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Why CPF Life payout keep dropping?

zhihau

Super Moderator
SuperMod
Asset
If CPF was voluntary, very few would participate as it is human nature to opt for instant gratification whenever it is readily available.

CPF worked very well in the past where contribution rate went as high as 25% (employees' contribution) back in the late 80s: in fact folks actually grumbled when the rates fell.

our brethren currently in their 70s and 80s would be able to appreciate the benefits of enforced savings where even when pay is relatively low, the public housing was truly affordable and the costs of living low.

no thanks to Wooden when the Honkies were allowed a hand in our public properties and driving the prices of public housing up in the mid 90s.

the monster grew and evolved when salaries rose slower than the prices of public housing, coupled with dropping contribution rates, that became the death knell of CPF as a retirement fund for the peasants...
 

zhihau

Super Moderator
SuperMod
Asset
When someone praises CPF Life and you ask them what is the purpose of CPF OA then you should see how dumbfounded they look.

truth be told, folks in my kampong whom i spoke to felt cheated when the compulsory annuity was introduced, no price for guessing who they voted for in GE11. that's also part of the reason why AJ-GRC fell, apart from the hard truths and threats of repenting from that senile bugger.
 

zhihau

Super Moderator
SuperMod
Asset
Does the govt serious expect a person to survive on a few hundred dollars of CPF Life payouts every month when the cost of living is so bloody high?

those civil servants on pension scheme still not so bad, those folks whom are self employed and with little self discipline... they should share their life lessons...
 

Thick Face Black Heart

Alfrescian (InfP)
Generous Asset
When someone praises CPF Life and you ask them what is the purpose of CPF OA then you should see how dumbfounded they look. Totally stuck - brain freeze. Then they start to mumble and you can see how foolish they look.

Occasionally a nutter will come out with the usual Batam story and how the money was squandered.


Yes the Batam story usually comes out. Used like a bogeyman to convince Sinkees to accept CPF Life.

Singaporeans should plan their finances as if their CPF OA did not exist. That will encourage more realistic expectations and more financial prudence.
 

Thick Face Black Heart

Alfrescian (InfP)
Generous Asset
those civil servants on pension scheme still not so bad, those folks whom are self employed and with little self discipline... they should share their life lessons...


Just be disciplined to avoid unsecured debt and excessive mortgage debt. Become financially literate. Learn to do the mathematics of retirement planning. Sock away some money every month in a bank account dedicated for that purpose - no spending allowed on that account. If you're young and financially savvy, you can consider putting the money into blue chip stocks, or ETFs, provided you know what you're doing. Otherwise, just tuck it safely away in FDs and preferably safe instruments that will not allow you to withdraw.

Just pretend your CPF OA does not exist and plan according, and you'll be fine.
 

Leongsam

High Order Twit / Low SES subject
Admin
Asset
Occasionally a nutter will come out with the usual Batam story and how the money was squandered.

It isn't just Batam. There is plenty of evidence that Bintan has caused even more misery. :rolleyes:

It's a sad state of affairs that Singaporeans need to be protected from themselves but I guess that's one of the realities of life.
 

scroobal

Alfrescian
Loyal
I was asked to speak to an elderly lady by her family when they held back her CPF. She had planned to withdraw it to visit her village in China. Though the family could afford to send her, she wanted to use her savings to show her relatives that she did it on her own. She was heartbroken.

I realised how the elderly feel when I heard of an elderly lady living in Australia who is entitled to pension (was a housewife in Singapore and never drew an income) who flies in once a year and brings a 10 kg bag of rice for her relatives. This is despite the fact that we have rice in Singapore and probably better quality but she was proud that it came from her pension.

Many felt cheated.


truth be told, folks in my kampong whom i spoke to felt cheated when the compulsory annuity was introduced, no price for guessing who they voted for in GE11. that's also part of the reason why AJ-GRC fell, apart from the hard truths and threats of repenting from that senile bugger.
 

scroobal

Alfrescian
Loyal
The biggest source of investment that go into MAS, GIC and Temasek comes from CPF. It contributes something like $7B in returns back to the Govt. Half of it is used for Govt expenditure. You can't allow a cheap of funds to dry up.

Yes the Batam story usually comes out. Used like a bogeyman to convince Sinkees to accept CPF Life.

