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Laurence Lien on CPF - No transparency!

scroobal

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Loyal
Joint responsibility for old age income security
Many of the criticisms aimed at the CPF system are based on a lack of understanding of how it actually works

PUBLISHED ON JUL 21, 2014 12:01 PM 26 0 0 0

BY LAURENCE LIEN FOR THE STRAITS TIMES
At first, it was not my intention to write about the Central Provident Fund (CPF). But I feel compelled to do so given the persistent lack of clarity about what the real issues are.

Some citizens have asked, is the money still there? Why does the Government need to hang on to our money after age 55? Is it because the money is lost?

As a previous director at the Ministry of Finance overseeing government investments I can only say that no one should worry about that. Unfortunately, the Official Secrets Act does not permit me to say any more than what is publicly known.

The investments of GIC are large and diversified across asset classes and geographical markets. Its 20-year returns - at 6.5 per cent in US dollars and 5 per cent per annum in Singapore dollars - are not substantially different from benchmark returns.

Citizens may not be similarly reassured because the Government has chosen not to release detailed numbers of the Government's balance sheet, including the actual size of GIC's assets under management.

Ironically, in the Singapore Government's case, the reticence is borne out of a desire to be conservative - to reduce the pressure to be profligate - and not a need to hide losses.

However, we have reached a stage of our political maturation process in which the lack of transparency, and perceived lack of public accountability, needs to be addressed. Transparency breeds trust.

There has been much debate over the changing Minimum Sum amount and the perception of constantly shifting goalposts.

But the policy intent has all along been very clear. Set at $80,000 in 2003, the idea has been to raise the amount gradually until it reaches $120,000 (in 2003 dollars) in 2015, with amounts adjusted yearly for inflation. There has been no change in this policy.

Once the Minimum Sum is set for a particular cohort, it does not change.

That said, however, each cohort does not get much advance notice. Someone who turns 55 between July 2014 and June 2015, will need to set aside a Minimum Sum of $155,000, which is equivalent to $117,500 in 2003 dollar terms. But this figure was announced only in May 2014.

The $155,000 figure is 32 per cent more than what the cohort five years older had to set aside. Rather than being too precise about the Minimum Sum quantum keeping up with the latest inflation rates, I am sure CPF members would welcome the Government setting the limits early and giving sufficient notice of future changes.

Ironically, this year's increase of the Minimum Sum (from $148,000 to $155,000), at 4.7 per cent, was the lowest rate of increase since 2003. It would have been even lower if the inflation rate had not been so high over the last five years. If the inflation rate had stayed at 2 per cent over the last five years - the rate from 2003 to 2009 - the Minimum Sum set this year would be $146,000 instead.

Apart from inflation eroding retirement savings, the widening income inequality here means that pitching it for the lower middle income household would make it increasingly less relevant for large segments of the population. A monthly payout of $1,200 is inadequate for many as the median monthly income is $3,250. Meanwhile, many other CPF members are not able to accumulate the Minimum Sum by age 55.

Multiple uses of CPF for purposes other than directly meeting retirement needs and the insufficient social safety nets - for example, to cater for periods of unemployment - have increased the pressures to expand the uses of the CPF.

Many have also asked whether the CPF returns are fair. They are, if they are measured against what is available in the market. The current yield on a 30-year Singapore Government Security, which is considered a long-term risk-free investment, is only 3.1 per cent per annum.

But the Government is not a commercial entity that needs to be profitable and obtain compensation in return for taking risks. It can take a long-term view and smoothen returns on behalf of CPF members.

Even the Ordinary Account can be invested in the long term. Although more liquid by design, the net contributions into the Ordinary Account are generally positive year on year.

In fact, the total balances of CPF members have increased every year from $52 billion in 1993 to $253 billion in 2013. This gives GIC the stability that it needs to invest CPF funds for the long term.

Currently, the Government is between a rock and a hard place. If it makes high returns, it will be accused of creaming off excess returns to fund already large coffers. If it makes low returns, people may worry that their funds are not safe.

Looking ahead

APART from more transparency, I believe the Government should commit to being revenue neutral over the long term on the investments of CPF funds. Based on GIC's current asset allocation, the Government should be able to accumulate excess returns on invested CPF funds over the long term and pay out bonus returns periodically.

The Government can also provide an option for CPF members to take on some risks willingly to invest in a fund that has a higher expected return than the Special Account, but whose price will be subject to market risk.

Some Singaporeans argue for the return of CPF funds to members at age 55.

A number of well-regarded retirement funds around the world, for example, the Chilean pension fund, require members to use the balance in their individual accounts to purchase an annuity and/or set up programme withdrawals over a retiree's expected life span. Annuities help to prevent either overspending or underspending.

