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More BS on the CPF

winnipegjets

Alfrescian (Inf)
Asset
CPF issue: Retirement scheme fair and one of world's safest: DPM Tharman

Here are excerpts of DPM Tharman Shanmugaratnam's reply to parliamentary questions on CPF interest rates:

"The CPF is not a perfect retirement savings scheme, but it is among the better regarded internationally. As PM has stated, we want to improve the CPF to provide greater security in retirement, especially for those with lower wages and to help retirees cope with inflation. We also want to give those who are 'asset-rich and cash-poor' more convenient options to get cash from their homes.

"But as we seek to improve the CPF or to add any flexibility, we must retain its basic strengths and avoid the huge problems seen elsewhere:

"First, our CPF system is sustainable. There are no unfunded or sudden liabilities that will burden our children's generation;

"Second, the CPF offers some flexibility for members to withdraw savings, indeed more so than many other social security systems. In particular, by tapping on their OA savings, the vast majority of Singaporeans have been able to own their homes and service their mortgages with little or no out-of-pocket cash, which Minister Tan has just emphasised.

"Third, while the CPF scheme does not provide the highest returns, it gives fair returns and certainly one of the safest in the world. Few systems offer the guaranteed floors on interest rates - 3.5 per cent for OA and currently 5 per cent on SMRA for those with smaller balances, who comprise the majority of members, and 1 per cent less for larger balances. The interest rates are guaranteed by one of the few remaining triple-A rated governments in the world. The CPF also offers the option to members who wish to place more money in their SA account, or take higher risks through the CPF Investment Scheme (CPFIS) in the hope of higher returns;

"Fourth, on top of the guaranteed interest rates, the Government subsidises CPF members through the Budget in a targeted and sustainable manner. We provide significant help to lower income members to build up retirement assets, , by giving them housing grants in their OA and CPF contributions through the Workfare Income Supplement (WIS). Members of the Pioneer Generation also now get top-ups for life, in their Medisave accounts;

"Taken as a whole, our CPF system prepares Singaporeans well for the future. Based on current policies, a new entrant into the workforce today can expect to draw a retirement income of about two thirds of his last-drawn pay if he is a median income earner. This is around the OECD average. He gets a much higher ratio of his previous pay if he is a lower income worker, chiefly because of Government subsidies. As Minister Tan has said, our key concern is to help the current generation of older Singaporeans who have low CPF balances, due to their much lower wages in the past and the more liberal withdrawal rules then.

CPF pays fair interest rates

"Let me now address the specific questions on how CPF interest rates are determined. The current CPF interest rate structure was implemented in 2008. It was an enhancement, especially for members with smaller balances. We debated the changes in Parliament in 2007, as part of the broader package of reforms to strengthen retirement security.

"The fundamental principle is to peg CPF interest rates to returns on investments of comparable risk and duration in the market. We also structured the interest rates to provide greater benefit to members with small and medium-sized balances, by paying Extra Interest (EI) on the first $60,000 of balances. Interest rates on the Ordinary Account (OA)

"In determining the rates, we have to recognise the fundamental difference in the purpose of the OA compared to the longer-term SA, MA and RA (or SMRA). OA savings can be withdrawn at any time for home purchases and servicing mortgage loans, or education. It is a liquid account. The interest rate on OA has therefore been pegged to the 12-month fixed deposit and month-end savings rates of the major local banks. However, unlike market interest rates, it pays a guaranteed floor rate of 2.5 per cent, or 3.5 per cent for OA balances of up to $20,000. More than half of all members enjoy the full 3.5 per cent on their OA.

"Members also have options to earn more than these OA interest rates. They can transfer OA savings to the SA so that these become long term savings, earning higher returns. This is a useful option for those who have paid up their housing loans. Those who want to take on market risks in the hope of earning better returns can also invest part of their OA balances through the CPFIS.

