The CPF pension system has been abused by the PAP as a weapon to exert control over the population and inflate housing prices. Concerned CPF members should read up on the issue which has been widely discussed online and question their MPs on our retirement shortfall. It doesn’t make sense to be contributing the highest percentage of our monthly wages in the world only to experience a retirement shortfall after 4 decades.
CPF Board was formed in 1955 and up till 2011 its mission was “to enable Singaporeans to have a secure retirement”. When the PAP realised it had failed in its mission 46 years after independence, it conveniently extended CPF’s mission – “to enable Singaporeans to have a secure retirement, through lifelong income, healthcare financing and home financing”. Instead of addressing its failure, PAP tried to pull a fast one on us.
PAP takes its failure very lightly because it is not accountable to CPF members. PM Lee recently told party cadres that when PAP “face problems, .. we deal with them. We do not pretend there’s no problem… We settle now”. So has the PAP settled the retirement shortfall problem by arbitrarily rewording CPF’s mission? Aren’t we paying our million-dollar ministers to play with words?
Instead of using revenue from our budget to construct public housing, PAP dipped into our CPF. It then liberalised the use of CPF to fund the most expensive public housing instead of mandating more CPF to be invested to fund our retirement. Without a doubt, PAP’s greed and shortsightedness led to our retirement shortfall.
After CPF was allowed to finance public housing purchase in 1968, the PAP had continued to abuse the CPF by:
– allowing HDB flat buyers to borrow from other members’ CPF at mandated below-market long term rates.
– allowing the state to borrow at mandated below-market long term rates to finance infrastructure.
The CPF Special Account was introduced in 1977 and was meant for retirement. Even though total CPF contribution rates had increased to 31% of wages, only 1% of wages went into the Special Account (SA) vs 30% for Ordinary Account (OA). (CPF contribution rates from 1955 to 2013)
30% for housing + 1% for retirement = a secure retirement?
In 1983, total CPF contribution increased to 46% but only 6% was meant for retirement.
40% for housing + 6% for retirement = a secure retirement?
After the introduction of the Medisave Account (MA) in 1984, total CPF contribution rate was unchanged but PAP transferred the 6% from the SA to the MA.
40% housing + 0% retirement + 6% healthcare = a secure retirement?
The PAP has never prioritised retirement needs. In 1999, the SA was suspended with OA at 24% and MA 6%.
24% housing + 0% retirement + 6% healthcare = a secure retirement?
CPF should have restated its mission because, in reality, our CPF was used to finance infrastructure and public housing.
The reason for mandating 6% for MA and nothing for SA – CPF members could fund our immediate healthcare costs such as health insurance, hospitalisation, etc with minimal government contribution whereas retirement was years away. The PAP did not deal with the problem of retirement funding but simply kicked the retirement can down the road.
The chart (below) shows the CPF contributions for the OA,SA and MA since 1977. (CPF contribution rates** in table, below post)
The PAP never did plan for our retirement because retirement savings were mostly channeled into housing.
For a number of years, there was ZERO SA (retirement) contribution. When the economy was going through a recession, there was no need to save for retirement because the PAP simply suspended the SA.
Was the PAP taking care of our retirement when SA rates were unbelievably low and on a roller coaster ride? What about allowing the SA to be used to meet housing shortfalls in 1999? Could this not have been prevented if not for the housing bubble created by the Goh Chok Tong government?
Although DPM Tharman has acknowledged “property prices not yet at meaningful correction”, the long-term solution to prevent future retirement shortfalls is to reform the CPF system. With much lower housing prices, less CPF will be channeled into housing and used for investment.
But even after a meaningful correction, housing prices will again be inflated because CPF policy allows 23% out of 36% to be used for housing.
As is evident, our CPF has been used by the PAP to inflate housing prices. There was never any planning for our retirement needs. There still isn’t.
Rates for age below 35
|YEAR||OA (%)||SA (%)||MA (%)|