The majority of CPF members should not be so focused on the Minimum Sum or on wresting control of it.

They should instead look at total retirement planning in order to answer questions such as: How much money do they require for retirement? What is the potential shortfall? How much must come from personal savings? How much longer do they need to work?

Higher-income CPF members must realise sooner, rather than later, that the CPF was not focused on them, and that CPF savings alone are likely to be inadequate.

The Government needs to work with those who are self-employed, or who have been outside the workforce for many years, to systematically shore up their retirement adequacy.

Income security in old age presents dilemmas and hard choices for policymakers everywhere, not just in Singapore.

The sooner everybody - government and people - starts working together, with openness and cool heads, to address it today, the better off everyone will be in the future.

The writer is a Nominated Member of Parliament, chief executive of the National Volunteer and Philanthropy Centre and chairman of the Lien Foundation
 

halsey02

Alfrescian (Inf)
Asset
No need to go publishing these articles on what CPF is...who in the blooding f$#$^$ mind in SINgapore does not know. All we are interested is, at 55 years old, we have the choice to withdraw all our hard, earned, blood, sweat & tears money. The other thing is, one can never trust any people, who has their hands on your money.

Give us the choice to withdraw at 55...& cut the bullshit!
 

phouse3

Alfrescian
Loyal
My understanding is different.

As CPF savings and spending are in S$, investments should be in S$. But Singapore is flushed with liquidity due to its status as private banking hub, millionaire-immigration hub, etc. So MOF mops up the CPF savings, passes them to MAS to convert to forex which in turn passes them to GIC to invest overseas. A mismatch of currencies occurred and forex losses are made.

CPF is mixed with budget surpluses, revenue from land sales, and SGS. Such aggregation provides a buffer for investment losses which keeps the CPF liquid. Conversely, the CPF also help boost the country's reserves. It's symbiotic.

Crises:
- Asia Financial Crisis (1998)
- Internet Bubble (2000)
- 911 (2001)
- SARS (2002)
- Iraq War (2003)
- Global Financial Crisis (2007-2008)
- Eurozone Crisis (2009-)

Apparently, the CPF was under seige from 1998 to 2003. Coincidentally, a major withholding of the CPF money over 10 years started from 2003. Minimum Withdrawal Age was also raised.

There were 8 years where GIC’s investment returns are below what the government pays on SSGS. Firstly, it tallies with the above crisis years. Secondly, it is probably a euphemism for GIC making losses. (As indications/proxies, Temasek lost 40% of its portfolio during the Internet Bubble in 2000. GIC lost 25% of its portfolio during the Global Financial Crisis in 2007~2008.) Thirdly, it means we are now in a golden era. It has been relatively calm over the last 5 or 6 years. (Shouldn't GIC sell down and keep cash?)

If the Minimum Sum and Minimum Withdrawal Age did not go up, the CPF would have been in trouble unless the buffer is large. This is the reason why the government has been collecting so much revenue and cutting back on healthcare spending. * Another reason is to keep the reserves high.

People who keep asking the government to pay more, assume more risks, do this and do that are overly optimistic about the performance of GIC's returns. If we really want to be able to enjoy our CPF, we should be asking for the government to pay lower returns.

(* It is no coincidence that GST was raised to 4% in 2003, 5% in 2004 and 7% in 2007. It is no coincidence that the government first started talking about means-testing on healthcare in 2004. It is no coincidence that land prices, development charges, stamp duties, foreign workers levies and HDB flat prices are high.)
 

PMPunk

Alfrescian
Loyal
Dogtor Joseph Ong, finally reveal your true colors as a PAP por lumpar! No wonder u spend so many years whacking WP! LOL!

My understanding is different.

As CPF savings and spending are in S$, investments should be in S$. But Singapore is flushed with liquidity due to its status as private banking hub, millionaire-immigration hub, etc. So MOF mops up the CPF savings, passes them to MAS to convert to forex which in turn passes them to GIC to invest overseas. A mismatch of currencies occurred and forex losses are made.

CPF is mixed with budget surpluses, revenue from land sales, and SGS. Such aggregation provides a buffer for investment losses which keeps the CPF liquid. Conversely, the CPF also help boost the country's reserves. It's symbiotic.

Crises:
- Asia Financial Crisis (1998)
- Internet Bubble (2000)
- 911 (2001)
- SARS (2002)
- Iraq War (2003)
- Global Financial Crisis (2007-2008)
- Eurozone Crisis (2009-)

Apparently, the CPF was under seige from 1998 to 2003. Coincidentally, a major withholding of the CPF money over 10 years started from 2003. Minimum Withdrawal Age was also raised.

