55?
Or the funds are in another account entry in the govt books?
If the 3rd statement is true, then how can we say that the govt is not holding our monies back because it is still with them?
I cannot believe the amount of monies pap pays people to post stupid entries like Mr. #Yip Chee Kiong
Like or Dislike:
0 
0
//Tan Sim Hang
This is Another joker.
“(1) compare bt the government’s (CPF Life) and the market (eg NTUC, GE) – the premiums, payouts, etc.”
The payout is not fixed for CPF life, how do you compare?
You can take out from the commercial one to put into another commercial one or overseas annuity scheme if your monies were with the commercial annuity. Can you do that with CPF life?
This is one of the stupidest comparison.
I really wonder how much PAP pays people to post on this blog.
There is also a lesser known fact:
should you choose the option where you take the maximum payout, and if you die between 55 to 65, the govt takes everything. None of your relative gets anything.
This is one way the govt is taking advantage of you dying earlier.
Remember the average age of death is 79. That means some people must be dying much earlier than 79. Some of course will be dying much later.
“Now we know where our scholars are”
For the amount that pap pays you, you will to write something that makes sense. The above is senseless.
“My greatest fear if anyone of those charlatans get into my constituency because of his tongue then we will all go kaput!”
We all know HC burns monies at a rate faster than anyone in Singapore: 40 billion++ in 3 months.
That’s a feat.
Why would we want money burnt?
Like or Dislike:
0 
0
//Yip Chee Kiong
Well, we know who to laugh at when CPF life halt payment: you.
Like or Dislike:
0 
0
Well done fpc for debunking the spurious logic of Yip Chee Kiong & Tan Sim Hang. It is laughable that their arguments don’t even make any sense upon closer examination.
Perhaps the PAP Internet Brigade thinks that their astro-turfing tactics will seem more credible if they start using “real-sounding” names. Well, hope they realize it’s the content of the arguments that count, not the “name” that is used.
Sincerely,
Tan Ah Kow
Like or Dislike:
0 
0
Yip Chee Kiong & Tan Sim Hang,
This CPF Life is not guaranteed and you can kiss your money goodbye when the fund becomes insolvent. It is in the Act.
CPF Life fund not solvent => no more payment.
Pls do not count chicken before they are hatched. You may experience stop payment way before both of you die or even before you received your 1st payment. Since when citizens know if the fund is solvent or not? For that matter does anybody know how much is our reserves and how much of our reserves disappeared? The PAP Town Council, Temasek Holdings and GIC – their record speaks for itself. How much did PAP Town Council lost in the Minibond? How much did Temasek and GIC lost? How come the opposition Town Council did not suffer the same fate? What is there to vote? What is there to decide? Am I even given a chance to vote?
Can you tell me where is the moral obligation in making it complusory and yet pass a law that enable CPF to stop payment altogether? Is the government i.e. CPF giving themselves a legally exit route to rip citizens off? If not, why the need to pass this law?
If you are paid to write such irresponsible postings, then can I suggest you do something useful? Something that will not bring your upbringing to shame. Coz you sell your soul of that few $$. Shameful!!!
Like or Dislike:
0 
0
CPF LIFE = Compulsory Ponzi Fraud Liability Incurred For Eternity.
Like or Dislike:
0 
0
“This CPF Life is not guaranteed and you can kiss your money goodbye when the fund becomes insolvent. It is in the Act.”
What’s guarantee in this world? Lehman? Freedy-Mae? Banks have collapsed. Any guarantee from the Opposition who won’t even spare the petty cash for postage?
Come, come . . . it’s all aboiut faith, isn’t it?
Like the Greenback that can be dumped one day.
For us we’ll trust the PAP over all the wat’s not and freebies by the Opposition,
44 good years ready. We ain’t dumb when it comes to money. Plkace it where PAP, PKMS, SDP, RP, etc???
Use your brains! Unless you don’t have or your are not a STAKEHOLDER here! Logical?
Like or Dislike:
0 
0
If you are a no brainer and ABSOLUTE NO HOPE DEPENDENT CASE, you trust your future with the incompetent but if you got a little bit of brain, you trust your own judgement of investing for your own future.
You are wiser to be your own stakeholder IN CONTROL OF YOUR OWN FUTURE rather than having impulsive gamblers replaced you as the disinterested and unaccountable for “stakeholder” by default. Can’t you see the difference?
Money in your hands is YOURS. Money in someone’s hand as you said is no guarantee, is like US dollars can be dumped any day and indeed brutally dumped in the last two weeks almost without respite until tonight.
Like or Dislike:
0 
0
The CPF Life program is supposed to be the implementation of the Report by the National Longevity Insurance Committee (NLIC) chaired by Lim Pin
http://mycpf.cpf.gov.sg/Members/Gen-Info/CPF_LIFE/NLIC.htm .
However, if you read it carefully, there are many critical provisions in the Report which the CPF Board did not implement, e.g.
1. the choice to opt-out of the program,
2. the choice to purchase alternative annuity from a commercial insurer.
We should understand that an annuity typically is a commercial product governed by a contract. If the CPF Board cannot guarantee the contracted payout, then it has no business offering the annuity in the first place.
Like or Dislike:
0 
0
Why do u need to depends on someone or the CPF Life to manage ur money? Why do u have to beg for ur own money to be paid to you? Your hard earned money is used not for yourself! And what about the rules for the Special Account? How many of us really utilise that? ( i would use my cash to buy insurance like those in AIA or prudential)
Please let us have our own plan and decision for what we think is good for us.
45 years?? Who get the fame and benefit? Do you really get it? U became happier? Dont u find that its harder and harder to live in our homeland? Think it for yourself
Like or Dislike:
0 
0
//Yip Chee Kiong
This is another blind joker.
CPF life is not about faith because you cannot choose to opt out.
It is as simple as that.
Just imagine people forcing to be a muslim. Is that acceptable?
