CPF Tips: A ’1-sided’ story?

I refer to the article “Roadshow gives tips on maximising CPF savings” (Sunday Times, Oct 29).

It states that “Panel speaker Soh Chin Heng, the CPF Board’s deputy chief executive (services), told the 660 or so people present to take advantage of avenues to increase their “pay cheque”. This is the portion of our retirement income that fulfils our daily needs such as utilities, transport and food expenses.”

If we look at it from the perspctive of the restrictions to the use of your money – this topping up “pay cheque” cannot be used for anything before you turn 55, and only after 55 (provided you meet the prevailing Full Retirement Sum (FRS) ($166,000 now or pledge property for half the amount) or age 65 under CPF Life – not for “daily needs such as utilities, transport and food expenses” – not even to pay for your medical expenses, mortgage, children’s education, etc, because the Special Account has the most restrictions for withdrawal before age 55 or 65 (CPF Life), as the case may be.

As to “For instance, CPF members could top up their CPF accounts and refrain from withdrawing their savings at age 55 if they do not need to.

Mr Soh considers the CPF Ordinary and Special Account savings the “best emergency fund” for members over 55 as they can enjoy interest rates much higher than bank rates and can get the money within a few working days after a withdrawal application” – I understand that funds that you can withdraw at 55, but choose not to withdraw – only get 2.5 per cent interest and not four per cent.

You may also need to be aware that this “best emergency fund” works only if you have met the FRS or BRS when you reach 55.

For example, with the FRS and BRS increasing by about three per cent per annum – after topping up your CPF – by the time yo reach 55 – you may not have enough CPF to meet your future FRS or BRS. In such a scenario – your “best emergency fund” after 55 may not work.

With regard to “Another avenue is to use cash instead of CPF savings for mortgage payments. After all, CPF Ordinary Account savings attract an annual interest rate of 2.5 per cent, higher than some housing loan rates” – if you run into financial difficulties in your lifetime – cash may literally “save your life”, as your OA may only be used to pay for your mortgage, children’s education, etc.

In respect of “CPF statistics indicated that many members have caught on to this. Last year, the top-up amount in Special and Retirement Accounts rose 96 per cent to $1.8 billion while CPF withdrawals fell by 1.1 per cent to $18.53 billion” – as I believe that the $18.53 billion refers to total CPF withdrawals for all purposes in a year – is there any connection between this and the increase in “top-ups” – to come to the “linked” conclusion that “CPF statistics indicated that many members have caught on to this”?

As to “Calling the national annuity CPF Life scheme a cheque book that never stops paying, Mr Soh said that a CPF Life plan with an escalating payout option to hedge retirement savings against inflation will be available from Jan 1 next year” – since “It will take a member about 25 years under the Escalating Plan to receive the same amount of cumulative payouts compared to the Standard Plan” – does it mean that one has to reach about age 90, in order to “receive the same amount of cumulative payouts compared to the Standard Plan”?

Does this statement factor in the time value of money? If not – does it mean that one may have to live to age 95, 96 or whatever is the computed age – in order to be better off?

Are there any life annuity schemes in the world with escalating payouts which need one to reach such an advanced age, before one is arguably, better off?

With regard to “Another panel speaker, CPF member Loo Cheng Chuan, outlined his “1m65″ ($1 million by age 65) strategy. This involved him and his wife diligently transferring money from their Ordinary Account to Special Account from the age of 30 to earn the higher interest rate of 4 per cent.

By the time Mr Loo and his wife turned 34, they had hit the then prevailing cap of around $120,000 in their Special Accounts.

Assuming the interest rate remains at 4 per cent, his savings and those of his wife in these two accounts could compound to almost $1 million by the time they reach 65, even if they choose to stop working and contributions to these accounts cease. However, he cautioned that such transfers are one-way only” – what percentage of Singaporeans are like him –  whereby both the husband and wife had managed to hit the prevailing cap of their Special Accounts by age 34?

In respect of “Parents can also opt to set aside some cash to grow their children’s CPF savings. Mr Loo said that $10,000 placed in a newborn’s Special Account will grow to $100,000 in 60 years” – one needs to be aware that you may arguably, literally be locking up the money for decades until your children reach 55 or 65 (CPF Life) as the case may be

Also, if you apply the cashflow principle of “first-in-first-out” – your children may start to withdraw their own CPF contributions first – and may end up not ever seeing your top-ups to their accounts now, if they die early after age 65 because of the relatively low bequests under the CPF Life Standard Plan.

