The CPF Mystery that has befuddled the Nation

[frenchbriefs]

Actually hor if CPF is so good at giving us interest,why don't they open it up like a bank and let us deposit all we want?why settle for 20 % of our income when u can have 100%?After all ho jinx need all the mahjong money to buy the world.we give u billions u give us 2.5% interest.4% also can.

 

[Sinkie]

If u buy an iphone try asking apple how much it actually costs them to make it. .

What a load of ignoramus rubbish....you mean you get married without testing your wife first? Fuck off lah, idiot.

 

[oli9]

If u buy an iphone try asking apple how much it actually costs them to make it. .

You may try asking MBT how much is the cost to build a HDB flat. His silence or his sneaky avoidance to that question will befuddle you as well.

 

[scroobal]

For national security and business competitive reasons always makes sense not to disclose certain things. Currently only MAS and Temasek's reserves / assets are disclosed but not GIC. GIC is our war chest.

Though the CPF component is the largest of 2 investment inflows, and the fact that we use 3 investment vehicles, the GIC size will still be hard to be determined. If the govt provides only the average historical returns from all three as a composite figure and attested by accountant general, that would be a good step forward.

If these costs are disclosed, "competitors" will learn Singapore Inc's trade secrets and the country will lose its competitive edge.

 

[scroobal]

i recall a high charged and emotional response by a HDB lady chief when she explained why the cost cannot be derived many years ago. It appeared like we asked her when she lost her virginity. At the end, no one was any wiser.

You may try asking MBT how much is the cost to build a HDB flat. His silence or his sneaky avoidance to that question will befuddle you as well.

 

[scroobal]

This is the biggest piece of rubbish that only a moron will belief. The future inverted population pyramid argument though an impending reality has been used as a scare tactic for years. We are not investing in 20 year US Treasury Note. If we were, this would not be an issue.

The fact that $7b comes into the govt coffers each year from the Net Investment contribution and that CPF funds is the largest component to generate the returns suggest that the big question needs to be answered. What is the actual returns from use of CPF funds?

http://www.drwealth.com/2014/05/21/3-truths-cpf/

1) Truth 1 – CPF money is forced saving for your retirement and medical needs.

Many Singaporeans are very unhappy with being forced to save for retirement. They believe everyone should have a choice and that CPF forces the choice on them. While it is true that more choice is usually better in a democratic society like ours, it depends on whether having that freedom causes much more problems for society as a whole.
Singapore has a rapidly aging population. Within 20-30 years, we will have a clear inverted population pyramid where a smaller base of workers have to support a larger top of retirees. If we have no CPF scheme or equivalent, what will happen is that future government will need to either let the elderly who fail to save enough live in poverty or use government funds to provide housing, food and medical care. And if government money will come from higher taxes or investment returns.
So it is wise to start forced saving for everyone so that at least there is a minimum standard or base of savings to leverage off. Even with current numbers, it is clear we will need to spend more and more on elder care and subsidies on healthcare. There is nothing wrong with this. In fact, we must do this as a caring and ethical society.



2) Truth 2 – CPF is still your money ….. with some restrictions

Think of CPF as a long term structured note that is principal guaranteed but which you cannot withdraw. The only way a citizen can withdraw CPF is for mandated purposes like housing and education or when you change citizenship. However, this principal guaranteed note does offer a 2.6% to 4% risk free interest rate. This is equivalent to a 20 year USA treasury note return. So we are not being shortchanged.
Now, some of us will argue that since the government takes this money and invests via MAS, GIC and Temasek to get better returns, we should partake in those returns directly. However, we need to realize that if we want to participate in those returns directly, we must also accept the risk if those returns turn out to be negative. There is no such thing as a risk free, high return instrument. That is what we call a scam.
Anyway, there is a way for us to get higher returns. We can always invest our CPF money in approved mutual funds over the long term to get equity like returns if we really know what we are doing when it comes to DIY investing via funds.