"Furthermore, the CPF interest rates are not the only help members get to build up their savings. As I just mentioned, the Government also provides subsidies through the Budget to CPF members, targeted especially at lower and middle-income members. These subsidies in effect amount to a significant boost to what the typical low-income member earns on his balances7 . If we look at his OA in particular:

"On top of the 3.5 per cent interest rate on his OA, he gets Workfare payments and housing grants. When he sells his home to upgrade or downgrade later, the housing grant is returned to his OA as part of his savings for retirement. Based on current policies, these grants (amortised over his working life) will in effect grow his savings by at least 2.5 per cent per year over a 30-40 year working life. In effect, his savings 'earn' 6 per cent per annum through the combination of CPF interest rates and Government subsidies.

"This does not include the OA savings used to purchase the housing asset, which benefits separately from appreciation in housing value. As Minister Tan explained, his home is an important retirement asset, and based on its value he can withdraw monies from his CPF balances at age 55.

"The OECD highlighted this critical role of homeownership in its recent analysis of pension systems in the advanced countries. Homeownership "can make a big difference for many pensioners, both reducing the need for cash and providing a way to generate income later in life."

"Mr Lim Biow Chuan asked if CPF interest rates could be pegged to those on 10-year Singapore Government Securities (10Y SGS). The OA interest rate, pegged to market deposits that can be withdrawn at any time, is fair. However, for several years now, the OA has earned the floor rate of 2.5 per cent to 3.5 per cent, well above the market rates. The OA has in fact been earning more than what 10Y SGS pays. (The average yield on 10Y SGS over the last 10 years has been 2.4 per cent. It is currently around 2.3 per cent.)

"The SMRA on the other hand is pegged at 1 per cent above the 10Y SGS, which I will now explain. Interest rates on SMRA

"The SA and RA are as we all know held for retirement. It is long term savings. As Medisave (MA) balances are also mainly used as Singaporeans get older, we have treated them like the SA for purpose of determining interest rates.

"The returns on the SMRA have been enhanced over the years. When we set the new basis for SMRA rates in 2007, our aim was to peg it to the rates for similar long term, risk-free investment. This was what the ERC had recommended in 2002.

"The best peg would have been the 30-year government bond, because 30 years is the typical duration for which SMRA monies are held. However, as we had not started issuing a 30-year SGS in 2007, SMRA rates were pegged to the yield of 10-year SGS plus 1 per cent to approximate the 30-year rate.

"As I told the House then, the 1 per cent spread on top of 10Y government bonds was in fact a little generous, as it was higher than what has been observed for 30Y bonds in international markets. However, it was fair and reasonable, giving allowance for future economic and market uncertainties, such as if inflation picks up sharply over the long term.

"Going by the formula for SMRA rates, we would be paying about 3.4 per cent today on SMRA. (This is higher than the actual yield of 3 per cent on the 30-year SGS, which is not widely traded.) However, we have maintained a floor of 4 per cent on SMRA, or 5 per cent for balances of up to $60,000. We have renewed this floor each year since 2008. Two-thirds of CPF members in fact earn the full 5 per cent on their SMRA.

"This is a fair system of returns for the SMRA. The CPF in essence pegs SMRA returns to long term SGS, but it has also been paying a floor of 4 per cent to 5 per cent that is well above market rates in the current environment. As I explained earlier, we have shielded members from the risk of low market rates.

How CPF monies are invested

"I will next explain how CPF monies are invested, as asked by Dr Lee and Mr Gan.

"The CPF Board (CPFB) invests CPF members' monies in Special Singapore Government Securities (SSGS). These are issued specially by the Government to CPFB. The payout from the SSGS is pegged to the interest rates that the CPFB is committed to pay its members.

"The Government guarantees these SSGS bonds, so that CPFB faces no risk of being unable to meet its obligations to its members. This is a solid guarantee, from a triple-A credit-rated government. The triple-A credit rating reflects Singapore's very strong financial position, with the Government's assets comfortably exceeding its liabilities. Both Standard and Poor's and Moody's recently reaffirmed our credit rating, noting that our strong net asset position provides ample cushion against shocks.