All the more so, when the current design actually aggravate the unpredictability of the life of a retiree because he needs to insure against the govt varying the payment or halting the payment.
Just tell me a few pension plans that are not underfunded over the last 30 years.
define benefit Pension plan is extremely difficult to administer and pretending that the current provision protects our interest is silly.
HC burnt 40 billion. What makes you think there are current PAP jokers who would do the same (even if he only managed to burnt 20 billion (half the rate) over the same period of time), you are not getting your pension.
We didn’t vote for PAP, at least for the generation of PAP people from 90s to 2000s. Most of those who were responsible for the foundation of modern singapore have died. The ones remaining are nearing death.
They know that.
The ones who walked over in all the constituencies have not been chosen.
And they get high pay for doing nothing.
Pretending that we voted for them is sick.
Like or Dislike:
0 
0
even if we did vote for the PAP, it is a blank cheque that they could use to squeeze us further.
Remember all the charity drives.
All started with a noble aim but we all know how seeing so much monies corrupted the CEOs.
Do you still donate now?
Like or Dislike:
0 
0
The current pension design actually aggravate the conditions of the pensioners because the payment is not fixed and could go down.
It is like HDB having for mission to provide low cost home and now its flats are costing a huge amount.
What makes you think CPF life would not be manipulated until it couldn’t fulfill its basic mission?
Like or Dislike:
0 
0
//Yip Chee Kiong
//44 good years ready. We ain’t dumb when it comes to money. Plkace it where PAP, PKMS, SDP, RP, etc???
I for one have not receive any CPF payments.
Everything I own, I have to work for it.
I don’t even work for the govt.
As for placing monies, I don’t know why you quote political parties.
Well of course, even the banks have failed. I don’t know why you have so much faith in the less professional banks.
Like or Dislike:
0 
0
//Yip Chee Kiong
//44 good years ready. We ain’t dumb when it comes to money. Plkace it where PAP, PKMS, SDP, RP, etc???
I for one have not receive any CPF payments.
Everything I own, I have to work for it.
I don’t even work for the govt.
As for placing monies, I don’t know why you quote political parties.
Well of course, even the banks have failed. I don’t know why you have so much faith in the less professional political parties.
Like or Dislike:
0 
0
To: Yip Chee Kiong
You mentioned you have 45 good-years under the PAP? Where were they when Singapore hit global-crisis. The last I know of PAP was when they started to cry for help and want Singaporeans to come out a solution. The last 45 years of wealth were built by Singaporeans hardship and made poor by the ruling party. Stop reading what ST has written, and pay more attentions to what has truly happened.
Like or Dislike:
0 
0
Amittedly, I have not familiarized myself enough with the CPF Life scheme, and I also just scanned through the article very quickly.
But this is what stands out for me so far.
1) There is an erroneous assumption made in the formulation of this scheme; all Singaporeans/PRs are assumed to have a CPF account.
2) The scheme also stipulates that only those with a) a CPF account; and b) a minimum of $40 000 in it, qualify for the scheme.
Right away, it reminds me of a *truth* that I wrote in the SDP website recently: whenever a/n conservative/ultraconservative and/or fascist government (whose political ideology, no doubt is informed by its position on the political spectrum) implements an income security or welfare program, it infuses its political values into those programs; those values are typically the harsh and punitive attitudes that conservatives of all stripes are well known for.
In this case, the political values the PAP has infused into the CPF scheme are those of punishing the extremely low income earners and those who don’t have a CPF account without trying to discover why the people who find themselves in such circumstaces do so in the first place; the hardest hit segments of society deserve to be hit even harder, according to conservative political ideology.
The other things that stood out for me were:
1. What if you were someone, usually a woman, who never worked outside the home because you wanted to bring up your children on your own? Has ‘Asian values Singapore’ reached a stage where a woman wanting to bring up her own children is such a radical idea? And that she should be punished with no income security in her old age?
2. What of Singaporeans who have a permanent disability and who were either never able to work or who were routinely denied employment because of discrimination based on disability, and thus never had a CPF account? Should the life-long punishment for their disability that the fascists – including those in the WP and the SPP – have determined are due to them continue into their old age?
Like or Dislike:
0 
0
Yip Chee Kiong,
“What’s guarantee in this world? Lehman? Freedy-Mae? Banks have collapsed. Any guarantee from the Opposition who won’t even spare the petty cash for postage?”
Before I start answering your question, I want to state that I am a citizen of Singapore, a stakeholder of Singapore, have a CPF account, have properties in Singapore but did not have a chance to vote for a good long time.
It is not about guarantee of any sort. My posting is in respond to your earlier posting. Now you asked about guarantee. There is no absolute gurantee I must admit.
BUT when you make it COMPULSORY for CPF account holders to partake in this CPF Life then, there is a moral obligation to ensure that it is as good as it should be i.e. ensure all CPF members have a regular source of funds to meet their retirement needs. They should not pass a law that enable them to wash they hands totally clean by just saying the funds is insolvent.
In the case of other forms of investment, individuals have choices.
1] They have choices in deciding if they want to take up whatever “investment opportunities”.
2] They have a choice to cut loss in the event that that investment turns sour or become irrelevant.
3] They have the choice to sue the issuer/counterparty for losses as in Lehmen bros now.
Do you have a choice of opting out of the CPF Life?
Do you have a choice to cut loss and opt out over time?
Do you have a choice to sue the government i.e. CFP for stop payment when they are protected by the law to stop payment?
Come on. It is not about blind faith. It is about being fair or not? If you want to make it compulsory, then do not have that legally binding escape route in place. That is totally unacceptable. Totally unfair!
I must agree that the pioneer years PAP rules is fantastic. I have great admiration and respect for politicians like Dr Toh Chin Chye, Goh Keng Swee and the like. But the current bunch of politicians including the MM & his son and his nephew in law are nothing to have faith with.
