As CPF fund manager prepares for low investment returns, PAP may remove the 2.5% CPF floor rate

GIC has predicted its own poor performance for the next decade: “.. real returns are expected to come in at around 1 to 2 per cent over the coming decade.”

With inflation at about 2 to 3%, this means GIC is expecting to earn between 3 and 5% for the next 10 years.

Since CPF interest rates are between 2.5% to 5%, this would mean the likelihood of GIC not meeting its obligations to CPF members. This may set the stage for the removal of the 2.5% CPF floor rate which was legislated in 1955, 62 years ago.

Anything is entirely possible whenever PAP is in desperate need of money.

Recall that the price of water was increased recently – despite a worsening economy – and the reason given by MEWR Minister Masagos was “water prices will go up after holding steady for 17 years“.

Despite HDB’s FY14/15 income of $595 million and a $79 million expenditure from managing public car parks, such obscene profit was still insufficient. PAP went ahead and increased car park rates last year by between 23% and 26% because rates had not increased in 14 years.

One day, CPF members may just wake up to this headline: “CPF floor rate removed because it has been unchanged for 62 years“.

 

Phillip Ang

* The author blogs at LikeDatOsoCanMeh.

 

 

 

 

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15 Responses to “As CPF fund manager prepares for low investment returns, PAP may remove the 2.5% CPF floor rate”

  • 2 diff sets of laws:

    HC & Co should pay back all the billions they lost investing with our
    CPF..
    OR she should just be replaced.
    How long can this go on?
    Scum of Singapore! No accountability…no transparecy.
    Yet being paid $mills in salary.

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  • Bebe:

    Even the returns are higher, they will still report it as lower because they need to cover a big hole mah.

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  • oxygen:

    IF GIC IS ONLY CONFIDENT OF a real rate of return of just 1 to 2% annually in the decade ahead, they should really close that FOACK SHOP.

    All CPF money should be return now to its rightful owners so that the “better” investing minds can achieve anything from 5% real return per annum or higher.

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  • oxygen:

    GIC’s assumption of 1% to 2% real return per annum achievable in their mind estimate rests on another presumption – EVER YEAR IS A GOOD YEAR for a decade without disruption.

    If the bubble burst in one year – they know financial assets now are way over-inflated – and if they lost 15% to 20% of our CPF money in one bad year, HOW ARE THEY GOING TO MAKE UP FOR THE EXPECTED MASSIVE SHORTFALL struggling on such thin margin expected in good times?

    Higher utilities, COE, ERP, MRT, healthcare, parking fees, GST, school fees for kids’education, higher BTO prices to cover for land sold (but not acknowledged in lease contract??) supermarket food prices etc etc etc to top up the massive capital loss?

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  • Bapak:

    One day, CPF members may just wake up to this headline: “CPF floor rate removed because it has been unchanged for 62 years“.
    =======================================================================

    One day, when Singaporeans voted in Opposition in to take over government, you may be surprised there is nothing in CPF.

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  • C'est la vie:

    *****
    This poxy government’s audaciousness not only sees no bounds, but no rivals either !!!
    ***
    *****

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  • PATRIOT of TEMESAK:

    Is the PONZI scam losing STEAM???….Not enough CONTRIBUTIONS from the BASE towards the PEAK???…Less existing CPF members contributing or new CPF members???

    Whatever Lah!!! the next few years will be CRUCIAL…no TPP…collapse of investment in China??? OBOR no share no matter how the PAP and MSM try to SPIN it…AND the Fall of The LEE Dynasty??? and the rats will scamper??? with the millions over the years and ASSETS overseas “Time to say GoodBye”

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  • doggie:

    wonder how much our reserve was left. I hope the chip goodyear guy leak some info out leh

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  • rukidding:

    Lets prepare for another Korean Soap opera,….starring the Naked emperor, and his team of Consorts and eunuchs !

    Wan sway, wan, wan sway….

    After LHY and LWL’s “revelation”,…suddenly they become so “pro-active”,…..”releasing” so many infos ????

    Mostly about Poor performances and long term asset investments point of view ?????

    Indeed,…suspicious and well “timed” releases of info ???

