20141221 Ordinary Singaporeans should help PAP put a stop to CPF-HDB scam

The original mission (before PAP’s arbitrary amendment in 2011) of the CPF Board is to enable Singaporeans to have a secure retirement. It has failed because the majority of CPF members do not have sufficient retirement funds

HDB’s mission is to provide affordable homes. It has failed because new HDB flats are only affordable with 25/30-year loans using most of our CPF. Resale flats, which fall under public housing, are unaffordable to the almost all first time buyers. The PAP should not cherry pick and exclude resale units to define affordability.

The failure of these two half-century old statutory boards is solely due to the PAP using them as instruments of control to serve its political agenda. Higher housing prices is deemed to be positive for our GDP and politicians’ remuneration. But higher housing prices need to be supported by a constant inflow of funds into real estate. That’s where our CPF (and immigrants) comes into the picture. .

CPF members with positive balances are mandated to make ‘friendly loans’ to buyers of HDB flats at PAP’s low interest rates. This is one of the ways PAP caused our retirement shortfall.

Take a look at historical CPF interest rates and you will see the PAP government has been using a flawed formula to fleece CPF members ie using short-term instead of long-term rates. According to PAP’s formula, CPF members should have received only 0.59% in 2005 on our OA but we were fortunate because PAP had a mandated minimum rate of 2.5%. No government in any functioning democracy would have got away with forcing retirees to accept an arbitrarily determined low rate. Is this not a scam?

An ex PM misled citizens with his asset ‘enhancement’ scheme which is actually another name for escalating property prices. It appears most have been fooled for decades. Time to wake up to reality before our impending retirement shortfall forces us into PAP’s game plan ie work for peanuts till we literally drop dead.

When the PAP realised public housing was a goldmine, it started pegging new flat prices to HDB resale price. This was on top of having priced in land cost. Now, if the land on which ALL HDB flats sit belongs to every citizen, why are we being forced to pay for the land cost? Should HDB buyers continue to accept such flawed logic? Why should PAP use the profit from citizens to supplement our budget?

A home can never be an investment unless decades of bonding with other residents mean nothing. That one will always be able to profit from our leased HDB apartment is also a fallacy.

The fallacy of profiting from ‘asset enhancement’ scheme

A new 4-room HDB flat in Sengkang cost about $250,000 in the mid 1990’s. Why the has PAP been concealing the construction cost of HDB flats is because it knows the obscene profits made by HDB will not be acceptable to voters. As much as PAP tries to hoodwink an educated population that HDB has instead been making losses, it is now no longer possible because PAP no longer controls all media.

In 2011, the construction cost of a 4-room flat was estimated to be about $135,000. Read “HDB construction costs revealed”.

Assuming a down payment of $50,000, the total amount paid, including interest, would have been about $323,000.

TENURE	LOAN AMT	INTEREST RATE	TOTAL AMOUNT	INTEREST PAID	MTHLY MORTGAGE
30 YEAR	$200,000	3.50%	$323,312	$123,312	$898

The market for HDB resale flats is poised for a huge correction. Assuming the flat is still worth the current market price of about $448,000 by the 30th year in 2026 (flat much older), the ‘profit’ would have been only $125,000. The $125,000 profit on a $250,000 ‘investment’ is only 1.66% annually! (50% divide by 30 years)

HDB flat prices poised for a big correction?

What has been planned for ordinary citizens by the PAP is a downgrading exercise using the annual 1.66% profit from our HDB to support our retirement. Assuming we do downgrade and pocket the difference of, say, $150,000, isn’t such an amount also insufficient in 2026?

What if HDB did not profit from buyers?

It would have been an entirely different story if the HDB had not profited from buyers. Assuming the loan amount was lowered by only $100,000, this will lead to a corresponding reduction of $449 in monthly installments or $5,388 per year. Calculator

LOAN AMT	INTEREST RATE	TOTAL AMOUNT	INTEREST PAID	MTHLY MORTGAGE
$100,000	3.50%	$161,656	$61,656	$449

Compounding the $5,388 annually, with yearly addition of $5,388, at GIC’s 5% Singapore dollar 20-year rate of return, one would have $399,151 at retirement!

GIC RATE	YEARLY ADDITION	30 YEARS
5%	$5,388	$399,151

Current CPF MS of $155,000 provides an income of $1,200 per month under CPF Life. With $399,151, each retiree would have $3,090 per month.

The entire issue with retirement shortfall lies with the greedy PAP squeezing maximum profit from public housing which it is not supposed to. This is similar to our privatised public transport and privatised public healthcare where the PAP socialised all government’s costs.

CPF is a scam

That the CPF is a scam is more obvious by asking questions ie Why did the PAP mandate $100 billion of our CPF into GIC during the last 5 years? Why is GIC investing our CPF with such urgency when it is well aware prices of all major asset classes have been inflated and will possibly collapse in the event of another crisis?

The answer to this is most of our CPF have been lost and of course lost investments don’t generate returns. This is not speculation but has been confirmed by Minister Lim Swee Say in June this year. It is likely that tens of billions of dollars of investments have been lost.

When CPF members demanded to know where our CPF has been invested, all our MPs and ministers were unable to address the issue of transparency. The answer we got was ‘trust us’. The PAP has got to be kidding to treat $250 billion as some loose change.

Is the CPF Board able to pay us all our CPF at 55? Again the answer is ‘no’. If it could, there would have been no need to mandate a ridiculous MS amount and lose political mileage. That is the reason why PM Lee could only agree to allowing, perhaps, a 20% lump sum withdrawal. Mind you, that’s not at age 55 but 65. And what about the mandated MS for our Medisave account?

To convince citizens that all is well with our CPF and that it is not a scam, the PAP could have simply addressed the issue of transparency by showing us where our money has been invested. The 3.57 million CPF members deserve an explanation.

Conclusion

The CPF Board and the HDB have failed Singaporeans.

The HDB included land cost in HDB flats despite flats only being leased on a very long term to buyers and arbitrarily pegged prices of new flats to resale prices. Singaporeans are being scammed but there is nothing one could do because parliament is dominated by PAP’s yes-MPs.

Our CPF has been abused to support exorbitant HDB flat prices. Despite having the highest pension contribution in the world, the majority of retirees are not able to retire.

The manner in which our CPF has been channeled into a GIC black hole makes our pension system resembles the mother of all Ponzi schemes. PAP’s inability to return our CPF at 55 indicates a solvency issue. Unless PAP addresses this by being transparent, its ‘trust us’ clarification will only erode more trust.

The CPF and HDB schemes have not served Singaporeans and increasingly resemble a scam. Without an urgent reform, our problems will not be resolved.

If the PAP is not going to reform the CPF and HDB, it should know the majority of voters already have nothing to lose and will be forced to offer our ‘help’.