Yet you still have that blind faith. If blind faith is asked from me, I rather have a change and take that chance to ensuring a more fair treatment. Already the current Opposition Town Councils do not have this minibond loss problem is good enough for me to think they are capable of handling the money vs those PAP run Town Councils that have lost millions of it in their minibond misadventure. How to have faith?
I want a fair government who would look into the interest of Singapore citizens and not treating us like idiots with their uniquely Singapore law to stop payment when they simply declared the fund is insolvent.
I also want a government that could treat Singaporeans better above those foreign trash e.g. those multi millions budget on integration project vs that miserable S$1 million on the aged; uni placements; NS; maids issue etc.
I also want a government that would respects fellow citizens. We must be allow to vote for our representative and no less i.e. all wards must be contested. Remove all deposit and penalty requirements, reduce the GRC to no more than 3 and open contest to be brought on. If it is not contested, then keep the window open till all seats are contested. What’s the hurry? I rather wait for 5 months than to not given a chance to vote for the next five years! This will allow everybody’s choice respected.
Finally, I want a government that is accountable to all Singaporeans – strategic purposes or otherwise.
Like or Dislike:
0 
0
[...] Twilight in Paradise. CPF Life – flaneurose: On CPF Life [Thanks twasher] – The Temasek Reivew: CPF Life – A Critical Analysis [...]
Like or Dislike:
0 
0
What is even more galling is this:
When you purportedly “benefit” (eg, Dividend Package, Growth Package, property tax/conservancy fee rebates, subsidized healthcare, etc), the Govt means-test you under the broadest possible net – from the type of property you live in to your married siblings’ financial status.
When you try to withdraw your own CPF money, suddenly everything is distilled down to what if your CPF balance as at your 55th birthday!
CPF Board doesn’t look at the properties you own or your net assets – surely if you managed your own finances pretty well up to age 55, you don’t need CPF Board to hold your money until age 62-65 before being allowed to draw down and stick your hand out for a monthly pittance???
Like or Dislike:
0 
0
As a first, Singapore ministers Should take up the scheme as a show that it is a good scheme which everyone should take up.
As a second, Since Everyone, who is working in singapore, are paying income taxes, Ministers and MPs should pay taxes too.
Like or Dislike:
0 
0
Yip Chee Kiong, if not a paid PAP poster, is definitely a sheep bleed and raised by the PAP, blinded and will be lead by the nose wherever, however and whenever PAP wanted you to go.
Like or Dislike:
0 
0
This “CPF Life” scheme is definitely one more scheme to lock down your CPF monies coz basically CPF is not solvent at all. Why else do they need to keep raising the min sum, raising the withdrawal age, encouraging you to top up the various amount, SRS, the ever-affordable housing loans, etc?
To all sheep, please remove the wool from your eyes and look around carefully.
Like or Dislike:
0 
0
I’ll be pretty sad if I have to depend on CPF Life for survival during my old age. But that tiny little bit of safety net is still better than nothing. Hopefully I can still buy $2 economic beehoon then… maybe congee, less strain on my dentures. Better talk less and sleep early, try to earn as much as I can so I will have my own bigger and thicker safety net. Once I have financial independence, I would not care if the government want my $60k to pay me $300 monthly.
Like or Dislike:
0 
0
“straighttalking on Wed, 23rd Sep 2009 11:09 pm
I’ll be pretty sad if I have to depend on CPF Life for survival during my old age. But that tiny little bit of safety net is still better than nothing. Hopefully I can still buy $2 economic beehoon then… maybe congee, less strain on my dentures. Better talk less and sleep early, try to earn as much as I can so I will have my own bigger and thicker safety net. Once I have financial independence, I would not care if the government want my $60k to pay me $300 monthly.”
You’re a smart chap. Your are darn right! You make sure that whoever who’s governing us then, when we’re old, frail & weak, can honour the CPFLife payouts (our blood & sweat savings) and continue to give out goodies like Growth Dividends, Utilities subsidies, etc.
Go for the proven, the track record. Stick with the PAP. I’ll will; don’t know abt you. Nothing political. It’s abt SURVIVAL.
Like or Dislike:
0 
0
Free choice should be available to one and all – TO OPT OUT.
CPF is my money and it should NOT be imprisoned like my political thoughts and my living well-being. I am not dependent on the power to be for my old age nor am I beholden to them. I just want to enjoy my money while I still can walk at 55.
For anyone else, weak, incapable or dependent, let their future be their own enslavement of their own free choice.
It has nothing to do with political herd mentality.
And yes, it is my survival and my own pleasure. This is a free democracy or is it NOT?
Like or Dislike:
0 
0
Where is the critical analysis in this article? It is critical of CPF Life, that’s all. To get a more complete view I decided to do a search and landed on ex-ntuc CEO site Mr Tan Kin Lian. See http://tankinlian.blogspot.com/search?q=cpf+life
I read the articles and various comments and come to the conclusion that CPF Life is not that bad. If you don’t agree you are entitled to your opinion.
I read dissenting views and one view is “it is my money and I should be allowed to do what I want with it”. Perhaps, true. However, I like to share my experience. After that you can call me stupid. I don’t really care.
There are just many people who are not financial savvy. I am one of those.
When CPF rules were relaxed to be used for investments, I was one of those. Those days they had CPF trustee stocks, and without proper research I bought based on recommendations and I suffered huge losses. Same thing when I took out from my special account (which was giving 4%) to buy into a fund a bank recommended. That also ended in losses. Should I blame government for relaxing the CPF rules? No, because people wanted it. Should I blame government for introducing trustee stocks? No, because I didn’t do my research.
I have an elder brother with a gambling habit. At 55, he took his money out from CPF and squandered them away. Now being old, he can’t get a job and is now causing much strain for his children.
Dissenters to CPF and CPF Life, do understand that not all are financially savvy. I think some of these people should be protected against their own destruction and that includes me.
Another dissenting view is this “I am rich. I don’t need CPF Life. Just give me back my money.”