Singaporeans should plan their finances as if their CPF OA did not exist. That will encourage more realistic expectations and more financial prudence.
 

wwabbit

Alfrescian (Inf)
Asset
I'm sure you've heard of the oft-mentioned phrase "asset rich but cash poor", in relation to Singaporeans. Its been around close to two decades. And guess what, it's not going away anytime soon. So unless I can see substantial statistics proving that the vast majority of Singaporeans retire in grace, I am going to question your premise much the same way as you are questioning mine.

Fortunately for those that have assets but not enough cash, there are ways to convert to monetize these assets, the best one being the Lease-Buyback Scheme if they qualify for that. Otherwise there are always options to downgrade, or sell the house and take up rent. Since 'in grace' is a subjective term, there is no objective statistics available.

Old ladies pushing card-board boxes on Geylang Lorong 1 (despite the fact they have a $200,000 HDB flat in their name), octogenarians cleaning tables at hawker centres and food courts, shirtless old men sleeping at void decks and neighbourhood parks and east coast beach, are all well documented instances of the forgotten poor of Singapore. Where is their CPF and what is the CPF doing for them?

We need to look at each of these at a case by case basis before putting the blame on CPF, but there are a few things to bear in mind.

1. An old aged worker working doesn't mean that the worker is in destitute. It is fairly common to continue working if you can, even if you have enough retirement fund to fully retire.

2. Some people work jobs where CPF contributions are not made. Some of them may also be entitled to CPF but their employers never contribute. Which is of course against the law, but we've seen several cases of low wage employees being exploited like this.

3. The homeless people - what happened to their homes? Did they sell off their home after 55 and squander all the money, and only have the monthly payout to live on? If they never bought a home before, then what are they doing with their monthly payout?

And are any of these people going to be any better if the CPF scheme wasn't around?

I'm perfectly well acquainted with TVM, having programmed excel spreadsheets and macro subroutines based on all sorts of TVM calculations. Of course if you start with $100,000 you can't get much out of it by forcing it to be stretched all the way till the day you die. What happened to the rest of the money? It went into property. And right now given property prices, even more of young people's CPF will go into property, so many of them when they grow old won't even have the $100,000 (in present value terms) to begin with. You can't argue this is a property problem rather than a CPF problem, because the govt has converted the CPF which is supposed to be a retirement scheme into a property escrow account, in essence subverting the original intent and encouraging speculation using precious savings. And all this while letting property get out of control thus effectively crippling Singaporeans ability to retire in grace.

Yes, property prices in Singapore is high and needs to be fixed. People need to buy a property they can afford, and make sure that when they pay off the loan and reach retirement age there will be sufficient cash left for retirement. This principle applies even if property is cheap, because as you know people living in countries where property is cheaper buy higher end property. If people buy the property which is the right price for them, they should have enough money to retire with assuming they retain their level of employment.

Also why are Singaporeans being forced to accept the risk free interest rate when GIC and Temasek are earning a lot higher. Surely there is scope to remit some of the excess returns back to Singaporeans. And why are Singaporeans forced to invest in the govt annuity and not given a broad range of choices? I don't accept the argument that govt annuity scheme in order to be sustainable must be compulsory, because local run insurance firms can also sustain their operations even though obviously they are not getting every Singaporean as their client.

I would say that 4-5% at the moment is a very good risk-free rate. You can't find any firms out there that will match this rate with that level of assurance and safety. You can of course invest your CPF-OA if you want to if you are not happy with the 2.5%. The GIC/TH thing is a bit complicated and opaque (possibly intentionally) because of the SSGS bonds. They don't all go into GIC and TH, so they don't all earn the rates that GIC/TH get - afterall a lot of it earn only 2.6% from HDB loans. Of course, since they are all part of the Government reserves, there is definitely scope for the Government to use budget excess to provide bonus top-ups into our CPF or through cash. In fact, this has been happening from time to time, and they tend to happen right before a General Election...

I've looked at Great Eastern and NTUC Income Life Annuity plans, and frankly speaking their rates aren't as good as CPF Life. So although it sounds like a good idea to privatize Life Annuity like the way Medishield has been privitized, it doesn't look like the insurance firms are too keen on this themselves, and would rather concentrate on selling products that get them more money. Prudential and Aviva don't even offer a Life Annuity plan.

