Govt yet to explain - CPF garbled report in TR E and Singapolitics

[scroobal]

Saw the TR Emeritus supposed MOF reply which they sourced from Singapolitcs. It turns out the source is the report below and the Q&A which was also attached is an old existing Q&A and not a fresh clarification given to SPH in the article below.

In essence it was the second attempt by the Govt after CJ Tan's write-up last Sunday which again like this was taken from the website which has been there even before Roy's publication.

Why did TR E and SingaPolitics give the impression as though they are new material.


Andrea Ong
The Straits Times
Saturday, May 31, 2014
SINGAPORE - No Central Provident Fund (CPF) monies go towards Government spending as this is prohibited by law, the Ministry of Finance (MOF) said last night.

In a response to queries by The Straits Times, it also reiterated that there is no link between CPF interest rates and GIC returns, even though the latter manages the Government's assets.

MOF was clarifying what the Government does with the money that goes into the CPF and how it determines CPF interest rates, topics hotly debated following online speculation that CPF cash is invested by Temasek Holdings and GIC, and comparisons between their returns and CPF returns.

The CPF Board invests CPF monies in Special Singapore Government Securities (SSGS) issued and guaranteed by the Government.

This is a "solid guarantee", as the Singapore Government is one of the few remaining triple-A credit-rated governments in the world, added the ministry. It also gives the assurance that the CPF Board will be able pay members all their monies when due, as well as the interest that it commits to pay on their CPF accounts.

MOF stressed that government borrowings, whether via SSGS or the market-based Singapore Government Securities, cannot be used to fund its spending, as the reserves protection framework in the Constitution and the Government Securities Act dictate that "monies raised from government borrowings cannot be spent".

MOF said the proceeds from issuing government securities are deposited with the Monetary Authority of Singapore (MAS) as government deposits. MAS then converts the funds into foreign assets via the foreign exchange market.

But as a major portion of these assets are long-term in nature, such assets are transferred to GIC to be managed over a long investment horizon.

"The Government's assets are therefore mainly managed by GIC," said MOF.

As a manager and not the owner of the assets, GIC merely receives funds from the Government for long-term management "without regard" to their sources.
MOF also emphasised that SSGS proceeds are not passed to Temasek for management. "Temasek hence does not manage any CPF monies," it said.

The ministry also explained that CPF interest rates are pegged to risk-free market instruments of a comparable duration. The Ordinary Account now earns 2.5 per cent interest, while the Special, Medisave and Retirement Accounts, meant for longer-term retirement and medical needs, earn 4 per cent. The returns that Singaporeans receive on their CPF accounts are risk-free and "significantly higher" than equivalent market instruments, said MOF.

"There is no link between CPF interest rates, and the returns earned by GIC, as the CPF monies are invested entirely in risk-free assets," it added.

On the other hand, it is the Government that takes on the investment risk in managing SSGS proceeds, said MOF.

It noted that while GIC has delivered creditable results on Government assets over the long run, its returns can fluctuate widely over the short term depending on global market cycles and shocks.

[email protected]

This article was first published on May 31, 2014.

 

[scroobal]

This is the misleading report using old and existing MOF Q&A latched on to the SPH report which got some cursory clarification from MOF yesterday. Why the misleading reporting by TR E and Singapolitics? We already got a prostitute press in Toa Payoh. Maybe the advertising revenue was more important. Maybe Richard Wan can clarify?


http://www.tremeritus.com/2014/05/31/mof-official-reply-on-cpf-monies-its-interest-rates/MOF official reply on CPF monies & interest rates
Protected May 31st, 2014 | Author: Contributions
[The Ministry of Finance responded to media queries on what the Government does with the money that goes into the CPF and how it determines CPF interest rates.]

Q: How are CPF monies invested? What does the Government do with the monies?

