20141027 CPF members better off with retirement savings managed under Malaysia’s EPF model

The PAP has been offering unbelievable justifications to pay CPF members below-inflation rate returns for decades. GIC, which manages our CPF, has been underperforming for decades, leading to our huge retirement shortfall.

The PAP has been disclosing meaningless statistics to the public on GIC’s performance – CPF members are only concerned with our returns. No point to keep repeating how well GIC has been managing our CPF when returns cannot even beat inflation for the last 2 decades.

GIC has stubbornly refused to be transparent because public scrutiny will confirm its subpar performance. The transparency of EPF really puts GIC and the PAP to shame.

A pension system which cannot provide adequately for our retirement is obviously flawed. The PAP must not be allowed to continue paying CPF members such unbelievable low rate of returns after shortchanging us for decades.

Just what is wrong with our model becomes obvious when we compare with our neighbour’s EPF system.

1 – The PAP has erred by taking excessive risks and allowed ALL CPF monies to be invested overseas because they are eventually converted into local currency. Under Malaysia’s EPF, only 23% is invested outside the country. 77% of the fund is invested in profitable Malaysian companies and prime properties yielding good returns. Exchange rate risk is reduced.

The PAP could have done likewise by investing CPF monies in the stable of Temasek-linked companies which have become very profitable after using CPF monies to set up decades ago.
But the PAP prefers to keep all these profitable companies to itself, redistribute cash to itself and wealthy shareholders but takes excessive risks for CPF members and continue paying a miserable average return of 3.5%.

Some years back, there was a huge cash distribution and unlocking of capital from non-core assets and billions of dollars were returned to shareholders and the government eg .Singapore Airlines, Natsteel, SPH, etc. Do we need a CPF Pioneer Package to recognise our contributions?

2 – In the ‘EPF Boleh’ system, the target return is 2% above the inflation rate. For our ‘jiak liao bee’ CPF system, the PAP targets our returns at peanuts bank interest rates and ignores inflation!

The EPF is an apple to apple comparison. Now when we take a look at the 20 year difference, we can see clearly the fund managers at GIC has been overpaid.

The table below shows the actual EPF rate. CPF rate is the estimated average of the OA, MA and SA after taking into account their different weightage.

Let’s look at the returns of an initial balance of $10,000 in the EPF and CPF.

YEAR EPF % $ CPF % $
1994 8 10800 2.5 10250
1995 7.5 11610 3.7 10629
1996 7.7 12503 4 11054
1997 6.7 13341 4 11496
1998 6.7 14235 4.5 12013
1999 6.84 15208 4.5 12554
2000 6 16121 3 12931
2001 5 16927 3 13319
2002 4.25 17646 3.5 13785
2003 4.5 18440 3.5 14267
2004 4.75 19316 3.5 14767
2005 5 20282 3.5 15284
2006 5.15 21326 3.5 15818
2007 5.8 22563 3.5 16372
2008 4.5 23579 3.5 16945
2009 5.65 24911 3.5 17538
2010 5.8 26356 3.5 18152
2011 6 27937 3.5 18787
2012 6.15 29655 3.5 19445
2013 6.35 31538 3.5 20126

The annualised compounded interest is 5.91% for the EPF and 3.56% for CPF. Over a period of 20 years, the EPF made a profit of $21,538 while CPF only $10,126. The difference is $11412. For those with $100,000, the difference under the 2 systems would be a staggering $114,120!

Some may argue against comparing CPF with EPF but why not? Aren’t GIC fund managers, who are paid humongous salaries and bonuses, supposed to deliver superior returns?

Anyway one looks at our CPF system, the conclusion is we have not been paying peanuts but still got monkeys who are not accountable for our retirement shortfall.


The CPF model is seriously flawed and perhaps we should model our fund management on Malaysia’s superior EPF system.

The PAP has kept all the profitable GLCs, many built from scratch with CPF monies, to itself in Temasek Holdings but takes excessive risks with CPF members’ savings by investing them overseas.

Compared with EPF, GIC’s underperformance is glaring and given the opportunity, its fund managers should be sacked.

The cause of our retirement shortfall is directly related to PAP’s flawed pension model. The PAP must return whatever amount it has shortchanged CPF members and increase the current rate of return.

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2 Responses to 20141027 CPF members better off with retirement savings managed under Malaysia’s EPF model

  1. Xmen says:

    I have a few comments –

    It was unclear to anyone until recently that CPF monies were invested solely in GIC. IMHO, PAP chose GIC instead of Temasek for obvious political reasons.

    GIC’s underperformance appears to be by design to boost Temasek’s performance (Note: PM’s wife runs Temasek.) As an example, Changi airport was largely funded by CPF. Yet it was sold to Temasek at a non-competitive price that vastly undervalued the asset. Please refer to Prof Balding’s assessment at the following link –


    We have a government that is not honest to its people. The “Mickey Mouse accounting” has been damaging to CPF and individuals. We need transparency and accountability in this country!

  2. Confused says:

    Philip, I think what you meant was had cpf is able to return the interest that has been generated by epf over those years, the whopping difference would have been S $114120 between 2 different returns? 100000 will become 315380 in 20 years (MORE THAN TRIBLE) instead of 201260 (only double) if the epf rate of return is achieved for our cpf. Otherwise, you cannot just take the difference between the 2 involved in different currencies.

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