3) Truth 3 – CPF is not a perfect system

Of course, CPF is not a perfect system. Can the CPF board pay us more interest? Of course it can. The government can decide to pay 3.5% interest rate to CPF board if it wants to. But is this good? It is highly debatable. Paying more interest will only benefit those wealthier Singaporeans who have loads of cash in CPF. Also, paying more will mean that we add less to our reserves since I do not think Temasek and GIC should take even higher investment risks to maintain same extra returns. But perhaps small tweaks upwards to help Singaporeans save for retirement via CPF is practicable. To set the right tone that the government is in it with the people on this topic of retirement savings.
Another idea is that we can we give citizens a well run fund that thinks over a 15 to 30 year time horizon to help invest their CPF money? I think this is quite doable? If GIC can give 5-7% returns over such a time horizon, I can imagine them setting up a mirror fund where citizens can invest directly to do the same? The logic behind this is that the current approved mutual funds are too short term and profit driven in their approach and the average Singaporean does not buy them with the right mentality.
About the Author
Lim Dershing is the Director of Doctor Wealth Pte Ltd (www.drwealth.com), which is an online financial planning platform. Dershing is also an active angel investor in other digital media startups. His goal is to help via experience sharing, these businesses to grow to their full potential. His experience covers all the topics required to startup, build and scale an internet business in South East Asia.

 

[tanwahtiu]

the best old fart con job is deduct $500 from your CPF for legal fee go straight to Gecko purse issue legal toilet paper to you which you dont get to see.

Until JBJ kpkb it has to stop by then enough for Gecko to be super rich.

This is the biggest piece of rubbish that only a moron will belief. The future inverted population pyramid argument though an impending reality has been used as a scare tactic for years. We are not investing in 20 year US Treasury Note. If we were, this would not be an issue.

The fact that $7b comes into the govt coffers each year from the Net Investment contribution and that CPF funds is the largest component to generate the returns suggest that the big needs to be answered. What is the actual returns from use of CPF funds?

 

[scroobal]

For 49 years, this PAP keeps harping about the amount of subsidy that it gives out HDB home owners, and for others expenses, while not disclosing how much are they are taking away from an ordinary CPF members investment returns is not only cheeky but rather dishonest if the returns are actually substantial.

It's like you if you want buy a sofa set that can be found everywhere for $500 and the salesman in a particular store tells you he is losing money selling it to you for $700 and we have seen these type of sleazy types all the time.

 

[Gigo88]

And now we have CPF Life. This one lagi better. Payouts are not guranteed. Only estimate given. At least CPF still spelt out the interest rates.

That Jinx can use this CPF Life money in even more risky investments. If lose money, simply reduce payouts. If make money, declare good bonus for Temasick staff.

 

[dumbo]

those days, $500 for legal fee for a flat that cost less than $30k for a 5 rooms was very high, a daylight robbery by the familee...will be good to know how much was robbed by the familee then.

anyone any idea how many flats were bought during those years?

 

[aurvandil]

I thought the more pertinent question is where is the difference disappearing to. Is it with GIC/Temasek? Or does it flow back to MOF? Or does it, as Roy suggest, flow to ...

The fact that $7b comes into the govt coffers each year from the Net Investment contribution and that CPF funds is the largest component to generate the returns suggest that the big question needs to be answered. What is the actual returns from use of CPF funds?

 

[Tuayapeh]

by all fairness....why dont they just peg the monies in our CPF according to the annual inflation so that we do not lose the "real" value of the funds stuck inside???


if they carry on like this....there gonna be another fucking round of top up to 300k in the next few years boss....


WTF!!!!

 

[krafty]

my perspective comes from an average sinkie, like me, cpf serve its purpose but i feel there is not enough for me to retire and they should increase interest rates and not raise the minimum sum.

This is the biggest piece of rubbish that only a moron will belief. The future inverted population pyramid argument though an impending reality has been used as a scare tactic for years. We are not investing in 20 year US Treasury Note. If we were, this would not be an issue.

The fact that $7b comes into the govt coffers each year from the Net Investment contribution and that CPF funds is the largest component to generate the returns suggest that the big question needs to be answered. What is the actual returns from use of CPF funds?