As Mr Tan says. If you are rich, treat CPF Life as another arm of your investments. You don’t have to manage everything yourself.
To me, CPF Life is a pool to help all who lived too long to have a steady income. In the many comments in the various articles, there are talks that government is not helping the poor. For the very rich, I say this, “If you don’t need the money from CPF Life, give it away”. Perhaps, there should be an option to allow the rich to VOLUNTARILY put money into the CPF Life for others. Wouldn’t that be nice?
Like or Dislike:
0 
0
Alternative, your comment..”Those days they had CPF trustee stocks, and without proper research I bought based on recommendations and I suffered huge losses. Same thing when I took out from my special account (which was giving 4%) to buy into a fund a bank recommended. That also ended in losses.” DID NOT SURPRISED ME ONE BIT.
I am NOT rubbing salt into past wounds. You got my sympathy in deep thoughts and sincere too.
Very few people realise that one SHOULD NEVER NEVER NEVER buy analyst’s buy recommendation. The devil of deception is in the details of vested interests. If it is such a great buy, why create competition for themselves in the market-place? If there is an adverse sell call, why don’t they quietly sell to unwary buyers rather than alerting more selling pressure forcing prices down to their own damaged interest?
If you had noticed carefully, when analysts recommend to buy, they write with highfalutin language in very subtle tone to celibrate your thought process to come to agreement with their recommendations. But those deceptively-framed stock buy recommendations find no “buyer” of agreed thoughts with peer analysts who can “see through” the exaggerations of earnings forecast, prospects for the future and also potential gains in share valuations. The ordinary folks in the street has no reference of determining or suspecting when stock buy recommendations are a hoax to coax buyers ( while they are quietly selling in the market to meet this artificially created temporary demand).And the reverse holds true. When a stock is good, they recommend sell to create supply. It is immoral of professional conduct BUT REMEMBER WHO PAY THE ANALYST’S SALARY to create competition for themselves???
I always looks at analyst recommendation of a buy as a warning to sell at the first sign of price weakness. A lot of trusting investors ( so-called financially not-so-savvy of impolite language to label them as such) always wait for sunshine to come again. They seldom do and FOUND IN HINDSIGHT LOST A LOT OF MONEY.
It is sad but it is also true.
When it comes to money, TRUST NOBODY EXCEPT YOURSELF BUT IF YOU CANNOT CONTAIN YOUR TEMPTATION, then lock your risk with a fund manager who either increase it for you or decrease it equally drastically if they invest in the wrong sector or wrong stocks at the right time.
GOOD FUND MANAGERS ARE VERY VERY FEW. Most are “good” in good times but when bad times comes, SOME DON’T EVEN KNOW WHEN IS SUNRISE, HIGH NOON OR SUNSET. You will be amazed in private life, how fund managers lost their apartment, their wives even their pets.
If only the trusting investors outside KNOWS!.
Like or Dislike:
0 
0
Alternative,
I empathise with you on your losses. However, not everybody is like you. There are people who can handle their own money very well and can generate much better return than what the CPF can offer. To take it as a extension of their investment portfolio will do them no justice. Let there be freedom of choice.
Your peculiar experience maybe irrelevant to others and is irrelevant to me. I do agree that some do need the CPF Life to help them manage their funds. But it should not be made compulsory particularly if that CPF accountholder can show that he/she is capable of handling their own money. Why make it compulsory?
The sore point about CPF Life is that if it is made compulsory, then there should not have this law that allows them to stop payment when they so decide to declare the fund is insolvent.
More important, they should be very clear payout amount and not having all kinds of CYA lame excuses like “only indicative” clauses in the CPF Life guide. AIA also used such lame indicative clause when their agents sold those policies with critical years. You know what happen to those who buy on the basis of those indicative critical years. All got short changed!
To have such clauses in place and for CPF accountholders to accept that, is to give them outright permission to short change CPF account holders. One day, you find that CPF Life gives you only S$1 per month payment, then you must remember you went in with your eyes open. Another day, you read in the State Times that CPF Life payment because it has become insolvent, you must remember you went in with your eyes wide open too! And legally, they are not wrong. Hey man, its an honest mistake. Lets move on!!
By then, we shall see if your potentially possible S$1 per month payout is sufficient for you to walk to the nearest hawker center to have the cheapest bowl of noodle or not. You answer yourself.
Like or Dislike:
0 
0
Rowen,
“As a second, Since Everyone, who is working in singapore, are paying income taxes, Ministers and MPs should pay taxes too.”
What? You mean those million dollars paid ministers and lesser paid MP do not pay income tax? How can??
Like or Dislike:
0 
0
To Anonymous on Thu, 24th Sep 2009 9:23 pm
Your wish to manage your own money is commendable. Let’s look at what you said from another angle.
- Those who can REALLY REALLY manage their own money would probably not be very concerned with the CPF Life because their other portfolios would probably do so well that they don’t really need to rely on CPF Life.
- How do you tell whether someone can manage his/her own funds?
- How do you decide who should be granted exception to manage their own funds?
- Let’s suppose it is an opt-in system. How many would opt in when they can hold on to cash, like my elder brother?
- Would those who opt out and not be able to generate enough income become a burden to others?
Frankly, I also like to have my money, hope to burn it and hope that the state can look after me. Self reliance vs state welfare is another issue that I’ll prefer not to get into. I still think CPF Life is a step forward.
Like or Dislike:
0 
0
“HC burnt 40 billion.”
Some crank says that. I thought everyone knew MM started out with just $300 million and today the fund is abt $150 BILLION!
Like or Dislike:
0 
0
Anonymous at 9.23 pm is completely right. Money in your hand is the best option.
Sign your money to an institution with an escape “no responsibility” clause leave you in a complete vulnerable submission to all unimaginable risks of failure.
