As CPF fund manager prepares for low investment returns, PAP may remove the 2.5% CPF floor rate

GIC has predicted its own poor performance for the next decade: “.. real returns are expected to come in at around 1 to 2 per cent over the coming decade.”

With inflation at about 2 to 3%, this means GIC is expecting to earn between 3 and 5% for the next 10 years.

Since CPF interest rates are between 2.5% to 5%, this would mean the likelihood of GIC not meeting its obligations to CPF members. This may set the stage for the removal of the 2.5% CPF floor rate which was legislated in 1955, 62 years ago.

Anything is entirely possible whenever PAP is in desperate need of money.

Recall that the price of water was increased recently – despite a worsening economy – and the reason given by MEWR Minister Masagos was “water prices will go up after holding steady for 17 years“.

Despite HDB’s FY14/15 income of $595 million and a $79 million expenditure from managing public car parks, such obscene profit was still insufficient. PAP went ahead and increased car park rates last year by between 23% and 26% because rates had not increased in 14 years.

One day, CPF members may just wake up to this headline: “CPF floor rate removed because it has been unchanged for 62 years“. 😦

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One Response to As CPF fund manager prepares for low investment returns, PAP may remove the 2.5% CPF floor rate

  1. Sinkie says:

    Not just the 2.5% rate …. But even more for the 4% floor rate for SA, MA, RA.

    This 4% rate is even more critical, because if lowered, that means people will find it much harder to be able to reach the minimum Retirement Sums as well as the Minimum Medisave Sum.

    That 4% floor will also be the obvious target for PAPies to lower as the hopeless investment “gurus” in both GIC & Temasek struggle to achieve enough returns.

    *** In fact the latest performance report card for Temasek showed that they only achieved 4% NOMINAL returns over the last 10 years!! This means a miserable 2% REAL returns over past 10 years. Cannot even pay for the basic 2.5% CPF interest!!!

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