There were 8 years where GIC’s investment returns are below what the government pays on SSGS. Firstly, it tallies with the above crisis years. Secondly, it is probably a euphemism for GIC making losses. (As indications/proxies, Temasek lost 40% of its portfolio during the Internet Bubble in 2000. GIC lost 25% of its portfolio during the Global Financial Crisis in 2007~2008.) Thirdly, it means we are now in a golden era. It has been relatively calm over the last 5 or 6 years. (Shouldn't GIC sell down and keep cash?)

If the Minimum Sum and Minimum Withdrawal Age did not go up, the CPF would have been in trouble unless the buffer is large. This is the reason why the government has been collecting so much revenue and cutting back on healthcare spending. * Another reason is to keep the reserves high.

People who keep asking the government to pay more, assume more risks, do this and do that are overly optimistic about the performance of GIC's returns. If we really want to be able to enjoy our CPF, we should be asking for the government to pay lower returns.

(* It is no coincidence that GST was raised to 4% in 2003, 5% in 2004 and 7% in 2007. It is no coincidence that the government first started talking about means-testing on healthcare in 2004. It is no coincidence that land prices, development charges, stamp duties, foreign workers levies and HDB flat prices are high.)
 

AhMeng

Alfrescian (Inf- Comp)
Asset
LET people decide what they want to do with their money at 55.
Those who screw ups are minority. So they deserve to die on the streets.

Why does majority of sensible people have their funds locked up because of a few bad apples?

On this point alone, i will Vote opposition. Period.
 

borom

Alfrescian (Inf)
Asset
As a descendent of the Lien Family of OUB, he could have chosen the easy way out and have an easy life instead of speaking up..

If the opposition can attract people like him, it will be good for society at large and send a strong signal to the incumbents that even the rich and privileged have enough and its time for a change.
 

virus

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Loyal
I will only believe him if he choose to go through the bed of nails with roy and marry him.
 

laksaboy

Alfrescian (Inf)
Asset
Laurence Lien is in charge of the Lien Foundation, which has been responsible for several surveys on 'attitudes towards death' and promoting palliative care, 'dying with dignity' and I suspect, euthanasia, once the conditions are right.
 

frenchbriefs

Alfrescian (Inf)
Asset
u know the bullshit is strong when they say this.....

"But the policy intent has all along been very clear. Set at $80,000 in 2003, the idea has been to raise the amount gradually until it reaches $120,000 (in 2003 dollars) in 2015, with amounts adjusted yearly for inflation. There has been no change in this policy."

wtf does that even mean?they want to increase minimum sum till it reaches 120,000 in 2015,but not just the number 120,000,it has to be the equivalent of 120000 in 2003 in 2015....wow amazing!!!!!

so why set the number at 120,000 in the first place?i thought the increase from 80,000 to 120,000 was inclusive of inflation of cost of living?now we have to increase CPF to account for inflation of money on top of inflation of cost of living?inflation of inflation?not only are we measuring inflation of inflation they didnt account for the 2.5% interest that CPF bears......which means now we have a inflationary revised target of $120,000 in 2015, in inflationary dollars of 2003,on top of 2.5% interest which is another form of inflation.....amazing foresight PAP has!!!!!!or ultimate bullshit?????

and i dont understand.....why are the targets set for 2015 and 2003?r u telling me the world is going to stop spinning in 2015?people stop retiring after 2015?inflation stops after 2015? why not set the target for 2050 in 2003 dollars?
 

kingrant

Alfrescian
Loyal
If only our Ministers can give such cool reasonable answers from the start, half the battle would be won, and there will be no Roy Ngerng.

Why are people like Laurence not in govt instead?
 

frenchbriefs

Alfrescian (Inf)
Asset
If only our Ministers can give such cool reasonable answers from the start, half the battle would be won, and there will be no Roy Ngerng.

Why are people like Laurence not in govt instead?

obviously u did not read the fucking article....Laurence used to work for the MOF and temasek at a very high level......the article is nothing more than propaganda hogwash....
 

dr.wailing

Alfrescian
Loyal
obviously u did not read the fucking article....Laurence used to work for the MOF and temasek at a very high level......the article is nothing more than propaganda hogwash....

Totally agree with you.

I've never ever trusted that hypocrite. He's a card-carrying PAP porlumpar under the pretext of doing charity works.

By the way he's an ah sia kia (rich man's son). What does he know about the plight and struggles that ordinary Sinkies have to face daily?
 

batman1

Alfrescian
Loyal
All these people born with a silver or golden spoon on the mouth DO NOT understand the needs,desires and aspirations of the majority of ordinary Singapore Citizens.Talk so much for what ? Eat full ,nothing to do,so talk cock.
 

kingrant

Alfrescian
Loyal
Whatever he was before and whatever he becomes after has nothing to do with the tone and reasonableness of his fucking article.

