20140524 Why I think CPF members are being cheated

There have been a lot of discussions on the CPF issue, thanks to Roy Ngerng. My take is that CPF members have been cheated of their hard-earned retirement savings by a government which lacks transparency and has complicated a simple system to confuse CPF members. CPF members need to take more responsibility for their retirement savings by demanding more transparency from their MPs. As more policy tweaks get implemented, our children will eventually face the brunt of stupid policies.

From a simple objective of having adequate retirement savings, CPF policies have been tweaked countless times ostensibly for our good but its benefits have yet to be felt. Due to the frequent tweaks, the CPF system is now extremely unstable. It’s objectives are no longer aligned with those of its members.

What’s wrong with the CPF system?

1 CPF lumped with national reserves

The first thing that is clearly wrong is our CPF savings are lumped together with the national reserves, a loan to the government in the form of Special Singapore Government securities. The reserves are managed by GIC, Temasek and MAS. Although it is generally believed that GIC manages our CPF, GIC claims it does not know. To understand why this approach is wrong, we need to be aware of the objectives of our national reserves.

2 According to the MOF, the objectives of our reserves are:

a “They provide a key defence for Singapore in times of crisis”. (the obvious question to ask is what has this function got to do with OUR retirement savings? Why is our CPF used to defend Singapore?

b “The investment of our reserves also provides a valuable stream of income for the government budget,..”. (again, why is OUR CPF being used to generate an income stream for the government when the returns rightly belong to us?)

How did our retirement savings even ended up becoming part of the budget?

3 PAP government unilaterally decides for CPF members

Through legislation and without any meaningful debate in parliament or through a referendum, the PAP simply shoved questionable policies down CPF members’ throats. Despite our pleas for a policy revamp which will truly serve our retirement needs, the PAP government entertains us with a bit of tweaks here and there. This worsens an already unstable system which may collapse one day.

4 Segregate account for CPF funds is common sense

CPF investment has a different objective from the national reserves and must have a separate account. The actual returns can then be determined with the returns, net of costs, credited to CPF members’ accounts. The government refuses to do so because it wants to continue using the returns from our CPF investments to form part of the budget. The government does not have the right to pay CPF members 2.5% to 4% and redistribute the balance to the budget.

5 Confusing and hiding something from CPF members?

The government says the annual returns from investments of our reserves is about $16 billion. (NIRC comprises up to 50% earned on the reserves) With an estimated total reserves of more than $800 billion, $16 billion returns, or about 2%, is really peanuts. Why are we paying millions to fund managers for such paltry returns? If Temasek Holdings is really making as much as it claims, the $16 billion could have easily been made from Temasek’s stable of shares. ($16 billion out of $198 billion – 8%) It is more likely GIC and Temasek have been underperforming and the only way to confirm this is through transparency. When GIC/Temasek repeatedly refused to be transparent, it is likely that they may be covering up huge losses. Both are sovereign wealth funds and there are none as opaque as ours.

Source: http://thehearttruths.com/2014/05/20/your-cpf-the-complete-truth-and-nothing-but-the-truth/

6 CPF returns below inflation rate a big joke

The government emphasises the need for citizens to plan and provide adequately for retirement. However, it takes our CPF retirement savings for investments and pays us returns well below the inflation rate. Elderly Singaporeans are then forced to continue working, some probably till the day they die. If that is the case, why even talk about planning in the first place when all the government intends to do is shift the goal posts further by increasing the Minimum Sum? This is morally reprehensible.

7 Doing the right thing

The only way to regain trust by the government is to have a separate account for CPF investments. Such transparency will allow members to see clearly if the fund managers are performing well or having fun with our money. Should the government refuse to do the right thing, members will continue to suspect it is hiding huge losses.

The poor investment returns of 2% is not an indication of our “strong reserves position” as the MOF claims. In fact, a 2% returns can be generated by any run of the mill investor with one eye closed.

That our reserves have been increasing is not entirely due to the performance of our fund managers but contributions from land sales, budget surpluses and the government selling our state assets like Senoko Power to a Japanese company for $4 billion in 2008, etc.

CPF funds must be placed with a proper fund manager to generate sufficient returns for members’ retirement. It is an insult to CPF members when GIC claims it does not know where our CPF funds are invested when the board of directors comprises our PM, 2 DPMs, 2 ministers, Mr Lee Kuan Yew and nine other members.


The government has tried to complicate a simple CPF system in order to make things less transparent for members. It does not have the right to use part our CPF returns to supplement the budget with the balance going into the reserves.

Our hard-earned retirement savings should not form part of the national reserves to defend our currency in times of financial crises.

The shortfall in our retirement savings is entirely caused by the PAP government because we have been paid interest rates which are way below the inflation rate for 2 decades.

CPF has been a source of cheap funding for the government for state investment and the opacity of such an arrangement indicates it is nothing but a scam. CPF members must demand transparency from the government failing which we will continue to be cheated of our hard-earned retirement savings. CPF returns must be returned to members.

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