CPF monies are invested by the CPF Board (CPFB) in Special Singapore Government Securities (SSGS)[1] that are issued and guaranteed by the Singapore Government. This assures that the CPF Board will be able to pay its members all their monies when due, and the interest that it commits to pay on CPF accounts.

As the Singapore Government is one of the few remaining triple-A credit-rated governments in the world, this is a solid guarantee.

The proceeds from SSGS issuance are invested by the Government via MAS and GIC, just as it invests the proceeds from the market-based Singapore Government Securities (SGS).

No CPF monies go towards Government spending. Government borrowings, whether via SGS or SSGS, cannot be used to fund expenditures. Under the reserves protection framework enacted in 1990 in the Constitution and the Government Securities Act (enacted in 1992), the monies raised from government borrowings cannot be spent.

When government securities are issued, the proceeds are first deposited with MAS as Government deposits. MAS converts these funds into foreign assets through the foreign exchange market. However, as a major portion of these assets are of a long-term nature, such as those that provide backing for long-term Government liabilities like SSGS, such assets are transferred to GIC to be managed over a long investment horizon.

The Government’s assets are therefore mainly managed by GIC. GIC is a fund manager, not an owner of the assets. It merely receives funds from Government for long-term management, without regard to the sources of Government funds, e.g. SGS, SSGS, government surpluses.

The SSGS proceeds are not passed to Temasek for management. Temasek hence does not manage any CPF monies. (See also FAQ 8 on the Temasek website). Temasek manages its own assets, which have accrued mainly from divestment proceeds from sale of its investments and reinvestments of dividends and other cash distributions it receives from its portfolio companies and other investments. Temasek also has its own borrowings and debt financing sources. The Government’s relationship with Temasek is that of its sole equity shareholder.

The information above elaborates on that provided on the MOF website.

[1] Special Singapore Government Securities (SSGS) are non-tradeable Government bonds issued to the CPF Board.

Q: How are CPF interest rates determined?

CPF interest rates are pegged to risk-free market instruments of comparable duration, with a current floor of 2.5% for OA and 4% for SMRA.

a. The OA is a liquid account. The monies in the OA can be withdrawn at any time for housing. Many members withdraw substantial amounts from their OA.

b. The SMRA are for longer-term retirement and medical needs. The interest rate on the SMRA aim to be equivalent to what a 30-year SGS would earn, as 30 years is the typical duration for which SMRA monies are held. As 30-year SGS did not exist when the Government made changes to the interest rate structure in 2007, SMRA rates were pegged to the yield of 10-year SGS plus 1%. The 1% spread is in fact higher than what international bond markets have paid on 30 year bonds. The current yield on the 30-year SGS, which is not widely traded, is around 3%.

The OA and SMRA currently earn interest of 2.5% and 4% respectively. However, many members in fact earn higher interest rates on their OA and SMRA accounts, because they benefit from the extra 1% on the first $60,000 of CPF balances. Many earn 3.5% on their OA account. The majority of SMRA balances earn 5%.

The returns that CPF members receive are risk-free, and significantly higher than for equivalent market instruments.

There is no link between CPF interest rates, and the returns earned by GIC, as the CPF monies are invested entirely in risk-free assets.

It is the Government that takes the investment risk in managing SSGS proceeds.

GIC has delivered creditable results on Government assets over the long-term. However over the short-term, returns can fluctuate widely, depending on global market cycles and shocks. This is indeed what happened during the Global Financial Crisis and its aftermath. GIC’s returns over the last 5 years were affected by the sharp market downturns during the crisis, and the lagged recovery in illiquid assets such as real estate and infrastructure (See GIC’s annual report).

Ultimately, the investment returns that the Government expects to make over the long term by taking the risks of long-term investments are not hoarded away in the reserves.

a. 50% of the returns from our reserves flow back to our annual Budget through the Net Investment Returns Contribution (NIRC).

b. The long-term returns therefore help to fund spending which benefit our citizens.



