20141024 Wrong for PAP government to legalise our CPF monies as reserves

The PAP government does whatever it pleases in Singapore because there are no checks in Parliament. After legislating CPF monies as government reserves, billions in CPF returns from investments in GIC were not returned to CPF members. This has caused a huge retirement funding shortfall. (Our CPF is ‘invested’ in Special Singapore Government Securities issued by the Singapore Government which pays a very low coupon rate arbitrarily decided by the PAP government.)

According to the Ministry of Finance, our nation’s reserves “are a critical resource for Singapore’s future. As a strategic asset, our reserves serve two key purposes”:

  • (a) They provide a key defence for Singapore in times of crisis. We cannot tell what crises ‒ natural calamities, war or economic crisis – will hit us in future and what the scale of the damage will be. Our reserves are a strategic asset should a major crisis occur, allowing us to mount a decisive and effective response.
  • (b) The investment of our reserves also provides a valuable stream of income for the Government Budget, which can be spent or invested for the benefit of current as well as future generations.

Why is the government using our CPF retirement savings to:

a – defend Singapore in times of crisis?
b – to mount a decisive and effective response in the event of a major crisis?
c – use the returns from investments to provide “a valuable stream of income for the Government Budget?

Why are CPF monies used for the above objectives when the ONLY objective should be to invest for our retirement needs? Isn’t the PAP abusing our CPF retirement savings to generate income to supplement the budget?

The reasons given by the government to pool and invest CPF monies with our reserves are downright ridiculous:

– “Having the GIC manage CPF monies as a standalone fund would require it to be more conservative, and thus make it harder for it to earn as good returns as it currently does”.

Pension funds elsewhere are managed as standalone funds and still manage to generate reasonable returns. The fact is GIC has generated extremely poor returns for CPF members for 3 decades.

It is more likely that if CPF monies were separately managed in a transparent manner, GIC’s subpar performance would be revealed. It is for this reason that the PAP pools and invests CPF monies and our reserves.

CPF members do not trust GIC’s performance figures given by the government because they cannot be verified. GIC’s non-transparent nature makes them a suspect.

– “CPF members also bear no investment risk at all,..”.

CPF members have in effect borne a very high risk with our money managed by GIC. The risk of a huge shortfall in retirement funds has already been realised – hundreds of thousands of CPF members are not able to retire comfortably, many not at all. GIC has been an incompetent fund manager by perpetually providing the lowest pension fund returns to CPF members.

Why has GIC never been held accountable? Is this due to the fact that the PM, 2 DPMs and 2 PAP ministers are also GIC directors and by holding GIC accountable would mean holding PAP ministers accountable?

– “… no commercial players are able to take on the CPF obligations”.

Returns in the Malaysian EPF averaged 5.9% p.a. during the last 20 years. From 1980 to 1990, the dividend rate was about 8.25% annually. In 2011, 2012 and 2013, it declared a dividend rate of 6%, 6.15% and 6.35%respectively.

What exactly are CPF obligations? If it’s to provide the lowest guaranteed returns of between 2.5% to 4%, there are thousands of run-of-the-mill commercial players. Why would any CPF member be agreeable to accepting between 2.5% to 4% for very long term investments stretching as long as 4 decades?

When interest rate is compounded over decades, the difference between a few percentage points could easily amount to hundreds of thousands of dollars. CPF members appear to have been cheated of our hard earned money. (I will highlight the difference between CPF and EPF returns in another post.)

What is the real reason for the PAP to insist on having zero transparency and pooling CPF monies with reserves?

According to the Sovereign Wealth Fund Institute (SWFI), GIC manages US$320 billion or about S$400 billion of our reserves. But S$264 billion are actually CPF monies. Actual government reserves are therefore only $136 billion ($400 billion – $264 billion).

It is misleading for the PAP government to repeatedly state that “GIC is a professional fund management organisation that manages Government assets”. $264 billion of CPF monies are not Government assets.

When GIC was set up in 1981, it had assets of $6.6 billion. Fast forward 33 years, its assets have miraculously increased by 60 times to $400 billion. But $264 billion does not belong to the government and it seems foreign governments and even the IMF have been fooled.

Singaporeans know that the actual government reserves in GIC amount to only $136 billion.

The PAP government has also tried to fool Singaporeans by claiming that it’s not in our interest to publish the size of our reserves in GIC. This is because “it will make it easier for markets to mount speculative attacks on the Singapore dollar during periods of vulnerability”. But the full size of GIC reserves has already been disclosed by foreign organisations such as the SWFI.


Moreover, Norway has disclosed every single investment amounting to more than S$1 trillion in its portfolio. link link link

CPF members and citizens have been screaming for transparency from our government and it seems we are not alone. Seven years ago, the IMF had already urged GIC to be “more transparent to strengthen further public confidence”. Public confidence of our sneaky government is at an all time low and still heading towards the abyss.

In reality, the $264 billion of CPF monies serve as a boost to GIC’s image in the global fund management industry.


The PAP government has no right to legislate our CPF retirement funds as government reserves. It is misleading to state CPF monies as government assets.

Besides legislating CPF monies as reserves/government assets, CPF interest rates were also arbitrarily pegged to major local banks’ 12-month fixed deposit/month-end savings rate. The PAP is therefore solely responsible for the resultant shortfall in Singaporeans’ retirement funding by paying us short-term interest rates.

Why has Malaysia’s EPF been able to generate much higher returns for their members than GIC for CPF members for more than 3 decades? Isn’t GIC managers grossly overpaid for its underperformance?

GIC is responsible for CPF members’ retirement shortfall but has not been held accountable because PAP politicians are also GIC directors. There is a clear conflict of interest as politicians cannot be serving a commercial/professional fund management organisation and citizens simultaneously.

Billions of dollars from our CPF returns have been used by the PAP government to fund the budget. Is this not cheating citizens of our hard-earned money.

Although this has been ongoing for decades, it’s about time the PAP government ceases using CPF monies as our country’s reserves. CPF monies and their returns belong to us and have never been government assets.

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4 Responses to 20141024 Wrong for PAP government to legalise our CPF monies as reserves

  1. Xmen says:

    The $264 billion amount attributed to CPF monies is probably too low. If you include the excess returns that got siphoned away over the decades, the actual CPF monies could well exceed the GIC’s $400 billion.

  2. Chris says:

    couple of points. The IMF is not fooled. There is a significant difference between the budget surplus reported by the SG government and that in the IMF statistics database. For example, in 2012 the primary budget surplus is 2% of GDP, in the IMF database it is 8.7% of GDP. The difference being land sales, returns on net assets (or unencumbered assets to use Tharman’s words) and excess returns between returns earned by GIC and MAS and the interest paid to CPF and other debt holders. Next point total debt to GDP is 111%of GDP – that means including debt to CPF, total government debt is over 400b. Under the constitution, all debt proceeds must be invested. Assets purchased by these proceeds are encumbered by debt but assets purchased by surpluses are unencumbered. If we add the 390b of budget surplus reported by the IMF since 1990 to the encumbered assets, we have 790b of reserves managed by GIC and MAS. Add 223b in Temasek, we have just over 1 trillion of reserves. It should be noted that CPF monies are not the only reserves.

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