When the time comes, they just tell you – we told you so! You signed willingly your money AFTER we told you of the risk in print. You lost! Not us but thanks for giving us the party all these hard years of economic uncertainty – a great life-style I would admit though it may be to your regrettable consequence.
Think about this carefully. I STRONGLY BELIEVE THERE SHOULD BE AN OPT-OUT OPTION for those who are financially savvy of looking after their own investment or who want to invest in a more secure opportunity like brick and mortar with their family member etc.
They have imprisoned your forbearance for 55 years of your life, should you get a little bit of “freedom” to decide and choice for the remaining chapter of your life???
Like or Dislike:
0 
0
CPF is a made into a very Big Component in our lives.
To Remove IT would mean admitting that it is Flawed.
The FACT remains, CPF is a COST to EmploYers. Period.
This , to me at least, means CPF is Part of the Salary from the Perspective of an Employer. Correct or not?
If I run a shop and hire a singaporean for $2000, i still need to pay for his 14% cpf. So, to me, his salary is NOT JUST $2000 but! $2280.
Now they give out JCS.
Why not stop CPF payable by employers for a while?
Oh, CPF is used by people to pay and pay housing loans.
Why like this? Add here and minus there?
Lets hypothesize:
================
1. IF Public housing is not made so EXPensive, there is less Pressure on Paying the LOANS.
2. This means LESS is NEEDED in the CPF.
3. If Public Housing is made AFFordable, the people need Not Rely on CPF scheme.
4. This translates into Employers no need pay and pay such overhead.
5. Which translates into Competitiveness for citizen workers.
6. Which means More Gets Employed potentially.
[Scenarios with/without CPF: ]
=========================
A. IF employee does not need CPF, and gets employed as a result of being cheaper, he gets to have income of say $3000 a month. Although he does not get CPF of 14% = $420, he gets a JOB paying him $3000. Using Sessame Streets game of comparing 2 pictures to see what is the difference, you tell me which is better : Not getting a job thus income vs Not paid CPF.
B. IF employee has to be paid CPF, and did not get employed and loses to a FT due to being a cheaper option for the employer, he loses $3000 income a month for every month that passes by. In Addition, obviously, he also did not get any CPF. The CPF also collects ZERO from this unemployed citizen.
In conclusion, while CPF scheme is mean for what is reported as good reasons,
such a model is appears to affect citizen employment rate.
What is Talent? $3000 worth of Talent. Can a normal singaporean not have the talent worth $3000 in the market to compete with FT? But then an Employer actually needs to pay and pay $3420 and not just $3000. So, if i were an Employer whose purpose in life is generally to earn more Money$, why would i want to hire a citizen unless its absolutely no choice?
sincerely,
Pinko
Like or Dislike:
0 
0
Alternative
Your questions:
- How do you tell whether someone can manage his/her own funds?
- How do you decide who should be granted exception to manage their own funds?
- Let’s suppose it is an opt-in system. How many would opt in when they can hold on to cash, like my elder brother?
- Would those who opt out and not be able to generate enough income become a burden to others?
Thanks for asking those questions. Those are valid questions and do require serious considerations indeed.
Below is my answer to your questions. This answer maybe elitist BUT it give a person the benefits of handling his own money without being co-opt by the law. There is a choice.
1] In the eye of the law there is this group of people called “sophisticated investors”. You go and find out how to qualified as one.
2] In SGX or for that matter any stock exchange, there is another group of people called “substantial shareholders”. Google it for your own understanding.
3] In the banking industry, there is this group of people who are being taken care by private bankers. Do not call the bank up to see how to qualify as they will invite you when you have arrived.
4] On an academic basis, those who are qualified with say an accounting or finance related or law or insurance related degree or a MBA etc etc, generally should be able to handle their own money.
5] What about those whose profession is to manage funds, helping their cleint to plan for their financial futures etc? Gosh, they spent all their life doing such things and when they retired they need CPF to teach them how to suck egg?
6] There are alot of people out there owning more than one fully paid properties and are happily collecting rent.
Need I say more? Anybody who qualifies, should be given a choice. Why not? Do you think these group of people will be a burden to the society just in case one fine morning they woke up and squander all their money away? You cannot be serious can you?
What burden are you talking about when this group of people have been dutifully been paying [and more] taxes year after year?
Why there are so much [uncountable] criteria about mean testing and new HDB application when you apply for some “subsidies” and what not, and yet none when they come to take our money away??? Is the whole scheme of things fair? Do they really respect us as individuals who have contributed to the society we live in?
Don’t ever think I am younger than you. Like you, I am also 50+. But I met 5 of the above 6 criteria. Enough? Get a life mate. Learn to live with your eyes wide open, very wide.
Alternative, I write to share with you my views and where I come from. I hope to share with you other aspects of life that you may not be aware. And I hope by sharing with you, you begin to understand that our garment is not at all benevolent. Please vote wisely.
I respect your view [that is why I posted in respond] and your sharing of that “don’t talk cock” bad experience. Do not let that “negative” experience blind your loyalty and stop you from looking at alternatives. For all you know “Don’t talk cock” may have done alot during his term. But that the garment put so much constrains on him and the MSM protray him so badly that we only know him as “Don’t talk cock”. [Remember the funding and permit disadvantages Chiam and Low faced? Very unfair right?] I cannot comment coz he is not my MP. Please be more open and receptive to opposition. Hear out what they has to say, what they has to offer before you cast your vote. Remember they ban that NKF topic from election discussion? Why? So coincident meh? Do you want your rights to be protected or being streamrolled over? It is your choice. But that choice of yours affects all of us. We need alternative voices in the parliament so that we don’t get fixed so easily and without mercy.
Like or Dislike:
0 
0
To admin,
I have posted twice comments that I made. They appeared then disappeared. Why?
Like or Dislike:
0 
0
Hello Rowen,
I ask again…
Re your posting on Wed, 23rd Sep 2009 12:21 pm
“As a second, Since Everyone, who is working in singapore, are paying income taxes, Ministers and MPs should pay taxes too.”