Ministry of Finance

[Source]: http://www.singapolitics.sg/news/what-govt-does-money-goes-cpf

 

[ChaoPappyPoodle]

The one overriding, over powerful aspect of the management of the CPF is how the government pretends that it's their money and that any gains profited from investing the CPF belongs to the government and not the people. This basic bullshit of the PAPzis must be made clear and loud to the people and the PAPzis have to answer why is there a separation between the profits and the people and why the government insists on this separation. Another important aspect of the CPF and its related accounts is the government actually pays up to 4% in some accounts. As this is the case, what is preventing them from paying this amount to all accounts?

 

[virus]

ENRON n Lehman Brothers were also enjoy solid rating also before they bowed out dramatically, Rating are nothing, cold hard cash matters.

 

[halsey02]

They invent the rules....change them, as & when they deem fit to. In the past POSB, if you know banking, placed their access funds directly in the Local Money Market...my point is, all this, 'snaking' around the questions & it is their world, they can do anything they want. Who is going stop them??

 

[ChaoPappyPoodle]

ENRON n Lehman Brothers were also enjoy solid rating also before they bowed out dramatically, Rating are nothing, cold hard cash matters.

Their ratings are there only because Singaporeans continue to pay CPF. It is not there solely because Temasick or GIC has a god given right.

 

[winnipegjets]

"There is no link between CPF interest rates, and the returns earned by GIC, as the CPF monies are invested entirely in risk-free assets," it added.

This is the lie. See below.

The CPF Board invests CPF monies in Special Singapore Government Securities (SSGS) issued and guaranteed by the Government.
MOF said the proceeds from issuing government securities are deposited with the Monetary Authority of Singapore (MAS) as government deposits. MAS then converts the funds into foreign assets via the foreign exchange market.
But as a major portion of these assets are long-term in nature, such assets are transferred to GIC to be managed over a long investment horizon.

CPF buys bonds issued by government. Proceeds go to MAS who then hands it to GIC. GIC gets returns of 20 percent. The government says that the CPF funds is not used to generate the returns? Are sinkees dumb?

 

[dr.wailing]

Why the misleading reporting by TR E and Singapolitics? We already got a prostitute press in Toa Payoh. Maybe the advertising revenue was more important. Maybe Richard Wan can clarify?

I heard unconfirmed reports that Richard Wan is a card-carrying PAP loyalist.

One of his customers used to be The Straits Times. The Straits Times Interactive Edition (a/k/a The Straits Times Online) was using his IT product to serve up the print edition of The Straits Times online. But The Straits Times stopped using his product since early last year.

He managed to get a contract with MyPaper. The latter is currently his customer.

One of the articles published, but not written by him, on T R E criticized a PAP loyalist for having to depend on PAP contracts for his livelihood.

Talk about the pot calling the kettle black!

 

[Equalisation]

It is high time for a Takeover come Sep 2015 !!:o

 

[zhihau]

The government says that the CPF funds is not used to generate the returns? Are sinkees dumb?

60.1% might be.

 

[Klose]

sinkies are not dumb.

 

[laksaboy]

ENRON n Lehman Brothers were also enjoy solid rating also before they bowed out dramatically, Rating are nothing, cold hard cash matters.

You can always pay money for the ratings agencies to give you a positive rating. It happens all the time.

 

[laksaboy]

The government says that the CPF funds is not used to generate the returns? Are sinkees dumb?

I would be extremely grateful if they don't piss away the money on 'strategic investments' such as Merill Lynch. Any returns is sheer bonus.

 

[GoldenDragon]

You can always pay money for the ratings agencies to give you a positive rating. It happens all the time.

He who pays the piper calls the tune, tio bo?

 

[soIsee]

The method is 'CHC' smell all the way.

Convert fund from one form to another and say 'No link'

All Sinkie that DAFT? LoL

 

[scroobal]

This separation is akin to money laundering with the same purpose of muddying the waters and losing the trail. If they wanted, all CPF funds when released in tranches are tracked in tranches. They chose to do it this way to to continue to access cheap funds. While the beneficiaries of this gravy train can send their kids and families overseas, live the high life and stay in good class bungalows.