This returns me to the original thread title of "why CPF life payout keeps dropping". Yes isn't that the whole problem? The purchasing power of money keeping dropping and yet payout keeps dropping too. Isn't that a double whammy for Singaporeans? Why isn't our budget surplus used to plug the gap?

Erm.. if you read my first reply in this thread, I've shown that the CPF life payout did not drop - the Thread Starter entered some wrong values into the CPF Life calculator.

If as you say people can be smart and make additional retirement schemes over and above CPF life, then why can't more CPF funds be released to allow people to make their own judgment calls? I still believe in giving people a choice because I don't believe govt will always be the best financier and I don't believe in restricting the fundamental freedoms of the people. So the issue for me is philosophical, political and financial, and I see no easy answer.

People can be smart and make additional retirement schemes over and above CPF Life. They can also be stupid and squander it all, in which case they still have the CPF Life to fall back on to provide them with an income. Because they were stupid, they would not be able to maintain the lifestyle they want with that income, but the income will be sufficient to allow them to survive independently. CPF Life caters to both stupid and intelligent people. By taking away the compulsory CPF Life, the stupid people will create a burden for the intelligent people.

You may want to do anything you like with your money. I, however, would happily give that up if it means that my money will not be used to provide an income to the idiots that squander all their money and force the government to bail them out.
 

wwabbit

Alfrescian (Inf)
Asset
truth be told, folks in my kampong whom i spoke to felt cheated when the compulsory annuity was introduced, no price for guessing who they voted for in GE11. that's also part of the reason why AJ-GRC fell, apart from the hard truths and threats of repenting from that senile bugger.

Before CPF Life (a Life Annuity scheme) was introduced, the Minimum Sum Scheme was in place (since 1987). The MSS is a 20-year Annuity scheme. I'm curious about why they hate the Life Annuity Scheme over a 20-year Annuity scheme. Also, the Worker's Party manifesto in 2011 says that they support the CPF Life scheme but wants the government to underwrite the solvency.
 

wwabbit

Alfrescian (Inf)
Asset
The biggest source of investment that go into MAS, GIC and Temasek comes from CPF. It contributes something like $7B in returns back to the Govt. Half of it is used for Govt expenditure. You can't allow a cheap of funds to dry up.

Would be funny though to see what happens if everyone invests all their CPF-OA into Stocks/UT/ETF, and everyone takes up bank home loans instead of CPF loans. Reduce rates on SMRA, or increase taxes?
 

scroobal

Alfrescian
Loyal
No need to go to the other extreme. Stick to the original role of CPF, follow some of the best practices of other funds that serve the same function. Conservative to medium term risk. Imagine allowing your CPF fund to pay for A class hospitalisation stay for member and his family. Are funding the nice lobbies in our hospitals or is this a nest egg for our retirement.


Would be funny though to see what happens if everyone invests all their CPF-OA into Stocks/UT/ETF, and everyone takes up bank home loans instead of CPF loans. Reduce rates on SMRA, or increase taxes?
 

winnipegjets

Alfrescian (Inf)
Asset
Fortunately for those that have assets but not enough cash, there are ways to convert to monetize these assets, the best one being the Lease-Buyback Scheme if they qualify for that. Otherwise there are always options to downgrade, or sell the house and take up rent. Since 'in grace' is a subjective term, there is no objective statistics available.

In developed countries, people have the money to retire and get to keep their house. That we can't do that shows that the CPF is a big flop in its mandate to enable sinkees to retire comfortably.



1. An old aged worker working doesn't mean that the worker is in destitute. It is fairly common to continue working if you can, even if you have enough retirement fund to fully retire.
In sinkapore, it is not of choice.

2. Some people work jobs where CPF contributions are not made. Some of them may also be entitled to CPF but their employers never contribute. Which is of course against the law, but we've seen several cases of low wage employees being exploited like this.
Look at those who diligently contributed to their CPF. They don't have enough to retire! This is the norm, not the exception.

3. The homeless people - what happened to their homes? Did they sell off their home after 55 and squander all the money, and only have the monthly payout to live on? If they never bought a home before, then what are they doing with their monthly payout?
You are grasping for straws to prove your point. Admit the facts.

And are any of these people going to be any better if the CPF scheme wasn't around?
We need a pension scheme, not CPF.