Can Rowen or any kind soul confirm if the statement above is true?
Like or Dislike:
0 
0
Dear Alternative,
I agree there are many people who cannot manage their money and will financially self-destruct. But the solution is not to impose a blanket CPF on everyone.
A better way forward is first to teach financial literacy to Singaporeans from young. Our schools have done nothing to address that. The second thing to do is to set certain financial tests for people to opt out of CPF. People who can pass the test obviously will know what they are doing, and need not have their hand held like a little kid.
But will we ever see these reforms happening? Perhaps we need to ask ourselves again whether CPF is actually a social security scheme or an indirect taxation scheme.
To Lets talk about the CPF model:
I just wish to point out a small but important correction.
From an economic point of view, EMPLOYER contribution is NOT a cost to EMPLOYERS.
In economic lingo, labour has a low elasticity of supply, so the burden of any tax falls mainly on workers instead.
Or in laymen terms, each employer has a fixed amount of salary he is willing to pay to attract talent. Assume that amount is $2000. But the employer knows he has to pay EMPLOYER contribution too, and will factor this in. Thus he advertises that he is hiring workers for a wage of $1700, allowing him to still fork out $2000 only at the end of the day.
In other words, EMPLOYER contribution serves to lower the “official” wages that employers are willing to pay. We do not get extra money from EMPLOYER contribution, as many people would believe. Rather, we bear the FULL burden of the 33% of CPF.
However, I agree with the rest of your post. CPF is heavily flawed in its current form, and actually disadvantages locals against foreign workers. We urgently need more opposition voices in parliament if we hope to ever push through any reforms.
Like or Dislike:
0 
0
To Anonymous on Fri, 25th Sep 2009 6:05 am
This is a reworded repost. My earlier comments were posted but then removed. Not sure why.
You have your points. Perhaps, you are one of the sophisticated investors and is very rich now. I am happy for you. It is commendable that you like to manage your own money.
However, I do have reservations about some of the criteria that you mentioned. Having seen the collapsed of the many financial institutions and the Madoff ponzi scheme, Oei Hong Leong loss (private banking), suicides of once extremely rich people; it is indeed difficult to know who will turn out to be wise investors.
The issue of opt-in/out does not just apply to CPF Life. It applies to NS, organ donations, education and perhaps many other pertinent social issues. Unless the rules to opt-in/out are very clear, it can result in misgivings too. If you can opt out of CPF Life and another cannot, the latter is bound to feel discriminated.
For the very rich, CPF Life is probably going to be only a very small portion of their overall wealth. That is perhaps why people like Mr Tan, judging from his blog, is not too concern with his own CPF Life. Likewise, I have a rich friend who has retired, when asked whether he withdrew his money from CPF at 55, remarked “What for? I don’t need it. Anyway CPF pays better interest than the bank.”
My conclusion is this. The very rich do not worry about CPF Life. The very poor have no CPF Life to worry about. Only people like me need to put some thoughts into it. For this, I am going along with CPF Life and I hope you accept my decision.
As for my voting, I thank you for your advice. BTW, the “Don’t talk cock” was directed at Chiam See Tong. Let me assure you I have many grievances with a number of government policies, but I try to be rational, and vote wisely.
Like or Dislike:
0 
0
I am glad I find this site with a good discussion here on CPF life. I am 56 year old and have a choice to join the CPF Life instead of MSS.
After I have done an analysis with my friend who are in similar situation on CPF Life. we make the following shocking discoveries.
To update those who are not familiar with CPF Life, there are 4 options for latest CPF Life instead of the earlier 12 options:
1. Life Basic – minimum monthly payout with maximum amount bequest
2. Life Balance – the middle choice between Life Basic and Life Plus
3. Life Plus – maximum monthly payout with minimum amount bequest
4. Life Income – maximum payout with no bequest
For the 4 CPF Life options, at least 2 of the options do not make sense and therefore should not be offered to the public at all.
As anyone who take the time to browse through the CPF life booklet, you will find the option with NO bequest does not make sense because if the person die before 65 year old, all his saving will go to the CPF board leaving nothing behind to his executor to pay even for his funeral expenses. So I believe most people will not chose this option. Just imagine if a person have a minimum sum of $117k at the start, this amount or more will gone to the CPF board if he died before 65 without getting a single payment. Even if he has no relative, he could donate the amount to charity instead.
For the remaining 3 options with bequest, if a person die before 65 year old, his beneficially will receive the full amount of CPF saving as the annuity plan has not kick in yet. So in this 10 years period, all the 3 options are the same. So if the person die at 65 year old and before any CPF Life payment being paid, according to the 3 Life plan, his beneficially will receive in full his CPF saving. The amount should range between 165k to 175k depending on the CPF saving interest rates during that period.
However, If a person dies 1 day after his 65 birthday, according to the CPF life estimator, the scenario is as follows:
Basic plan – beneficiary will receive $175.5k
Balance Plan – $163.5k
Plus Plan – $124.2k
The Difference the beneficiaries will received are:
Basic over Balance option = $12k
Balance over Plus option = $39.3k
The amount paid out for the 3 options are
Basic = $846 per month
Balance = $909 per month
Plus = $965 per month
Hence additional payment
[Balance over Basic] = $63 per month
[Plus over Balance] = $56 per month
So a person taking the Plus option instead of the Balance option would stand to lose $39k of his hard earned saving for his beneficiaries to exchange for misery $56 per month annuity after 65 years old. If you takes $39k and divide by $56/mth, this is equivalent to 701 month or 58.4 years!