In fact, I am suprised that he refrained from using the common official jargon and pompous language and smoke and mirrors you often see from govt Ministers like Khaw, Teo CH, Mah BT, Tan CJ, Chan CS etc.

obviously u did not read the fucking article....Laurence used to work for the MOF and temasek at a very high level......the article is nothing more than propaganda hogwash....

By the way, he was director in MOF overseeing investments, nothing to do with CPF directly. Nowhere was it mentioned in the fucking article that he worked for temasek. You invented this did you?
 
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scroobal

Alfrescian
Loyal
Laurence Lien has been critical of this govt on many things. He speech on the population white paper is outstanding. Read the article carefully. He is asking for transparency i.e. the govt is not disclosing everything that a citizens needs to know. I am sure you can guess what he is hinting at. He also mentions that the Govt should provide periodic bonus when there are good times. It a nice way to say - stop profiteering.

If he was more forthcoming in his article, it would not appear in the ST.

obviously u did not read the fucking article....Laurence used to work for the MOF and temasek at a very high level......the article is nothing more than propaganda hogwash....
 

frenchbriefs

Alfrescian (Inf)
Asset
look whatever...what he was and who he worked has a big significance,especially since this guy seems to be particularly high up in the PAP hierachy and obviously was in charge of some pretty important stuff.....this automatically put him on suspect and a pro establishment cunt like leongsam.....

secondly lets analyse this article objectively from a economics or financial point of view.....this article may not be thick with jargon and voodoo talk like the usual PAP crap but it still explains nothing,it merely states what the policies are but theres no logical or thorough reasoning backing it......it doesnt acknowledge the fact that theres obvious failings in the CPF system and that there is rampant inflation and the government seems to be impotent in dealing with it and instead merely throwing the heavy responsibilities onto the citizens and individuals......a article filled with nothing but excuses and mollycuddling the incompetent incumbent.

it also states the reserves have grown from 53 bil to 253 bil,yet so many elderly still remain in destitute times.....what exactly is the government waiting for?for reserves to grow to 500 billion or 1 trillion and still unable to care for the old folks on this tiny island?

it also state high returns people scare government steal the returns and low returns people scare funds not safe....but thats not the problem is it?we have been assured that cpf is bonded and 100% secured and triple AAA ratings.....the reason people dont trust the government is THEY KNOW PAP IS SCREWING WITH THEM.


Whatever he was before and whatever he becomes after has nothing to do with the tone and reasonableness of his fucking article.

In fact, I am suprised that he refrained from using the common official jargon and pompous language and smoke and mirrors you often see from govt Ministers like Khaw, Teo CH, Mah BT, Tan CJ, Chan CS etc.



By the way, he was director in MOF overseeing investments, nothing to do with CPF directly. Nowhere was it mentioned in the fucking article that he worked for temasek. You invented this did you?
 
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dr.wailing

Alfrescian
Loyal
Laurence Lien has been critical of this govt on many things. He speech on the population white paper is outstanding......

Come GE 2016 he and his extended family will vote for the PAP.

BTW are you Lawrence Lien or an acquaintance of his?
 

zeebjii

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Loyal
Laurence Lien has been critical of this govt on many things.


There has been much debate over the changing Minimum Sum amount and the perception of constantly shifting goalposts.

But the policy intent has all along been very clear....


VERY CLEAR???!!?? critical indeed! another pap dog, a very rich one.
 

scroobal

Alfrescian
Loyal
No lah bro, this kind is very different. Early in his civil services careers, he asked to be with community / welfare services. His OMS peers thought he was mad. The guy is scion to a massive fortune. No need to work a day. Also real family man.

He also not involved in sucking people's money like those who have HDB contract etc.

There has been much debate over the changing Minimum Sum amount and the perception of constantly shifting goalposts.

But the policy intent has all along been very clear....


VERY CLEAR???!!?? critical indeed! another pap dog, a very rich one.
 

zeebjii

Alfrescian
Loyal
No lah bro, this kind is very different. Early in his civil services careers, he asked to be with community / welfare services. His OMS peers thought he was mad. The guy is scion to a massive fortune. No need to work a day. Also real family man.

He also not involved in sucking people's money like those who have HDB contract etc.

Sorry mate...his haughty, condencending attitude in his article made me lose all respect for him, and lose all hope that some how, a fucking rich man born into obscene wealth can empathise with what a commoner sinkie goes through in life.
 
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