In respect of “time in the market is more important than timing the market.

By staying invested, you get average returns and it is less stressful – but ensure that you have time, at least 10 years, to ride out the market volatility, he added.

Other important factors to consider when investing include the use of low-cost tools like exchange-traded funds and index funds, as well as assessing your risk profile, which should take into account your need, ability and willingness to take a chance” – wouldn’t arguably a globally diversified portfolio of your CPF funds in equities, bonds, commodities, property, etc – give a higher annualised return than CPF interest rates?

Isn’t this what most national pension funds in the world do, instead of paying relatively low interest rates, and keeping the excess returns?

 

Leong Sze Hian

 

 

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21 Responses to “CPF Tips: A ’1-sided’ story?”

  • Rabble-rouser:

    First things first – your CPF isn’t your retirement bank account to use as you wish. It has many restrictions & the goalposts keep shifting to elude CPF holders from accessing their monies early re: 65 years old->70 years old.
    Secondly, the CPF basic 2.5% p.a. return is ridiculously low. The PAP should realistically shut down their CPF/SWF & allow the private sector to manage people’s CPF balances under govt regulatory supervision. That’s what govt’s role are for – to regulate the economy, not run it. Where in the world have govts successfully run businesses with efficiency & profitability long-term- none! they all failed. The PAP should get out of businesses & investing! The Australian Superannuation (Pension scheme) model which outsourced fund management to the Private Sector had achieved an average of 6% to 8% p.a. returns (last 5 years performance). The CPF is a travesty of people’s blood, sweat & tears!
    Finally, Loo Cheng Chuan & his 1m65 strategy is incredibly STUPID. Why would you want to lock-up your hard-earned money until 65 year old? Even that, you run the risk of goalpost shifting to 70 years old. And 4% p.a. Special Account rate of return isn’t even that attractive when Aussie Super can achieved an average 6%+ without sweating. The PAP/SWF paying themselves millions through underperformance when people can achieved better results elsewhere for less. I wouldn’t top up any CPF accounts for the simple reason – I can get better results on my own. 2.5%/4% p.a. are crap returns by a lousy (lazy) govt. In any other country, they would have been voted out long ago for financial incompetence!

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  • I Object:

    “Isn’t this what most national pension funds in the world do, instead of paying relatively low interest rates, and keeping the excess returns?”

    Mr Leong, I object to your choice of words.

    The proper words should be:
    “Instead of returning a small part of the CPF investment profit, and unethically, immorally and most probably illegally keeping the rest of the profit.”

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  • Amos exposed PAP hypocrisy:

    PAP has expanded its HDB scam to include CPF. It wants Singaporeans to top-up their CPF accounts so more money can be “drained” (by SLA through HDB) after it continues to increase the price of HDB flats.

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  • RDB:

    It is all a Lee Kon You his DAFT Sinkies who believe in him blind folded and ears plugged plus brain induced by him in perpetual political stupor “coma” for his arckia son’s career benefit. What’s new puss* cat’s purring & meowing in PEEING AND POOING while shitting paid rich that 70% still said is okay LeeLah!

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  • If tomorro never comes:

    What theyre preaching at those road shows are just speculation…aimed at the gong gong silver generation and other dafts.
    No one knows whats going to happen tomoro or the next week , month or year.
    God only knows.
    They encourage parents to even put $$$ in new born’s accounts? Cpf accounts???
    Gov is so greedy n desperate for our money.
    Something IS really not right.
    Cant anyone find out for us ?
    Lying n cheating gov ppl proves that ‘GREED KNOWTH NO BOUNDS’.
    ANEN to that.

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  • If tomorro never comes:

    If tomorro never comes:
    What theyre preaching at those road shows are just speculation…aimed at the gong gong silver generation and other dafts.
    No one knows whats going to happen tomoro or the next week , month or year.
    God only knows.
    They encourage parents to even put $$$ in new born’s accounts? Cpf accounts???
    Gov is so greedy n desperate for our money.
    Something IS really not right.
    Cant anyone find out for us ?
    Lying n cheating gov ppl proves that ‘GREED KNOWTH NO BOUNDS’.
    ANEN to that.

    Error on last line..shd be AMEN to that.
    Apologies.

