20160712 Illogical to say government bears risks on behalf of CPF members

I refer to Chris Kuan’s “Singapore’s “funneling of CPF funds” no different from any first world country”.

A flaw in his assertion needs to be corrected.

When Chris says the government earns the “risk premium” which he defines as “the reward for taking risk” on behalf of CPF members, he has assumed the government to be a different entity. But the fact is the government is elected by the people, “for” the people. To be able to earn anything from us would mean it has to act ‘against’ our interests in the first place. Did it?

What happens if the government incurs investment losses? It could raise taxes, further delay CPF payouts, reduce social spending, etc. Whatever actions taken by the government, CPF members are screwed. Where is the logic?

The government is not a separate entity and therefore there’s no such a thing as taking risks on our behalf while rewarding itself the “risk premium” come rain or shine. The risk has always fallen on CPF members and we rightly deserve “the reward for taking risk”. Redistribution of confiscated CPF returns is no justification for the immoral act.

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6 Responses to 20160712 Illogical to say government bears risks on behalf of CPF members

  1. Chris Kuan says:

    I suggest you read my post again. I wrote “The government is aware that paying the current CPF rates and then handling the funds over to GIC to invest globally, enables it to earn the “risk premium”, i.e. the reward for taking risk”.

    That is not what you alleged I wrote “the government earns the “risk premium” which he defines as “the reward for taking risk” on behalf of CPF members”. The “behalf of CPF members” changes completely the meaning and context of what I wrote. On behalf means that the risk premium will be awarded to CPF members but that is not what I wrote. “Therefore by paying the current CPF rates and “harvesting the risk premium” by investing globally, the government increases the amount of reserves” is clear that the government keeps the risk premium.

    “It could raise taxes, further delay CPF payouts, reduce social spending, etc. Whatever actions taken by the government, CPF members are screwed. Where is the logic?”

    Ask yourself – isn’t this exactly the same proposition as any investor in any government bonds even AAA rated government bonds when governments raised taxes. Isn’t this the same proposition when government finances becomes strained to an extent that pensionable age has been increased even in Norway despite the size of the GPF, the amount of pension is reduced and the extent of social benefits reduced? Why pick on Singapore as an exception when this risk of taxes being raised to cover government debt is common occurrence?

    • Phillip Ang says:

      The government is aware and also did earn (confiscate) the risk premiums, no?
      You could stick to the PAP legislated definition and propose tons of suggestions which everyone knows will fall on deaf ears. Many do not subscribe to PAP’s narrative.
      When I mentioned about govt raising taxes and screwing up CPF members, it was with reference to PAP being the only winner in every situation, ie earning risk premiums should GIC perform well but resorting to fiscal measures should it incur investment losses. Most of the funds managed by GIC belongs to CPF members.
      Raising taxes when government finances become strained due to an economic downturn is different from raising taxes when an inadequate budget results directly from investment losses of CPF monies. So Singapore is an exception.

    • Xmen says:

      No, it is not the same proposition as any investor in any government bonds. CPF holders are forced to purchase government bonds for their retirement savings. Find me one pension fund that invests in 100% government bonds. There is none because it is a sure way to ruin your retirement plan at 2.5% annual return instead of 8% in a typical pension fund over 30+ years.

  2. Be Fair says:

    Redistribution by taxing the rich and subsidise the poor will also be an immoral act based on your logic.

    • confused says:

      Depending on how rich is defined, it maybe interesting to find out if actually much more tax money goes to the riches than benefiting the poor if we sum up what’s been paid as salary and bonuses to those super scaled civil servants, all ministers, high rank officers and directors (some of them with multi-directorships) sitting in those probably hundreds of GLC related companies?

      If we have 50,000 of these riches drawing an average of $500,000.00 each a year not to mention our multi million paid full ministers (we are not sure if ministers are also being paid for multi portfolio as well), these will be a humongous of $25,000,000,000.00 ($25 billions) of tax money. Even half of it will be $12.5 Billions.

      If you assume 1 million of the poor is receiving $1000 benefit from the tax dollars a year, it is merely $1billion. Do we have this happening?

      So who actually benefit more from the tax dollars remains to be verified?

      My figures may not be accurate but I believe the riches took more of the tax monies than the poor quite clearly in relayive sense unless I am proven wrong.

  3. wongcheokwan says:

    Basically it is all about cpf returns.Money NO enough.

    One says: 2.5% cpf interest is very good.

    Another says: you pay me 2.5% but risk my money to make 6.5%.

    Solution: Those who deposit money into cpf for 2.5 % interest must be

    entitled to cpf loan at 2.5% interest for the same number of years.

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