"What does the Government do with the proceeds from SSGS issuance? It pools them with the rest of the Government's funds, such as proceeds from the tradable Singapore Government Securities (SGS), any government surpluses as well as the proceeds from land sales which under our Constitutional rules have to be accounted for as Past Reserves.

"The comingled funds are first deposited with MAS as Government deposits. MAS converts these funds into foreign assets through the foreign exchange market. A major portion of these assets are however of a longer term nature, and are hence transferred over to be managed by GIC.

"The SSGS proceeds are not passed to Temasek for management. Temasek manages its own assets, and does not manage any CPF monies."
 

winnipegjets

Alfrescian (Inf)
Asset
A lot of unnecessary info to obfuscate the issue.

Here are the key points that the government have not addressed:

1. Is the return given for the CPF savings sufficient for the individual to retire?
What is the point of being 'safe' when the return is insufficient for the individual to retire with?

2. Can the government prove that investing in the S&P over the long term is riskier than leaving the money in the CPF?
If the S&P collapse, sinkapore will be worse off.

Annual investment of $10k over 30 years .....
In CPF, you get $450k
In S&P ETF, you get $1.3 million

Who in the right mind would want to put the money in the CPF????????
 

mojito

Alfrescian
Loyal
To drill into the issue further, let us ask tharman who regards it as safe and why is it so?

It is "safe" because they will always be able to return your money. Since they owe you sgd, govt can easily turn on the printing press in an instant.
 

johnny333

Alfrescian (Inf)
Asset
For me it is going to be very simple decision. If they keep on making excuse & don't return MY money then I will vote for the opposition who can promise to return my money.

Even if the opposition cannot make this promise, I will still vote for the opposition because they will pry this infomation from from those who have it: LKY, LHL, Ho Ching,... It's time that Sporeans know the truth:rolleyes:
 

freedalas

Alfrescian
Loyal
For me it is going to be very simple decision. If they keep on making excuse & don't return MY money then I will vote for the opposition who can promise to return my money.

Even if the opposition cannot make this promise, I will still vote for the opposition because they will pry this infomation from from those who have it: LKY, LHL, Ho Ching,... It's time that Sporeans know the truth:rolleyes:

That's right. The botak Indian can explain for all he wants, no one is ever going to believe a single word he says, not even if PAP explains it a million times. The people's view of the CPF is already hardened - that the PAP is delaying withdrawals because it is a continuous source of cheap funds for Ho Ching to gamble. So to that Indian botak - you can go fucked.
 

Qantas

Alfrescian
Loyal
That's right. The botak Indian can explain for all he wants, no one is ever going to believe a single word he says, not even if PAP explains it a million times. The people's view of the CPF is already hardened - that the PAP is delaying withdrawals because it is a continuous source of cheap funds for Ho Ching to gamble. So to that Indian botak - you can go fucked.

Aiyah the shiny Indian botak head is only the messanger. Please dont shoot him, lol:biggrin:
 

batman1

Alfrescian
Loyal
Alot of hot air and BS.
Guarantee my foot! This botak conman guarantee you ?
If u want your CPF money back,VOTE OUT the blood-sucker PAP.
 

winnipegjets

Alfrescian (Inf)
Asset
Alot of hot air and BS.
Guarantee my foot! This botak conman guarantee you ?
If u want your CPF money back,VOTE OUT the blood-sucker PAP.

The government guarantee is worth nothing.
If the S&P collapse, there will be a global depression and sinkapore will sink along with it.

So, why would you want to give up $1 million return for a $150k return backed by the government?
 

winnipegjets

Alfrescian (Inf)
Asset
That's right. The botak Indian can explain for all he wants, no one is ever going to believe a single word he says, not even if PAP explains it a million times. The people's view of the CPF is already hardened - that the PAP is delaying withdrawals because it is a continuous source of cheap funds for Ho Ching to gamble. So to that Indian botak - you can go fucked.

The holding back of your money is necessary to keep GIC and Temasek afloat. Without your CPF money, the House of Cards collapse.

