I read this recently. If I understood it correctly, the entire premise of that post seem to be that the so-called “Roy Clique” is detrimental to the opposition and that it will sort of deter the middle voters which have in recent years drifted towards voting for the opposition camp. If not, it suggest that this clique will actually draw the rabidly anti-PAP crowd towards them and thus would hurt the moderate parties which have chosen a less confrontational path in their politics.
I can’t tell the future so I cannot say it will not turn out the way as the author of this post has predicted. However, for those who are “ABP” (anything but PAP), it really doesn’t matter whether an opposition party will ride on the coattails of the “Roy Clique” or not. Any opposition party will get their votes, which typically made up about 25 ~ 35% of the total votes. I will not be surprised that certain opportunists may capitalise on the CPF issue in the next election to try and win votes, but the condition whereby a split in the opposition vote will only occur in a multi-corner fight. Should the ruling party thus win with a small margin and less than 50% of the votes cast in such a situation, then instead of pointing fingers at who has divided the votes and caused the electoral defeat, the opposition parties should sit down and reflect upon their own political discourse and evaluate why it has not drawn the other voters towards them. They will have to make themse;ves stand out among the rest. The Punggol East By-Election has demonstrated that an opposition party can stand out among the rest and consolidate the opposition votes in itself. I personally hope that isn’t a one time effect, but an example of a maturing electorate.
Back to the matter “advocated” by the “Roy Clique”. I have bothered with none of the CPF-related “protests” at Hong Lim Park so far. Does it mean I do not care?
No. I certainly have my own unhappiness about the minimum sum, and I am not particularly happy with the returns in both the Ordinary Account (OA) and the Special and Medisave Accounts (SA & MA). I certainly isn’t happy that we cannot withdraw our CPF in a lump sum in our old age. However, I do not see what the likes of Han Hui Hui and Roy Ngerng will achieve. Han and Ngerng can ramble on and on about the problems or the issues of confidence we have about the CPF, but what outcome are they expecting in the end? I am not asking them to propose solutions, but at the very least tell us what they believe is the best for us, and it is up to the million-dollar paid bastards to tell us whether they can (or cannot) do it.
Roy and his merrymen seem to want to convince us of a few “facts” – that a large part (or perhaps even all) of our CPF monies have been mismanaged and lost, and that we are short-changed in terms of returns. Contradictory in some sense, because wouldn’t asking for more returns for something that may already be gone make the hole even deeper?
As for whether the CPF monies are still there or not… I’ll make two assumptions. Firstly, assuming the worst case scenario where the money in the CPF (Central Provident Fund, for those outside this country who are not familiar with our abbreviations) is indeed all lost, then there can be only one outcome – i.e. the value printed on our CPF statements will not even worth the paper it’s printed on, one way or another. That also means whatever Singapore currency in your wallet and outside the CPF is going to be pretty much worth shit as well. If you don’t get it, that will be the result either because of the complete collapse in confidence in Singapore’s financial viability, or the Singapore government printing more money to cover the hole. In short, whether I liked it or not, it would be better to “live the lie” so some people can continue to draw out their CPF in parts during their old age instead of everybody seeing the value of their money gone.
Next, assuming that the CPF monies are still there (i.e. just invested and cannot be cashed out immediately or suffering a shorfall as a result of paper losses in investments), then the main bone of contention would be the minimum sum and why CPF members are not allowed to draw it all out in a lump sump.
We often heard that this is to stop people from messing up. But I disagree. From a completely selfish point of view, the main reason for this to be done is to avoid having to bail out anyone who has misused their CPF monies either through womanising or gambling, regardless how few these people are. Really, everyone can say I am good enough to manage my own money, but no one will stand up and admit “I screwed up” when they failed to live up to their word. It really doesn’t matter to me when people messed up their own lives, but there will always be those who complain that the government isn’t doing anything to help these people, and even advocate for the government to do something. For those who are all so noble, they can put their money on the line and pledge it to help those people. After all, it shouldn’t really concern anyone to make that pledge, if they believe everyone can be responsible to themselves and also live with the consequences of their own choices.
