Monday, May 26, 2014

Your CPF savings are safe

 I wish to address the issue on whether the CPF is able to pay off all its members, if it is dissolved today. 

The annual report of the CPF at 31/12/2012 showed total amount owing to CPF members to be $230 billion. This is invested in Singapore Government Securities totaling $229 billion, with a few other billions invested in other assets.

If CPF were to be wound up, will the government be able to pay the $229 billion?

The answer is clearly "yes". The reserves of the government comprises of $198 billion in Temasek Holdings, $305 billion in MAS and "over $100 billion" in GIC. The total is over $600 billion.

If this were to happen, will the government be able to sell the assets to raise $230 billion to pay the CPF members? There is no need to. If the government were to issue bonds of $230 billion, that is backed by the $600 billion of actual assets, it should have not much difficulty.

Another way is for the government to "print $230 billion" of money to pay back the CPF members.

The actual amount that the government needs to pay back the CPF members will be much less than $230 billion. The outstanding loans owed to the HDB (which is a part of the government) should be a large sum. Surely, if the government were to pay back the CPF balances, the members should also pay back the balance of the HDB loan?

If you wish to verify my figures, you can check them here:

The winding up of the CPF is completely hypothetical and inconceivable. I have used this scenario to illustrate that the savings in the CPF is safe, and that the fear that there is no money to pay back the CPF balance is totally unfounded.

However, I do not support the current system where most of the savings are stashed away by an ever increasing minimum sum. This has to be reviewed, and a portion of the savings should be allowed to be withdrawn at age 55, even if the savings is inadequate to meet the minimum sum.

Tan Kin Lian


hhw said...

I wish more people reads this post and put this erroneous allegation of the CPF NOT being able to pay us back our money to rest.

The people who raised the issue of the government not being able to return our CPF money is shifting focus away from a much more pertinent issue of what a reasonable return to our CPF should be.

Surely it must be comfortably above the inflation rate to be considered the "million-dollar" good performance that Singaporeans have paid for.

michael13 said...

Basically, the old way of telling Singaporeans that the government cannot and will not disclose the full financial details of GIC, Temasek Holdings or MAS, although the taxpayers/CPF account-contributors are their legitimate shareholders do not sit well with us. The government's main argument is that they do not want anyone(outside force) who one fine day, has the evil intention to short Sing-dollar knowing our total numbers of bullets to take revenge by using unknown balance of bullets to kill all of them(the shortists) eventually - the so-called 'Singapore Winning Strategy'.

However, this outdated argument is viewed by many as "rubbish". What Singaporeans truly want is "Total Transparency And Accountability'. No more and no less!

It's wise for the government to seriously take note and change NOW because CPF is the core issue that needs sound/honest principles to guide its payouts and returns.

yujuan said...

Figures are just numerical digits to be moved around.
Yes, there is money in the CPF kitty, but not enough to cater to the withdrawal demand by retiring babyboomers. You just can't cash out investments made abroad by our SWFs using our CPF Funds by snapping fingers, owing to long term time frame, or worst paper losing ventures that may take decades to recoup.
Only the Lee family, who controls the Nation's purse strings, has the real picture, not even the PAP Ministers, nor their MPs, even less so Mr Tan Kin Lian or we ordinary citizens have.
The ever relentless increase in the MS every year or two dun even make common sense. Even the Joker PAP MP LSS has expressed doubts albeit jokingly, but there are words behind his joke,
"Maybe there is no money in the CPF." Inability to pay out is not an exception for Singapore, many countries including the US, face this problem, with the exception of Malaysia, who has Petronas's huge profits to help foot the temporary shortage. So no shame to own up.
Just take the published figures with a pinch of salt.

Surferket said...

Temasek Holdings consistently rated 10/10 for transparency.

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