More important question is why is the PAP government condemning sinkees to paltry return of 2 percent when a safe investment vehicle - S&P ETF - can provide 7 percent return?
 

eatshitndie

Alfrescian (Inf)
Asset
cpf is the safest vault for sinkies. old sinkie women would do themselves a big favor by safekeeping their hundreds of thousands of cash savings with cpf instead of losing them to confidence tricksters. :wink:
 

virus

Alfrescian
Loyal
Greek banks used to b one of the safest, after collapse of the banking sector all cash were locked down n depositors were guaranteed with shares from these failing banks with no mention of their savings.
 

halsey02

Alfrescian (Inf)
Asset
We just want our money, not their money, at 55....give us all back out BLOOD SWEAT & TEARS money....can we trust the PAP for the next 50 years with our money??
 

Leongsam

High Order Twit / Low SES subject
Admin
Asset
That's right. The botak Indian can explain for all he wants, no one is ever going to believe a single word he says, not even if PAP explains it a million times. The people's view of the CPF is already hardened - that the PAP is delaying withdrawals because it is a continuous source of cheap funds for Ho Ching to gamble. So to that Indian botak - you can go fucked.

The people's view of the CPF has hardened because they are idiots who don't understand finances. The government doesn't have to bother about the opinions of retards.

They please people like me because we are the ones who understand what is necessary to keep Singapore ahead of the game. Our opinion is what counts.
 

winnipegjets

Alfrescian (Inf)
Asset
The people's view of the CPF has hardened because they are idiots who don't understand finances. The government doesn't have to bother about the opinions of retards.

People have gotten smarter ...they know longer take the PAP government at its words. They know the PAP has this total bs policy.
Time for you to wake up too. You are losing millions to the PAP. Your $450k in the CPF could have been $1.3 million with guarantee that is better than that given by the government. But you believe in the PAP blindly and thus have lost $850k!

They please people like me because we are the ones who understand what is necessary to keep Singapore ahead of the game. Our opinion is what counts.

Sorry, I have rush to the toilet to puke.
 

tanakow

Alfrescian
Loyal
To say that the CPF money is guaranteed is meaningless as the G can print money which has no market value then. What Thafman can do , is to guarantee payment in a foreign currency like USD, Euro or RMB. In this way, we can be assured that the money will be there as the G cannot anyhow print foreign currencies.
 

halsey02

Alfrescian (Inf)
Asset
To say that the CPF money is guaranteed is meaningless as the G can print money which has no market value then. What Thafman can do , is to guarantee payment in a foreign currency like USD, Euro or RMB. In this way, we can be assured that the money will be there as the G cannot anyhow print foreign currencies.

Are SINgaporeans, THAT STUPID?? ( the 60% that is)??? The people who guarantee yOUR money are the same people, who take yOUR money & invest them...who is guaranteeing who??

They keyword to all these is "TRUST ME"!...we are too TRUSTING of the PAP !! we are too trusting to part our hard earned BLOOD SWEAT & TEARS savings to people like these, who had it ever so good, for money is perpetually flowing in every day. But, they have no qualms in drafting policies, that bring in deluge of foreign workers ( not the blue collar ones) who will SMASH YOUR RICE BOWLS. You have, on show, on paper, plenty of CPF money, but you struggle, hand to mouth to feed yourself. The worst part, you loose your hard earned job to a worker from a 3rd world country & you work with such people, who with the support of the government you voted for, snide you at work. Can you not be xenophobic? how trusting can you be, of people, who hold on to you savings for a very long time? Can you trust them? :p

They can explain, all they want, we all know how CPF work etc...till the 'cows come home'...the noise is very clear & specify...at 55, giver us all our money of hard earn savings, if we want to leave it behind to TRUST them to invest them & withdraw in stages, OUR CHOICE. We cannot complain , we make that choice, but choice, must be given, not setting rules & regulation at their own free will for the next 50 years.

We do not need all these bull shit on how we spend our money especially our CPF, if we cannot manage that savings...we might as well, be paid in kind every month. It is my savings, I take them, I spend, how, when & who, I like...I do not need a NANNY!.
 
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