Back to some of the common complaints about the CPF, I have sort of notice that there are some things which are not very well publicised. They are unfortunately all on the CPF website for those who make a bit more effort to look. But really, more can be done to better inform the people about them. Here are some of them:
- It is not entirely true a person cannot get better returns with his CPF. There is the CPFIS (CPF Investment Scheme). While it is limited in its scope in what it can be invested in to make more returns, it is not true at all that there is no avenue whatsoever beyond the first $20,000 in the OA. The downside means the person will also have to take the risks that comes with the scheme, and it all depends on your risk appetite / tolerance.
- It is also not entirely true that the government has done nothing to help the returns of the CPF catch up with the minimum sum. The first $20,000 in the OA and then the first $40,000 in the SA & MA combined (i.e. the first $60,000 in all 3 accounts) pays an additional 1% p.a. on top of the current CPF interest rates. Consider the power of the compound on the long run. It may not be really a lot, but it is in my opinion baby steps in the right direction. We can all hope that the extra interest that is paid on the first $60,000 can be adjusted according to inflation, or that some form of dividends on top of it can be paid to our CPF accounts when the country is doing well.
- The minimum sum seems unachievable for all. However, most Singaporeans should be able to “own” a HDB flat, even for those who consider it a long-term lease. The value on that flat itself would probably have surpassed the minimum sum. While we cannot pledge all of that as the minimum sum, the fact most of us will still have a shelter over our heads which will allow us to cover one of our basic needs. Even at its barest, some of us can still rent out a room to make a small amount of money.
Before I end, I will point out that there will be those who doesn’t have more than $20,000 in their CPF accounts and thus not be able to get that 1% additional interest nor invest their money. There will also be those who don’t own a flat. This group of people is worse off than the lot of us who are unhappy about not being able to see all of our CPF money again. The next worse off group would be those in need, who can only look at the figure in the CPF statement but not utilise it. I have no solutions for them and in my case, whether I liked it or not, I need to have some alternate savings and make some sacrifices now. Hopefully when I am old, whatever I managed to save together with the monthly amount doled out from the CPF will be enough to meet minimum subsistence level.
There are also those of us who felt we have been betrayed and that the CPF system that we were once promised no longer serves its purpose. That may perhaps be true. But it is completely meaningless to whine about it. We can demand someone to make things better, but we still have to plan for ourselves if things don’t go our way. So for those of us who still can, make the best of whatever tools and means we have now to go as far as possible.
FYI – Here are the inflation data from last few years –
2013 2.37%
2012 4.55%
2011 5.24%
2010 2.80%
2009 0.62%
2008 6.60%
Inflation rate in Singapore averaged 2.80 Percent from 1962 until 2014.
There is nothing contradictory about CPF monies being mismanaged and lost, and that its members are short-changed in terms of returns. GIC+Temasek have a combined long term return that is perhaps 3x what CPF pays out to its members in interests. So CPF is obviously mismanaged (and no pension fund should invest in a “fixed” deposit regardless!) Further, the “lost” monies are redirected to government’s other accounts (e.g. reserve). This is basically a tax except that it is regressive in nature.
Until CPF becomes transparent, we do not know its true performance, solvency and sustainability. E.g. are their assets marked to market? Is the risk profile suitable for a pension fund?
Elaborate on “the ‘lost’ monies are redirected to the governments other accounts (e.g reserves)”.
I’ll explain what it sounds like to me: “All losses are covered up by shifting money out of the reserves”.
If GIC earns 6% using your CPF monies and pays CPF (or you) only 3% over long term, CPF is losing 3% every year. Compounding that 3% over 35 years, you are talking about (hundreds? of) thousands of dollars per CPF account. The 3% is redirected to the reserves or whatever accounts the PAP government dictates.
You may find it incredulous that retirement savings can achieve more than 3% returns but it is common for a pension fund to earn 7-8% interest over long term. Please visit some financial websites on retirement savings and you will agree with me that CPF returns can and should be much higher.
Actually, I don’t think you know what you are talking about. Here’s an analogy, if I borrowed X amount from you and I promised I will pay you a certain percent in interest, and then I find Y amt of funds elsewhere and pooled them together to make an investment and have more returns on top of what I have promised to pay you, I am under no obligation to pay you more.
I really don’t like the above argument, but considering that the CPF monies only made up part of the funds that the GIC+Temasek utilises, that’s how things will stand. You can go on and on about it but even if you take this to a court of law you won’t get anywhere further.