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  • oxygen:

    COME ON, LSH, CPF IS NOT merely a 1-sided story – it is a 1% truth, 99% LIES, FANTASY AND PROPAGANDA – peasants got after got duped for over 50 years.

    It was backdoor taxed before 55 years of age, and thereafter vaporized to theft (with no one admitting) of perpetual trustee to mortality.

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  • LIONS:

    CPF is a $cam of huge proportions now.
    Sgs are at risk of not getting back their money.

    It will be sucked LEEgitimateLEE UNLESS we vote for MORE GOOD OPPO MPs to STOP THIS DAYLIGHT ROBBERY by the PAPsters who act like Mafiaso.

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  • billyma:

    At 55, your s$83k will be locked away in your ‘retirement fund’.
    This amount you can’t touch.

    Of course, your medisave also be kept by CPF. Use only if you fall sick & your ailments fall within PAP list of illness.

    And yes, this is on assumption you’d paid up your HDB loan.

    Guess how much left for you to withdraw at 55?

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  • Halimah a big BS:

    We have waited for appointed president Halimah to ask LHL serious questions on the CPF. So far, there is hardly any sign that she is prepared to do so. A co-opted mouse will not offend her master LHL.

    What is the point of ‘Do Good and Do Together’. What is the point of suggesting that people be allowed to visit the Istana more often? Will Halimah be serving nasi lemak there?

    In Singapore, lies, scams, tricks and fabrications are prevalent. The unwary and unsuspecting are victimized from birth to death.

    What is the point of ending British colonial oppression only to be replaced by PAP oppression?

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  • N.Jungne:

    In 2020 let’s give the white Living Dead a fright, to run road (fasterest & betterest)

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  • oxygen:

    THAT THE CPFB paid its members an administrative-determined (not actual varying achieved market rate) mere 2.5% return can only mean one of the two things

    - it can’t deliver or confident of delivering a return exceeding 2.5% as its presumed borrowing costs paid to us who funded its investment capital

    or

    - it stole (without admitting theft) the difference between the actual achieved market rate of return and what it pays out to us as our return for providing the risks capital.

    I cannot find any other reasonable explanation i.e. they failed their FIDUCIARY RESPONSIBILITY TO PROTECT OUR FINANCIAL INTEREST at law after we supply them our complete trust. No trustee party in that position of trust may benefit itself at the expense of the lawful beneficial interest.

    HOW LONG HAVE THIS DEBASED DISREGARD FOR OUR FINANCIAL INTEREST HAVE BEEN GOING ON – forget the theft of our retirement money via a scam construct of a perpetual trustee scheme deception past 55 years of age?

    This is monumental proof that 70% of Sinkies in LEE-jiapore is TOO STUPID TO EVEN BEGIN TO DISCOVER THEY ARE STUPID TO IMPOSSIBILITY of letting this rort going on for so long.

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  • oxygen:

    @ Rabblke-rouser

    EXACTLY RIGHT – those GREEDY STUPID IDIOTS who topped up after CPFB promised 4% p.a. on their special account (not even permanent on this seduction) ALL NOW GOT RAPED BRUTALLY – they can’t touch their money if PAPpy denied their election to take it out at 65 and by “default” of no prior rejection acknowledged to have received, can now only take out at 70. And that 70 goal posts can be shifted again in 5 years time to 75 age to withdraw and only by installment too.

    Serves them right for getting buttered in their dumbfarked a*ses richly deserved.

    Rabble-rouser: Finally, Loo Cheng Chuan & his 1m65 strategy is incredibly STUPID. Why would you want to lock-up your hard-earned money until 65 year old? Even that, you run the risk of goalpost shifting to 70 years old. And 4% p.a. Special Account rate of return isn’t even that attractive when Aussie Super can achieved an average 6%+ without sweating. The PAP/SWF paying themselves millions through underperformance when people can achieved better results elsewhere for less. I wouldn’t top up any CPF accounts for the simple reason – I can get better results on my own. 2.5%/4% p.a. are crap returns by a lousy (lazy) govt. In any other country, they would have been voted out long ago for financial incompetence!

    If this CPF scheme is credible of integrity/performance – it should be left ENTIRELY with free choice after 55 years of age to withdraw everything, or leave it there until such time the beneficial owner changes his/her mind or LEAVE THERE PERMANENTLY if they so wishes too.

