A primary role of the President is to safeguard the past reserves of the country. A large part of the reserves represent the savings of Singaporeans in the Central Provident Fund.
Many Singaporeans have expressed concern about the security of their CPF savings when, from time to time, they hear about the large losses incurred by Temasek Holdings, Government of Singapore Investment Company (GIC) or the Monetary Authority of Singapore (MAS) in their investments. Just a few days ago, MAS reported a loss of $10.9 billion during the past year.
There is a need to inform and educate Singaporeans about the long term nature of the investments and to give them the assurance that the investments are made prudently. This is especially relevant, given the occasional newspaper reports of money from the reserves being invested in foreign companies which report larges losses and go to the brink of bankruptcy. Some of these foreign companies are not well known and have a risk profile that appears to be very high.
A President, who has the financial knowledge and expertise, and backed by a panel of investment experts, can play a useful role in keeping an oversight over the investment policy. As a trusted, independent person, the President can give the assurance that Singaporeans are looking for about the security of their CPF savings.
The CPF savings represent the hard work of Singaporeans made over several decades. They depend on their CPF savings to take care of their financial needs during retirement, to pay for the cost of living and their medical expenses in old age.
Many Singaporeans have found that, in spite of the frugality and savings habit, they still do not have sufficient savings when they reach the retirement age. They have expressed the view that the CPF scheme is not working to their benefit.
I wish to echo their views and call on the Government to review the operations of the Central Provident Fund and implement changes to achieve the following goals:
I call on the Government to from a panel with representation from all segments of the people to carry out this review and that the review should be carried out in a transparent manner, so as to gain the trust of Singaporeans.
Tan Kin Lian
Many Singaporeans have expressed concern about the security of their CPF savings when, from time to time, they hear about the large losses incurred by Temasek Holdings, Government of Singapore Investment Company (GIC) or the Monetary Authority of Singapore (MAS) in their investments. Just a few days ago, MAS reported a loss of $10.9 billion during the past year.
There is a need to inform and educate Singaporeans about the long term nature of the investments and to give them the assurance that the investments are made prudently. This is especially relevant, given the occasional newspaper reports of money from the reserves being invested in foreign companies which report larges losses and go to the brink of bankruptcy. Some of these foreign companies are not well known and have a risk profile that appears to be very high.
A President, who has the financial knowledge and expertise, and backed by a panel of investment experts, can play a useful role in keeping an oversight over the investment policy. As a trusted, independent person, the President can give the assurance that Singaporeans are looking for about the security of their CPF savings.
The CPF savings represent the hard work of Singaporeans made over several decades. They depend on their CPF savings to take care of their financial needs during retirement, to pay for the cost of living and their medical expenses in old age.
Many Singaporeans have found that, in spite of the frugality and savings habit, they still do not have sufficient savings when they reach the retirement age. They have expressed the view that the CPF scheme is not working to their benefit.
I wish to echo their views and call on the Government to review the operations of the Central Provident Fund and implement changes to achieve the following goals:
- Ensure that the CPF is able to provide an investment yield that is higher than the rate of inflation
- Ensure that CPF members have adequate savings for their retirement needs (after paying off the cost of a modest HDB flat)
- Review the contribution rate of older workers to allow our workers to build up adequate savings for retirement.
- Improve transparency and communication, to assure the people that that their CPF savings are being invested prudently.
- Allow partial withdrawals of CPF savings to meet financial needs of people who have lost their jobs due to factors beyond their control.
- Review the use of CPF savings for tertiary education, to see if the scope can be widened
I call on the Government to from a panel with representation from all segments of the people to carry out this review and that the review should be carried out in a transparent manner, so as to gain the trust of Singaporeans.
Tan Kin Lian
3 comments:
Presidential Election Watch Part III - Dr Tony Tan & Singaporeans' CPF Savings & Wage Cuts
http://de-leviathan.blogspot.com/2011/07/presidential-election-watch-part-iii-dr.html
GIC recently reported their performance, but only in USD terms and not in SGD terms.
I did a quick check on historical USD/SGD exchange rates and the annualised rate of depreciation of USD against SGD are:-
10 yrs --- 3.9%
5 yrs --- 5.35%
(I couldn't find exchange rates beyond 15 years ago on my favourite currency website and didn't bother to search for others.)
Therefore, GIC's investment returns in SGD terms are:-
10 yrs --- 7.4% - 3.9% = 3.5%
5 yrs --- 6.3% - 5.35% = 0.95%
If take into consideration of Singapore's inflation, GIC's REAL returns is almost zero.
Definitely negative over the last 5 years.
I wonder if this is one of the factors causing CPF to withdraw the minimum 4% for SMRA starting 1st Jan 2012?
From 2012, the floor interest rate for ALL CPF accounts will be 2.5%. OA will still use the same formula based largely on local banks' FD rates.
But SMRA formula will change to average 10-yr SGS bond yield plus 1%. Currently, this formula will give only 3.2%. And this yield looks to be going down even more with the global economic uncertainties.
A reader asked me to provide a link to this article which covers the interest rate paid by provident funds in other countries.
http://furrybrowndog.wordpress.com/2011/03/19/a-comparative-analysis-of-real-cpf-returns-and-other-provident-funds/
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