20150712 History of CPF abuse, why CPF will always remain an issue

Under the PAP, CPF-related issues are here for good. This is due to the abuse of our CPF scheme.

2 The total control of public housing has been an effective tool to help PAP achieve it’s political objectives. However, it couldn’t have done so without the abuse of our CPF, ie frequent tweaks to channel CPF into housing. The abuse of our CPF started decades ago and not only recently, as is widely believed.

In order to understand better, we need to look at historical CPF rates (table below). There have been countless tweaks for the different age groups and to simplify this, we’ll just use the CPF rate applicable to members aged 35 and below.

CPF rate changes since 1955 (age 35 and below)

Year CPF % of wages Inc/(Dec) % Year CPF % of wages Inc/(Dec) %
1955 10 . 1984 50
1968 13 3 1985 unch unch
1970 16 3 1986 35 -15
1971 20 4 1988 36 1
1972 24 4 1989 38 2
1973 26 2 1990 39.5 1.5
1974 30 4 1991 40 0.5
1975 unch unch 1999 30 -10
1977 31 1 2000 32 2
1978 33 2 2001 36 4
1979 37 4 2003 33 -3
1980 38.5 1.5 2007 34.5 1.5
1981 42.5 4 2010 35 0.5
1982 45 2.5 2011 35.5 0.5
1983 46 1 2011 36 0.5
1984 unch unch 2015 37 1

3 After the introduction of the Public Housing Scheme in 1968, CPF rate was increased by 3%. Rates continued to shoot up and finally hit 50% of wages in 1984, a five-fold increase since 1955. Long-term planning or abuse?

4 Channeling up to 50% of employees’ wages into real estate predictably resulted in housing prices shooting through the roof and high inflation trickling down to all goods and services. Other countries could have easily replicated PAP’s ‘growth’ model but did not so. Why didn’t other governments use PAP’s shortcut?

The issues of unaffordable public housing and retirement shortfall resulted directly from PAP’s folly. It appears our CPF chickens have come home to roost.

5 The highest number of HDB units constructed from 1981 to 1985 coincided with the peak of CPF rate of 50%. PAP had been gradually increasing CPF rates from 1968 to 1985, without which only a fraction of the estimated 500,000 units would have been completed. PAP’s abuse of CPF could not have been more obvious.

HDB statistics (pg 3)

Year Total units
1961 – 1965 54430
1966 – 1970 66239
1971 -1975 113819
1976 – 1980 137670
1981 – 1985 200377
1986 – 1990 121400
1991 -1995 99557
1996 – 2000 158621
2001 – 2005 55515
2006 – 2010 30069
2011 – 2014 46796

6 When 23% of total wages meant for retirement is channeled into real estate, it creates artificial housing prices. The PAP has maintained our housing bubble for decades and there will be catastrophic consequences if it addresses this issue today .

PAP will need to continue to abuse the CPF scheme to prevent a political backlash from collapsed housing.

7 Besides channeling a large portion of CPF into housing, a disproportionate amount also goes to fund our healthcare needs. This has resulted in unnecessarily huge Medisave surpluses which provide a cheap source of funds for GIC to invest. Legislating a cheap source of CPF monies for GIC to invest is tantamount to abuse.

Half-truth from PAP – the government could have raised funds more cheaply. Total Medisave balance stands at S$72 billion. Who will lend GIC $72 billion at a lower interest rate than CPF rate to engage in speculative activities in the stock market?

8 CPF started off with the objective of providing for our retirement needs but PAP has abused it by channeling a disproportionate amount into housing and Medisave account.

In 1987, PAP introduced the Minimum Sum scheme without consulting citizens. Hundreds of thousands of CPF members need our CPF at 55 but to PAP, it’s ‘you-die-your-own-business”.

The abuse of CPF has gone on for too long and this has resulted in chronic problems which will not be resolved as long as PAP remains unchecked in Parliament.

9 Without a doubt, CPF members have been shortchanged for decades. But the power is still in our hands to remove PAP’s control over our retirement funds and our lives. Think about this issue carefully and you will realise that only a fool will put his money in another’s hands, no questions asked. “Better late than never” or “a fool and his money are soon parted”?, CPF members must decide soon.


PAP uses public housing as a tool to achieve its political objectives. But without the (ab)use of our CPF, more than a million HDB units would not have been completed and there would have been no housing bubble. Abusing our CPF allows PAP to exert its control over 82% of the resident population living in HDB flats.

Public housing prices are not determined by market forces but solely by PAP. It is able to decide how much it wants to profit, enslaving dual-income buyers to 25/30-year mortgages.

The abuse of CPF has gone on for decades because of PAP’s unchecked power. By returning only part of investment returns to CPF members, PAP has also created the issue of retirement shortfall.

The CPF is in urgent need of a revamp. But with PAP remaining unchecked in Parliament, this will be a pipe dream.

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