    I am sure it is ONLY the MOST STUPID/GREEDY ones who will park their CPF permanently there looking for a return of 2.5%/4% targeted benchmark (said to be higher than bank deposit rate now) and ALL THOSE CLEVER ONES TAKE OUT EVERYTHING and self-invest looking confidently to a better return (they know their own track records in CPFIS scheme) or invest in privately-managed superannuation funds like my Down Under getting slightly over 8% over a 20 years horizon.

    RIGHT NOW, I see the extension retention of my CPF money past 55 as nothing short of THEFT OF MY PRIVATE PROPERTY not admitted by anyone – contrary to common and statutory law applications.

    By this compulsory imprisonment of our CPF money past 55, the CLEVER ONES are FORCED to subsidize the STUPIDITY of dumdfarked 70% who support this scam by their sheer ignorance and incompetence of self-managing their retirement needs. This lot of weak dumb monkeys NEVER GROW up and CAN NEVER GROW UP.

    They should all crawl back into their mommy’s wombs!

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  • PAP in power at any cost:

    CPF Board:

    CPF is in grave trouble. Temasek and GIC have lost all our money. We have to find all ways to trap all those uninformed and gullible citizens to put their savings into the CPF.

    That will buy us precious time for we do not have to meet the payback time until they are 55. Besides, there are many more ways to lock them up even further. If need be, we can easily shift the goalposts even further away from their reach. PAP must remain in power at any cost.

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  • WITH REGARD TO:

    So many “with regard to” and “in respect of”. Accountant language or petition lingo?

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  • NotMyProblem:

    When someone said “CPF is not your money” and you still put in more money, YOU MUST TO VERY STUPID. 4% interest rate is only a TRAP! Curiosity kills the cat, but GREED kills you.

    Remember this; “STUPIDITY HAS NO CURE” and “There is limit in intelligence but stupidity has no limit”.

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  • RDB:

    @PAP in power at any cost: November 5, 2017 at 1:11 am Quote)

    CPF Board:

    CPF is in grave trouble. Temasek and GIC have lost all our money.
    ======

    We all know they lost much of our CPF & tax money but hide it under their dishonesty. But do we really know that they have LOST ALL OF OUR CPF?

    So please show us your proof in accusation. This is about not behaving like PAP you are accusing. It is about accountability in the way we say things with or without credence in a responsible way. You are emotional dude!

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  • FromCradleToGraveBeingFleeced:

    Now CPF traps you from cradle to grave.
    All the ministars n mps are happy n not speaking out cuz they dun really need to depend on their cpf..with their mil$salaries.
    Dont let us hear that crap again ‘Do good, do it together’ . Wat does it even mean? !

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  • Halimah has failed us!:

    The story about the building of a modern-day police state is yet to be told. One day, it will.

    The story about Halimah’s silence about the state of the CPF is only to be expected since her two predecessors have profited obscenely from their silence. Halimah is not breaking any presidential record or is expected to do so.

    Under LHL, Singapore is unravelling faster than you think. With people like Halimah around doing LHL’s bidding, the situation will only get worse.

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  • Tom lee:

    Everyone just need to know these 2 CPF Principles:

    1. Any amount that pays more than 2.5% is the amount you cannot withdraw from.

    2. Even if you meet the minimum sum and can withdraw, it will start from the account with the higher interest, ie. your from your CA first then your OA.

    Every which way, you lose. Period!

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  • CPF start good now scam:

    One needs to just trace the old records on why CPF was set up and what it means, one would understand its intention was noble and how the ordinary citizens can be assured of a decent life but importantly a life embraced with humam pride and value. Do then trace the patch up channges to CPF all thru the year and associate it with the Govt policy, change and expenditure. Opacity plays a considerable role . Only retired bureaucrats with remants of human value, pride and conscience returning with as the needs to plp for real return in the way of reward for extra comfort becomes superflous and unworthy of the degradation of plp possibly would wiki wiki to regain at least part of the personal shame borne all these years.

    Nevertheless looking upon what little reflecting from the opacity, CPF becomes a burden the citizenry has to bear to support the pack of hungry, greedy and ferocious billionaires and newly made multimillionaires and the millions needed to provide training sessions of investment for the imberciles and gorillas. Scam is now what CPF has become. This is the true legacy of the nepotic scumbags.

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