20141106 PAP government responsible for huge retirement shortfall because CPF was used to finance infrastructure

The PAP government has been telling a lot of half-truths in order to justify paying CPF members low returns.

DPM Tharman once claimed that CPF was expensive money as if the PAP was doing CPF members a huge favour by offering us low returns. Tharman attempted to stretch our imagination by claiming the PAP government “could issue 10-year bonds and pay the market rate … it can do so at a lower cost”.

Tharman should be reminded that from 1981 to 1988, US 10-year bond rate was between 8% and 16%.  During the same period, the PAP government shortchanged CPF members with returns of between 3% and 6.5%!. It has continued to shortchange us 30 years later.

If the PAP were to issue bonds during this period, the interest it had to pay would have averaged at least 10%

US 10-year bond interest rate

(Most Singaporeans mistakenly believe the 6.5% CPF rate was high in the 1980’s but relative to the high inflation then, as reflected by US bond rates, CPF rates were in fact low.)

The reason for mandating low CPF rates should be evident to every CPF member by now – lower returns for CPF members = lower borrowing costs to the PAP government. The PAP government has been helping itself to our CPF by arbitrarily legislating our CPF as reserves to finance infrastructure. But the contribution of CPF members to the skyrocketing GDP was never acknowledged; instead the PAP slaps CPF members with perpetually low rates of return.

It is a fact the PAP needed billions of dollars to finance the construction of HDB flats, roads, MRT, etc. It is also a fact that the government did not have sufficient funds from our budget to create the Singapore ‘miracle’. Considering our GDP was between US$14 billion and US$36 billion during the same period, our budget did not allow such a massive expansion of housing and infrastructures such as roads and MRT simultaneously.

Between 1981 and 1990, our resident population was about 2.32 million and 2.74 respectively. But the HDB constructed a record 309,007 flats in 10 years. Could the PAP have done so without using our CPF?


Contrary to PAP’s propaganda, CPF monies have always been the cheapest source of fund to finance infrastructure. Without the use of CPF monies, our GDP could not have increased by more than 1000% since 1981.

Instead of sharing with CPF members the dividends from our tremendous growth, the PAP government slaps us by mandating low rates of return. With the assistance of the mainstream media, many CPF members have been fooled into believing CPF returns are good.

By any standard, our pension returns are extremely low and this has resulted in a retirement funding shortfall for the majority of Singaporeans.

During the 1980’s and early 1990’s, CPF monies were not properly managed and invested by GIC but were instead used to finance infrastructure. The PAP government has therefore been reckless with our CPF savings and is responsible for our retirement shortfall.

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