If you think about it, there is actually no choice at all in CPF Life because we must enroll in one of the options and when you compare them, you will find all options except the Balance option is just rubbish and not worth considering!
p.s. For female, the monthly payment will be less than the above, for a female, currently 54, his additional monthly payment between the Plus and Basic option is less than $30 per month. How ridiculous!
p.s.s One additional finding from my good friend. For us, we have a choice not to opt in to CPF life and remain in MSS. The finding is under MSS, we can take our draw down from age 62. The monthly payout is about the SAME as Income option no bequest. The advantage of MSS is if we die within 20 years, our beneficiaries still get the whatever remains!
p.s.s.s The is a S Bonus of $1800 offer for us to postpone our retirement from 64 to 65 year old. At first glance, it is attractive getting a 3x the interest earned in 1 year. But the issue is this $1800 is add to your existing balance to be paid out over the next 20 years to 30 years. So is the free lunch great?
The point of this article is “Shouldn’t CPF board [Government] give us the relevant information to decide simply rather than hiding them in the details. What I am most concern is that by choosing the “wrong” options, you stand to lose a major part of your hard earned money – $39k as shown above.
Like or Dislike:
0 
0
To reader on Fri, 25th Sep 2009 4:28 pm
I am not good at social policy and cannot effectively debate with you on merits/demerits of CPF. For me, it has served me well to acquire a property, but I am not sure if it can support me through old age.
A social welfare state where I don’t need to worry about old age will be nice, but I understand that itself may cause some problems (heavy taxation).
Self reliance vs welfare state is a delicate balance. It would be good if someone with energy and resources do a proper study of how the aged and weak in Sg can be looked after. Perhaps, as I say earlier, the government and the rich can voluntarily contribute to CPF Life to look after the more unfortunate.
Like or Dislike:
0 
0
Good to see such lively comments
@Alternative
The word “critical” on the title is indeed an intended play on the word. The objective of my article is to raise questions I deemed valid about the scheme. These are questions that will not be asked by the CPF board or the Straitstimes.
@steve
That is a good breakdown and decision tree on the different plans – If only CPF Board will publish these in their pamphlets and educate the public!
On whether MPs pay tax or participate in CPF Life, all I have to say is… no one will ever know for sure, unless we have a whistleblower one day. For example, the the UK, there is a recent scandal on the MP’s expenses claim, It surfaced when someone from within sent a log of expenses claims to a newspaper. A series of investigations and public apologies followed and the system was shaken up. Will we ever have full discloure (I mean in detail, not just a number) of MP pay and expenses in Singapore?
Like or Dislike:
0 
0
Dear Alternative:
On the surface, CPF helps Singaporeans in acquiring property. But a closer examination will reveal that CPF actually cause property prices to rise higher and become less affordable. This is because everyone will use money stuck in CPF for property purchases, and this artificially increased demand will raise flat prices.
If the govt is genuine in helping Singaporeans acquire property, they should lower CPF contributions and abolish the Ordinary Account. With higher take-home pay, Singaporeans have the same amount of money to spend on housing, but because now they are not restricted on the use of that money, flat prices will drop and become more affordable.
Like or Dislike:
0 
0
Dear Alternative:
As for self reliance vs. welfare state, our CPF can do a lot better than return 2.5% – 4.0% every year. I believe Temasek’s financial team achieved around 17% pa when averaged over many years.
I understand Temasek takes on higher risks on their investments, but even a more modest return of 7 – 10% pa would be enough for CPF.
And this is simply using Singaporeans’ own money, no additional money is needed from the govt (aka no welfare state is needed).
So this brings me back to my question. Why is the CPF only offering 2.5% – 4.0% in return? Is the CPF a social security scheme as advertised, or is it more of an indirect taxation scheme?
Like or Dislike:
0 
0
To steve on Fri, 25th Sep 2009 5:04 pm,
Nice work. Will look into the computations when I have to decide plan. However, writing off totally Life Income (plan 4) may be incorrect. Some who believe they have very long lives (genetics) may prefer this, and also for those who have no dependents.
See http://tankinlian.blogspot.com/2009/09/cpf-retirement-account-or-cpf-life.html, it may address some of your questions.
I look at CPF Life as social security support where those who unfortunately die earlier than the norm can help those who live too long. From that link, my understanding is that those who choose plan 4 and die prematurely will be leaving the rest of the money in the fund for the others who are still alive. Well, this is 1 form of charity, if you choose to look at it this way. This is why I suggest an option for the very rich who don’t need the money, as a form of charity, to give to CPF Life to benefit others.
As to how the CPF Life fund is managed, perhaps this link can also help: http://tankinlian.blogspot.com/2009/09/cpf-life-will-be-operated-on-mutual.html
Like or Dislike:
0 
0
To reader on Fri, 25th Sep 2009 9:13 pm,
To me CPF is forced savings. I can still invest but money just goes back to CPF (you used to be able to withdraw profits). As you agreed earlier, some people are just foolhardy to squander when they have cash in hand.
As for CPF returns, you have a good point. Do you know who manages CPF funds?
As for CPF relationship to property prices, I can’t quite follow. CPF is money, cash is money.
OK. We should stop here. This thread is not about CPF but CPF Life.
Like or Dislike:
0 
0
To those who think that CPF is a pension scheme, think again –
1. CPF pays a fixed return instead of market return of its investments to CPF Holders.
Hence it is appropriate to compare CPF with fixed income instruments (bonds, notes, loans), and CPF Holders as fixed income investors.
In simple terms, CPF Holders are lenders giving a loan to CPF (the Borrower). That money is then used to finance Temasek at below market rates.
To see how a pension fund is being implemented, see Malaysia’s EPF or any regular contribution mutual fund / unit trust for that matter.
2. CPF returns are below the risk free rate of the same tenor.
The average yield for 10-year Sing Government Bond (SGS) is 2.5%, while 15-year is 3.2%, and 20-year 3.3%.
Now, why should anyone accept 2.5% return when the average life of the money in CPF is easily over 20 years?
3. CPF has inferior credit risk.
Money in CPF is non-guaranteed as stated in the Act. It is therefore many rungs below Singapore’s sovereign rating, possibly junk.
Why would anyone accept a return lower than the risk free rate from a much inferior credit profile? At what return should a junk bond be priced?
