Monday, May 21, 2007

Why is CPF inadequate?

Hi Mr Tan

We used to have a high saving rate to the CPF. Why is the saving inadequate for people to retire?

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REPLY:

The CPF system encountered the following shortcomings during the past years:

* too much savings were invested in expensive property
* interest rate on CPF was quite low, at 2.5% p.a.
* the contribution to CPF were cut on a few occasions to reduce business cost
* when CPF was liberalised, many members made bad investments in financial products with high charges

These shortcomings have been recognised in recent years, and are now being addressed.

I wish to give some tips for young people on how to invest their CPF savings and also set aside an 10% to 15% of the earnings as additional savings for the future. Read my tips in this FAQ.

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