The one overriding, over powerful aspect of the management of the CPF is how the government pretends that it's their money and that any gains profited from investing the CPF belongs to the government and not the people. This basic bullshit of the PAPzis must be made clear and loud to the people and the PAPzis have to answer why is there a separation between the profits and the people and why the government insists on this separation. Another important aspect of the CPF and its related accounts is the government actually pays up to 4% in some accounts. As this is the case, what is preventing them from paying this amount to all accounts?

 

[scroobal]

Richard is in difficult position both in terms of his software and the R&D work that he does with his partners. This on top of law suits that he received. No matter what behaviour modifications takes place. Thus the appearance of articles like these and Bertha Henson's to give a sense of balance.

From his past in is forum, I know that he is genuine and sincere but life is such. I thought the MOF reply article was really poor form.

I heard unconfirmed reports that Richard Wan is a card-carrying PAP loyalist.

One of his customers used to be The Straits Times. The Straits Times Interactive Edition (a/k/a The Straits Times Online) was using his IT product to serve up the print edition of The Straits Times online. But The Straits Times stopped using his product since early last year.

He managed to get a contract with MyPaper. The latter is currently his customer.

One of the articles published, but not written by him, on T R E criticized a PAP loyalist for having to depend on PAP contracts for his livelihood.

Talk about the pot calling the kettle black!

 

[ChaoPappyPoodle]

This separation is akin to money laundering with the same purpose of muddying the waters and losing the trail. If they wanted, all CPF funds when released in tranches are tracked in tranches. They chose to do it this way to to continue to access cheap funds. While the beneficiaries of this gravy train can send their kids and families overseas, live the high life and stay in good class bungalows.

I estimate close to half a billion dollars have been paid to LKY, LHL and Ho Ching in salaries and bonuses over the past 20 years. This is not a small matter and someone will have to answer how such a travesty has happened to such a small country with limited resources and worse yet having the highest salaries for politicians and civil servants. Someone has to stand up to call the bullshit to stop this plundering of the nation's wealth.

 

[scroobal]

Yet, they invented the rules and control the rules. They made it law so it becomes legal.

They invent the rules....change them, as & when they deem fit to. In the past POSB, if you know banking, placed their access funds directly in the Local Money Market...my point is, all this, 'snaking' around the questions & it is their world, they can do anything they want. Who is going stop them??

 

[scroobal]

Sadly in everyone of 1st world countries without exception, all such payments received for public related tasks must be disclosed.

I challenge any SPH prostitute to prove me wrong. Temasek is a private entity by law and they do not have to disclose what she earns. Not even the accountant-general, auditor-general or the President can ask. Is that a control and transparency issue crying out for attention for a state sovereign fund

I agree this is no small matter. This is public and citizen's funds that must be accounted for.

The concept and principal of conflict of interest has been spit upon, trampled, brushed aside, ignored and turned on its head where Temasek and the. Prime Minister is concerned. Surely his wife career development opportunities has no bearing to the rest of the country. Surely she cannot be the only one in the world that can deliver these functions and to the standard that is expected.

The sale of Changi airport is drawing so much of attention around the world.

All these I am sure are legal but are they ethical. Parliament today can pass a law that allows the PM to take 10% of state revenue as a performance based remuneration if he can prove that revenue grew consistently over the last 3 years over a certain threshold. But is that ethical? Should one family have their singular luck of having their collective noses in the state trough?

I estimate close to half a billion dollars have been paid to LKY, LHL and Ho Ching in salaries and bonuses over the past 20 years. This is not a small matter and someone will have to answer how such a travesty has happened to such a small country with limited resources and worse yet having the highest salaries for politicians and civil servants. Someone has to stand up to call the bullshit to stop this plundering of the nation's wealth.