Can the CPF be trusted?
The answer is simply NO.
There are already quite a lot of articles written by bloggers, Facebook users and internet forummers on this CPF issue. We are beginning to converge to agree on a few fundamental points:
1) Nobody in his right mind would have put money into CPF for its promise of "guaranteed" return of a meager 2.5% to 4% when it could just change the rules on when and how much you could draw your own money anyhow they like without consulting us. If CPF is not compulsory, I don't think anyone with a right mind would want to RISK their money like that.
2) Government guarantee doesn't mean RISK FREE. Yes, please get this right. The only reason why government can give guarantee to CPF is because if everything fails, it can just print money to repay us. However, that will create hyper inflation that will practically devalue our CPF money altogether. So it is NEVER risk free even when it is guaranteed.
3) Returns to our CPF are really understated. We could have invested DIRECTLY into GIC or Temasek Holdings to earn higher returns, instead of going through the government which practically end up making use of our CPF as "National Reserves", invest in GIC and make profits out of these investment. In essence, we have been shortchanged in our CPF returns no matter how we look at it. GIC gave much higher annualized returns of 6.5% to 8.8% for their 20 year and 10 year span. Why are we paid only 2.5% and 4% only? This is in fact a very heavy implicit tax applied on our CPF money's potential returns. i.e. more than 50% implicit tax!
All in all, I find PAP government is just paying lip service when they tried to show "how concerned" they are with our ability of financing our retirement. If they really care about our retirement financing, they won't:
1) Increase the HDB prices so recklessly so much so that most of us will not have very much cash left in our CPF account for our retirement. In the end, they just give us a false option of "monetizing HDB for retirement"!
2) Increase our medical cost so much so that we need to put aside a hefty amount aside in Medisave.
3) Giving a flat LOW return on our CPF for decades under the guise of "risk free guarantee return" rhetoric which basically put the growth of our CPF very much at the lowest pace in the developed world, barely above inflation rate or sometimes, even LOWER than inflation rates.
4) When they finally realize that some people will be really short of funds for retirement, they came up with Life Annuity which is basically totally opposite of the CPF's self financing system! Life Annuity is in essence, similar to the "Social Security System" where retirement financing is basically share pooling of risks. Life Annuity is just pushing off risks and responsibility from PAP government's failed management of the CPF system, by shifting the inadequacy of retirement financing to some other "shorter life" Singaporeans. If you look at it from another perspective, it is shifting the risk to the descendants of those "shorter life" Singaporeans, depriving them their rightful inheritance.
Such glaring insincerity on PAP's part in taking care of our retirement financing really makes me think that PAP is only interested in milking our CPF as CHEAP funds for them to invest and earn profits/taxes. In places like Hong Kong, EPF contributors will invest DIRECTLY their retirement funds into different trust funds with indications of their various risk portfolios. They can choose to invest in different percentages of different risk portfolios. Although their system is not perfect but the fact is, the government cannot mess around with their retirement funds directly! But it seems that CPF has become a piggy bank that gives PAP very cheap funds to play around with!
My distrust of PAP government further enhanced when they started to play the game of Taichi. They started to claim GIC and Temasek Holdings don't manage our CPF funds, throw smoke bombs about GIC etc.
In GIC's website, it tries to throw smoke bomb and demonstrate IGNORANCE that it is managing our CPF money. GIC is basically trying to obfuscate the fact that it is managing our CPF money by saying:
Does GIC invest CPF monies?
The short answer is that GIC manages the Government’s reserves, but as to how the funds from CPF monies flow into reserves which could then be managed by either MAS, GIC or Temasek, this is not made explicit to us. What we do know from public sources: Singaporeans’ CPF funds are invested in bonds called Special Singapore Government Securities (SSGS) which are fully guaranteed by the Government. These are non-marketable floating rate bonds issued specifically to the CPF Board. These bonds earn for the CPF Board a coupon rate that is pegged to CPF interest rates that members receive. Under the Protection of Reserves Framework in the Singapore Constitution of the Republic of Singapore, the Singapore Government cannot spend any monies raised from Government borrowings. All the proceeds from the Government’s borrowing are therefore invested.
But on the other hand, Ministry of Finance made a reply to ST's enquiry by stating that our CPF money is basically put into GIC and it manages our CPF! Now trust can only be earned by being open, accountable, transparent and most importantly, forthright with simple answers to simple questions. But GIC is basically not telling the truth! And it is totally IMPOSSIBLE for GIC NOT to know the truth because it has BOTH the Prime Minister and Finance Minister on its Board of Directors! How could GIC ever claim IGNORANCE of such arrangement? You mean the Prime Minister and Finance Minister are totally in the dark of such things? That will really worry me! The Finance Minister runs the Ministry of Finance and technically speaking, he is the sole shareholder of GIC!
This is what is written in MOF website:
When government securities are issued, the proceeds are first deposited with MAS as government deposits. MAS converts these funds into foreign assets through the foreign exchange market. However, as a major portion of these assets are of a long-term nature, such as those that provide backing for long-term Government liabilities like SSGS, such assets are transferred to GIC to be managed over a long investment horizon.
Why would GIC want to hide such simple fact? There is only one conclusion I have after looking at the whole thing. PAP doesn't want us to make any direct comparisons to the meager CPF returns they are giving us (2.5% & 4%) with the very much higher annualized returns of 6.5% and 8.8% for 20 years and 10 years respectively!
So, you tell me, how can I place any trust on PAP to take good care of my CPF money? They have used all sorts of method to hide the fact that our CPF money could well get much higher returns than what they are offering!
Why can't we invest our CPF money DIRECTLY into GIC or Temasek Holdings by choosing the risk portfolio according to what we desire? They have even claimed that Temasek Holdings have an impressive 16% annualized return, for goodness sake!
I have totally lost trust in PAP government in the way they manipulated us and our CPF money. High HDB prices basically transferred our CPF money through HDB to SLA so that it is kept away in the already bloated National Reserves (my conservative estimate is over S$1 Trillion).
And they are not interested to help us grow our retirement fund but only interested to make us left with little for our next generation to inherit. i.e.they have coined the idea of "monetizing HDB for retirement" and Compulsory Life Annuity! They are only interested to drag on the withdrawal time and amount of your CPF money and they could continue to enjoy the cheap funds they can take from your CPF! Never mind if you are dead sick when you reach 55 years old or if your health can't last much longer after that.
Can I trust PAP government with my CPF money? You bet, NO!
Goh Meng Seng
*The author is the former Secretary-General of the NSP.
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