My only issue with the above is that since the government of Singapore is supposedly elected for the benefit of the people of Singapore, then WHATEVER happened to those extra returns? That is perhaps an issue of transparency and not one whereby the “short-changed argument” will stand on.
To add on, the GIC+Temasek do not make profits every year. Will you take the losses when they also make losses? Which thus goes to say that whatever extras in the returns they made goes into the reserves is not always true. In fact, it is almost certain when GIC+Temasek loses money, the reserves will be the first to take the impact and monies is then paid out in reverse to the CPF to ensure that the obligations of the SGS and SSGS is met.
I challenge you to find a major public pension fund that invests its money in a fixed deposit account. Most major pension funds release their financial report to the public so it should not be a difficult task. Some big funds include CalPERS, Government Pension Fund of Norway.
All fund managers have fiduciary duty to invest for the benefits of its clients. Retirement savings 101 dictates that a pension fund should invest in a mix of stocks, bonds, and some alternative instruments (e.g. real estate, precious metals) to both maximize returns and reduce risks. A pension fund manager that invests its fund solely in junk grade bonds or cash is failing his fiduciary duty and can be sued for negligence in a court of law. The rule applies to trustees of an estate, college funds etc. If you have any questions about what I just wrote, you can read about it online or talk to your financial friends.
There is a big flaw in arguing that the extra returns do not belong to the CPF. What if the GIC lost 90% of its capital in the last GFC (Global Financial Crisis)? Does GIC have the money to pay promised returns to CPF members? The answer is NO. So you are basically saying that it is okay for GIC to keep the extra returns but not pay back any losses. The world does not work this way. When a government (or a company) is broke, the pensioners lose their pensions. This will happen to you if something really bad happens to GIC investments.
On your last paragraph, it is true that no pension fund makes money every year. But over long term, CalPERS and Norway have both done well on their investments, with around 7%-9% returns. It is NOT OKAY for the Singapore government to keep the extra returns due its retirees to itself. That is basically a regressive tax on its people. If they want the extra tax revenues, they should raise it thru taxes, not thru stealth and worst, regressive taxes. We are talking about hundreds of millions, if not billions, in confiscated returns here.
I did point out I don’t like the returns, did I not? So go take your problem with it being “invested in a fixed deposit account” to the right people. I am not defending this system, but I don’t see any point in the “Roy Clique” either. In fact, I ain’t even the person you need to convince that the CPF can be better. My point is simply, if it isn’t good enough then do something in your own powers to have some money away from the CPF.
And as I have said – indeed the GIC (or even Temasek for the matter) does not have the money to pay promised returns to the CPF members, and the reserves will thus take that blow. And you can keep quoting your CalPERS or what not, because you are trying to hard sell that as if it is the norm other than the exception that a pension fund will make money every year. You obviously do not understand what I have written in my replies to you – that the reserves are used to cushion the impact during years where the GIC returns are bad. Since you said those extras are funnelled into the reserves (which you claimed, but I didn’t) then what are you complaining about now?
What exactly do you want now? That when the times are good the government should pay us everything and then when times are bad it is to find its own money (whereby it’s gonna come from the printing press, I suppose)? Or that you will take the losses when they get wiped out? Do you want that?
Call it a regressive tax or whatever you will, because you aren’t making any sense to me.
I have never suggested that “when the times are good the government should pay us everything and then when times are bad it is to find its own money.” This is not how a pension fund pays its members! A pension fund typically pays out like an annuity. Most pension funds assumes a target long term return rate of 7%-9% (note the number may be adjusted to account for performance) and pay out accordingly. Serious structural reform is urgently needed. Unfortunately it is not happening as seen in the 27 minute long dog and pony show by the current PM. Thank you for your time.
I will take a 2.5% guaranteed return promised by the CPF over an assumed / expected 7% ~ 9% rate of an annuity anytime. If the CPF itself is going to be structured like a pure pension fund, then it shouldn’t even be used for housing and medicare and other stuff at all. And I am not entirely sure I liked that either.
On top of which, regardless how much I disliked the returns, I think it is set up in such a way not to go bankrupt when times are bad and when demographics change against us. And yes, some structural reform is needed but well so far no one has said anything that makes any sense to me. Thank you for sharing with me your views too.