Where repayment is non-guaranteed for a debt instrument, (usually known as non-cumulative and non-redeemable upon maturity) such terms are common with preference shares or mezzanine debt instead of senior loans. In layman terms, CPF is treating CPF Holders like preference shareholders with zero rights. For that matter, it also seems CPF Holders cannot demand repayment from Temasek for the loans that CPF made to it.
As an aside, when a Borrower does not pay its debt when due, it is called “a default”. When the borrower requests to extend the maturity date in a default (for example extending CPF withdrawal date from 55 to 65, or repaying in installments over next 20 years and calling it CPF Life), it is called a “debt restructuring”. Such actions are allowed under the Act, and CPF Holders’ consent is not required.
Imagine what would be the implication if MAS decides to pass a law stating they will no longer honor the obligations of their issued SGS. All SGS will become junk bonds overnight, and Singapore’s “AAA” country rating will be downgraded to junk.
Now why should CPF Holders be short-changed and forced to lend to the state (CPF/Temasek) at below the risk free rate and at such ridiculous terms?
4. Can the public replicate CPF’s returns and improve on the scheme?
Answer is potentially yes. Retail investors can purchase any SGS issued. (Just go to any local bank.) Retail investors could purchase the long dated SGS (20-year) regularly. If the investor requires liquidity (say to buy a property), the SGS purchased can be pledged to a bank as collateral for a bank loan. For additional yield pick up, the retail investor can also buy quasi-government debt (such as bonds from HDB, JTC, etc).
5. On a lighter note, what is the name of the scheme whereby new money contributed by investors is used to pay off the old investors?
That’s right. It’s called the Ponzi scheme! Google “Madoff” for more information.
Question: Is the contribution from new CPF Holders used to pay off the moneys due to the old CPF Holders?
Like or Dislike:
0 
0
//reader
Try asking a foreign company if CPF is a cost (extra) to the company.
I am surprise if they say no.
The fact is they ended up employing more foreign workers than they used.
Of course there are other drivers but to think that cPf is not extra cost is silly.
Even bonus requires CPF contribution.
Like or Dislike:
0 
0
great comment HDB Wins.
Like or Dislike:
0 
0
@HDB
I think you raised very valid points, especially #2.
However, I have been trying to find this out myself – where can you find concrete evidence that CPF money is channeled to Temasek and GIC? There has been loads of talk on this, but no one can say for sure.
Like or Dislike:
0 
0
Dear fpc:
I am unsure if you are misunderstanding me, or I am misunderstanding you.
My point was that there is no fundamental difference between EMPLOYER contribution and EMPLOYEE contribution.
Employer contribution is not an extra cost, because the company can simply choose to lower the “official” wages they offer, and thus end up paying the same amount AFTER contribution.
The fact that only locals require CPF contribution means that companies will either offer a lower wage to Singaporeans, or choose to hire more foreigners at the original wage.
Like or Dislike:
0 
0
To my knowledge, what CPF does is that it purchases bonds from HDB, GIC and possibly Temasek.
Thus CPF can only give a low return, in accordance with the returns from those bonds.
HDB and GIC then use the loaned money to fund their far more profitable investments and operations.
Disclaimer: I am unsure if this is what really happens, nor do I have any concrete evidence. CPF has never been transparent about what happens to the CPF money. All we know is that the money is put in “low risk” investments.
Like or Dislike:
0 
0
By now it should be abundantly clear that CPF is not a pension fund.
One can deduce that CPF’s undeclared purposes are:
1. to provide cheap financing for Temasek (presumably GIC does not require SGD funding since their funds come from the national reserves in foreign currency) for their acquisitions;
2. a form of indirect individual tax;
3. to mop up excess liquidity from Singaporean residents to prevent asset inflation as well as prevent the SGD from appreciating to maintain Singapore’s competitiveness.
If the government is serious about setting up an annuity scheme, then it should be run by external fund managers (selected through a competitive bidding). CPF Life just sounds like another dishonest “debt restructuring” effort to delay repayment.
I would humbly suggest my points be noted and be used to challenge the ruling regime at the next election.
Like or Dislike:
0 
0
//reader
what you said could be done but did the employers do that: offer singaporeans lower take home pay so that the total pay is the same as a ft?
Why didn’t they do it?
Like or Dislike:
0 
0
IS tan Kin lian in CPF life?
How much does he has in CPF life?
Is it credible that he speaks positively about CPF life?
You decide.
Like or Dislike:
0 
0
Dear fpc:
You have raised a valid point, and I do not have a concrete answer to that, so I can only hazard a guess.
My guess is that foreigners are willing to work for far lower wages. Thus what companies are offering are not the “original” wage to foreigners, but a lower wage.
To keep labor costs equivalent, a company would have to offer an even lower wage to Singaporeans. That wage would be too low for Singaporeans to survive, and few would be willing to take up the job.
Besides, many foreigners are actually hungrier than Singaporeans, or are graduates that are equally well trained. Thus there is little inherent reason to favor locals over foreigners.
In other words, I believe companies favor foreigners not just because of CPF differences, but also because there is a huge influx of foreigners who are willing and able to work for a lower wage.
Like or Dislike:
0 
0
hungrier is not the right word.
They have less obligations.
This hungry notion is getting exploited to squeeze singaporean workers to ridiculous extent.
That’s why immigration needs to be controlled and is controlled all over the world even bermuda. Go check it out.
Yeah, foreigners workers are willing to work for less because they can bring back more monies back home and yes, that’s the primary reason why they came in the first place and are therefore willing to put up with lousier conditions.
However, the new immigrants turned Singaporean, should be expected to be forthcoming to be integrated for the exact same reasons. Else why become a singaporean.
So, all this 10 million integration is a scam. It is a clear demonstration that the govt has been accepting lousy FTs and need to spend monies on them to integrate them.
Like or Dislike:
0 
0