20160912 Returning CPF savings to retirees a win-win situation

The continued retention of CPF savings is a lose-lose situation for the PAP government and citizens. This is because GIC is forced to invest at inflated prices in an artificial low-yield environment while retirees are prevented from accessing money which belongs to them..

GIC was clearly aware of heightened investment risks since 2012 which is why its cash increased from 3% to 11% (pg 13). But its market call then was wrong and it had subsequently gone on a buying spree, regardless of inflated prices. Two months ago, GIC sounded another warning when it reported lower 20-year returns and warned of tough times ahead.

Group CIO Lim Chow Kiat: “These difficult investment conditions can stretch for the next 10 years.” Lim is right to be pessimistic as even novice investors are aware that greater uncertainty and a higher degree of volatility lie ahead. He also pointed to the high levels of debt in some countries.

Every country been increasing their debt to record levels: Investment gains are all fueled by trillion$ of debt.

Source: ft.com

During the last 3 years, $67 billion in CPF monies have already been invested in overpriced assets. How much more risk should CPF members continue to bear?

In 2014, DPM Tharman told Parliament that GIC could not even make CPF rates in 8 out of 20 years. With global interest rates much lower today, GIC will soon be in trouble. Should another financial crisis erupt, will PAP delay CPF withdrawal further? Is PAP reviewing the legislated CPF minimum rate and planning to lower it?

By returning all CPF monies in the RA and MA to their rightful owners, GIC would then not be forced to take unnecessary risks.

Cash rich retirees will also help to generate much needed economic activity, contributing to GDP growth.

Isn’t this a win-win situation?

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2 Responses to 20160912 Returning CPF savings to retirees a win-win situation

  1. sinkie says:

    Another GE with 70+% “mandate” and PAP will seriously consider changing CPF Act to lower CPF interest rates to 1% / 2% instead of the current 2.5% / 4%.

    PAP will never allow return of CPF to the people, because PAP has created a Singapore that is 1st world cost but 3rd world wages. Too many Sinkies cannot retire and PAP needs all the CPF monies as backstop to dole out breadcrumbs to large percentage of elderly/disabled Sinkies who have exhausted all savings and all help from family members / other relatives.

    Through their own actions, PAP is now forced to use the average middle-income Sinkies to subsidise the low-income / no-income Sinkies. This is why in the last 5-7 years the poorest Sinkies are slowly seeing mini increases in welfare benefits (but still pretty much at subsistence quality of life), while average Sinkies keep on seeing increases in cost of living, bills, continued high property prices, rentals, transport, taxes, duties, fees, etc etc. PAP has already slapped itself and no one is saying it. PAP keeps on criticizing western-style pay-as-you-go benefits as unsustainable. But PAP-CPF-style is more & more becoming like pay-as-you-go with more & more CPF monies being locked up for longer in order to subsidise & keep alive the poorer segment of Sinkies.

    If PAP were to ever allow full return of CPF to people at 55 or even 65, AND IF PAP doesn’t provide western-style state pensions and free medical, THEN within 5 years you will see 400,000 – 500,000 people penniless and creating a socio-politico-economic challenge that will cause the downfall of PAP. PAP is fully aware of this. And hence PAP will die-die maintain the status quo while feeding bullshit to Sinkies.

  2. Confused says:

    @sickie,
    Totally agreed with para. 1.

    Would like to offer another perspective on others.

    PAP will never allow return of CPF to the people, because PAP has created a Singapore that is 1st world cost but 1st world millions $ payout to political leaders from our tax monies.

    Through their own actions, PAP is now forced to use the average middle-income Sinkies to subsidise more to the high income political leaders than to the low-income / no-income Sinkies.

    By continuing to stretch the retirement age to 70 and beyond, PAP gets to pay the leaders longer when they should have relied on their cpf and saving. It’s basically 1 stone kills 2 birds. Most may continue to benefit from sitting in few boards to earn additional director fees.

    If the investment return continue to get below average 3% as reported and you insist cpf to be returned to members at 55, wouldn’t it trigger the cpf to akin a Ponzi scheme although it may not happen immediately but if the continuing net outflow one day assuming the population growth is also capped? This is why both have to continue?

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