Yes, property prices in Singapore is high and needs to be fixed. People need to buy a property they can afford, and make sure that when they pay off the loan and reach retirement age there will be sufficient cash left for retirement. This principle applies even if property is cheap, because as you know people living in countries where property is cheaper buy higher end property. If people buy the property which is the right price for them, they should have enough money to retire with assuming they retain their level of employment.
Retirement savings should NOT be used for purchasing of homes. But the PAP can't do that as then people will realize that they have been conned, that they can't afford to have a home.



I would say that 4-5% at the moment is a very good risk-free rate. You can't find any firms out there that will match this rate with that level of assurance and safety. You can of course invest your CPF-OA if you want to if you are not happy with the 2.5%. The GIC/TH thing is a bit complicated and opaque (possibly intentionally) because of the SSGS bonds. They don't all go into GIC and TH, so they don't all earn the rates that GIC/TH get - afterall a lot of it earn only 2.6% from HDB loans. Of course, since they are all part of the Government reserves, there is definitely scope for the Government to use budget excess to provide bonus top-ups into our CPF or through cash. In fact, this has been happening from time to time, and they tend to happen right before a General Election...

The CPF has failed in its mandate to provide retirement money. That's a fact. And it is because the PAP government did not make the CPF into a pension fund, opting instead to use it as a cheap source of funds.

I've looked at Great Eastern and NTUC Income Life Annuity plans, and frankly speaking their rates aren't as good as CPF Life. So although it sounds like a good idea to privatize Life Annuity like the way Medishield has been privitized, it doesn't look like the insurance firms are too keen on this themselves, and would rather concentrate on selling products that get them more money. Prudential and Aviva don't even offer a Life Annuity plan.
Who, in its right mind, would want to buy annunity?
 

zhihau

Super Moderator
SuperMod
Asset
Who, in its right mind, would want to buy annunity?

the MIW would have fared better if they re-introduced the pension scheme for the civil servants. if CPF is that good, then why keep the pension scheme for senior civil servants and political leaders? put everyone under CPF lah!
 

kukubird58

Alfrescian
Loyal
if CPF is that good, then why keep the pension scheme for senior civil servants and political leaders? put everyone under CPF lah!
hahaha...your wish is their command.....
pension has been removed for all political appointment holders wef 21 May 2011.
 

Leongsam

High Order Twit / Low SES subject
Admin
Asset
In developed countries, people have the money to retire and get to keep their house.

That's such an sweeping generalisation that it pretty much wipes out any credibility you might have.

Many people are forced to sell their homes upon retirement in countries such as Australia and New Zealand despite the fact that they have a pension for life.

There are a myriad of reasons for this and foremost amongst them is that the pension is insufficient to pay the bills.

Those who continue to live in the same homes do so only because they planned for their retirement and have other sources of income.
 

winnipegjets

Alfrescian (Inf)
Asset
That's such an sweeping generalisation that it pretty much wipes out any credibility you might have.

I am as credible as you are. :biggrin:

Many people are forced to sell their homes upon retirement in countries such as Australia and New Zealand despite the fact that they have a pension for life.

You take some cases and blow it up into a national tragedy. If it is a national tragedy, there should be riots there.

There are a myriad of reasons for this and foremost amongst them is that the pension is insufficient to pay the bills.
The pensions there are many times more than the CPF savings of sinkees. Look at the median, not average income of retirees.

Those who continue to live in the same homes do so only because they planned for their retirement and have other sources of income.
You have a better chance of retiring comfortably in other developed countries, than in sinkapore, because of pension.
 

Thick Face Black Heart

Alfrescian (InfP)
Generous Asset
Fortunately for those that have assets but not enough cash, there are ways to convert to monetize these assets, the best one being the Lease-Buyback Scheme if they qualify for that. Otherwise there are always options to downgrade, or sell the house and take up rent. Since 'in grace' is a subjective term, there is no objective statistics available. .


This should be a separate thread altogether. How many have used the lease buyback scheme to help fund their retirement? There are limitations to that, for example, only applying to 3 room and below flats. This discriminates against large families who may have needed a bigger flat in their prime years.

In any case, I refer to Scroobal's analogy of the padlock and the crime neighbourhood. The LBS is another padlock. Let us turn back to focus on the crime and why it is so high. That is, why has CPF OA failed to deliver, such that padlocks like LBS and CPF Life are needed to plug the gap.
 
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