    More like “cover own backside” before somebody “digs the truth” out !

    Ho Jinx, Ho say !

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  • HUAT AH:

    with the world asset at all time high yet our GIC return is so low. What the return will be if asset return to normalize level in the next ten year?Do we missed the opportunity in the last ten years of asset bubble?

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  • Trust only myself:

    One day, when Singaporeans voted in Opposition in to take over government, you may be surprised there is nothing in CPF.

    Then we must have a total change of gov once, and soon, to get to the bottom of whether CPF is still there, half full or empty ….

    Any fund missing or not in order, the whole group (PM, ministers, MPs and President) who step down must be made to pay back with all their assets, from worldwide, until they they are bankrupt is necessary……

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  • Just tax more:

    Just tax more on the people and everything will be ok.
    More money to invest.

    So simper!

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  • opposition dude:

    If it does go below 2.5% then no way can housing interest still be at 2.6%.

    Should this happen I wonder what fanciful excuse we will get from HDB on the loan interest rate. We can also use the same reasoning of housing rate unchanged for 62 years so now must be lower.

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  • Rabble-rouser:

    QUOTE: “GIC has predicted its own poor performance for the next decade: “.. real returns are expected to come in at around 1 to 2 per cent over the coming decade.”
    With inflation at about 2 to 3%, this means GIC is expecting to earn between 3 and 5% for the next 10 years.”
    HA-HA-HA-HA! Who are these guys fooling? 1% to 2% isn’t the real return for the next decade but rather the end result after decades of poor SWF performance. Tummysick/GIC will be paying the price this coming decade!
    It is the predictable outcome after nearly 2 decades of topsy-turvy investing & trading of ‘Bubblicious’ financial assets in a highly inflated world of QEs & zero interest rate. That 2 decades of monetary expansion/ZIRP (QE) is coming to an end soon. A lot of credit created from QEs suffered from mis-allocation to rather poor & risky investments eg. Brick ‘N Mortars (Commercial Mortage-Backed Securities, REITs) Buying up companies; asset stripping & loading huge debt (Private Equity play); Oil & Gas (Offshore, Shale oil, Tar sands), Unicorn IPOs (Uber), Consumer debt (credit cards, car loans, etc), etc. AND THAT IS CALLED CREDIT DESTRUCTION! A lot of Global banks, financial intermediaries, investors & lenders will suffer huge haircuts when this occurs. The situation rest upon global Central Banks pulling back on credit expansion/decreasing their balance sheet simply because it is UNSUSTAINABLE. But the present-day system requires ongoing infusions of credit to keep the game ticking like a drug addict! But Central Banks are getting wary, lenders cautious; & the financial markets volatile – THE END IS NEAR!
    For S’pore’s SWFs, there are simply too many ‘holes’ to cover up from huge losses investing in global banks & numerous failed stocks. The problem now is that there is a CAPITAL REPLENISHMENT GAP between SWFs free cash flow (asset less liabilities + expected dividend flow) & the govt debt owing to the CPF. SIMPLY SAYING, THE SWF CAN’T REPLAY TO THE CPF WHAT THEY’VE BORROWED. Given that SWF’s main cost of capital is at a low 2.5% (CPF rate), it is a thoroughly atrocious performance from them.
    And you can see, the PAP govt raising revenue (30% water rates, car park rates, maybe upcoming GST to 10%) from various sources to make up for the inadequacies of the SWFs. How can PAP push inflation up through various cost schemes which they controlled & yet reduced their expected real return from SWFs. I smell a rat!

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  • oxygen:

    @ Rable-rouser

    INSIGHTFUL THOUGHTS there. You smell a rat only? I smell cockroaches of “return” deceptions at work too. It may be another scam of money recycling from peasants into SWFs (via cash injection) and give it a label of “return” (defined as dividend/interest income plus unrealized growth in size of portfolio pretended as gain in total asset values through value appreciation)

    Rabble-rouser: And you can see, the PAP govt raising revenue (30% water rates, car park rates, maybe upcoming GST to 10%) from various sources to make up for the inadequacies of the SWFs. How can PAP push inflation up through various cost schemes which they controlled & yet reduced their expected real return from SWFs. I smell a rat!

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