Most Singaporeans are aware that CPF scheme has failed. A scheme that works does not require frequent tweaks to delay payout.
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A – Post independence, Singapore needed billions to finance infrastructure and HDB construction. With unchecked powers, PAP borrowed from CPF members at self-determined rates which were below short term FD rates on numerous occasions. When total contribution rates skyrocketed to 50%, PAP wasn’t one bit concerned about increase labour costs impacting businesses.
B – In 1986, PAP bailed out employers by reducing the employer CPF rate by a whopping 15%, effectively reduced wages of average workers by 15% across the board. Retirement adequacy was never a priority, evident by SA allocation at average of 4% before the turn of the century.
In 1989 and 2000, SA allocation was reduced to only 2%. Worse, ZERO SA allocation in 1999.
The disproportionately high CPF OA allocation was intended to support high housing prices, creating an illusion of wealth. Excess CPF OA balance – currently at $137 BILLION – is converted to state reserves, very cheap 2.5% loans for GIC.
CPF scheme has been abused for 5 decades and no amount of tweaks can prevent its ultimate collapse.