 

[Papsmearer]

Actually no.

Fund Managers are required to disclose fees and they are audited by various authorities. There is transparency. This is a public role and for the public. These things must be transparent.

The actual returns coming out of the 3 investment arms does comes out as a notational value (nothing hazy). This is net of the charges that Temasek, GIC and MAS apply which is quite all right. Not interested in anything else.

So if the return from all 3 for argument sake is 5% each, the average return is then 5%. All the govt has to state are the historical average returns. Anyone who has held a job in business or senior civil service or i the professions or had a savings account will know that it is easy as pie.

I am aware CPF only gets the bond yield but this too me is unnecessary and form of round-tripping.

The short answer is that I doubt if the PAP themselves know what is the actual return. You can calculate the actual returns, but its very time consuming.

First, you would have to track all the CPF money that was sold as SSGS to MAS. Than you would have to see how MAS apportioned the money among the 3 of them (MAS/Temasek/GIC). For example, if $100 billion was sold to MAS as SSGS for a certain year, did MAS park 20% with itself, than 40% with Temasek, and the remaining 40% with GIC? So you have to work this out first, and every year, they have a different apportionment %. I do not believe that it is fixed. I have to believe that the breakdown is at least 50% for GIC because they are the far larger fund. This complicated by the fact that CPF funds is not sold to MAS as SSGS once a year, but instead perhaps monthly or several times a year. So, you would have to trace it like a dye and follow it as it goes through the system.

Once you have this apportionment breakdown, than you have to see what each of the agency did with their money. Using the above example, lets say that MAS bought bonds at 5% with their $20 billion (20%). Temasek maybe parked their $40 billion into a short term instrument and than used it with other funds to buy a company. So Temasek's share is now blended with funds from other investment to buy the company. And lets remember they buy lots of companies a year. Once Temasek sells the company and puts the funds pack into a short term instrument, you can than tell what rate of return CPF's $40 billion with Temasek got. You do the same for the GIC's $40 billion, although they are not as active in the company buying business.

At the end of the day, you take a weighted average of all these returns to arrive at the overall return from the $100 billion CPF money for that year. E.G. MAS's $20 billion made $100 million in interest, CPF's $40 billion earned $200 million (pro-rated) after the company it was used to buy was sold for profit, and similarly GIC's $40 billion earned $300 million. And lets say all of this happened within one calendar year. Than simplistically speaking, the rate of return for 1 year on CPF's $100 billion would be $600 million or 0.6% return. this is just an example. In the years that Temasek and GIC lose money, it will be a negative return.

In my mind, this is the only way i would use to accurately calculate the returns, Unless someone on this forum is a financial investment guru, they can come up with a more efficient way of doing so. I welcome other ideas on it too. Good thread, and in my opinion, these are some of the questions that WP should have been asking in Parliament.

 

[Papsmearer]

my perspective comes from an average sinkie, like me, cpf serve its purpose but i feel there is not enough for me to retire and they should increase interest rates and not raise the minimum sum.

U don't get it. The PAP has no intention of ever releasing the CPF to you.

 

[Papsmearer]

by all fairness....why dont they just peg the monies in our CPF according to the annual inflation so that we do not lose the "real" value of the funds stuck inside???


if they carry on like this....there gonna be another fucking round of top up to 300k in the next few years boss....


WTF!!!!

Firstly, the PAP always fudges the inflation rate. In some years, the inflation rate was over 10% but they will say it was 5%. U can tell that so many economists in Singapore have hugely varying levels of projected inflation every year.

Secondly, if they raise the CPF rate too high, than it becomes a disincentive for sinkies to take their money out to buy flats. And selling the flats is where the PAP makes the most money.

 

[JHolmesJr]

Laughable...why should a service provider tell you how much money theyre making from you.

I might as well ask nike, singtel, louis vuitton etc to publish how much they actually make their products for.

Some businesses markup their goods by anywher from 300 to 1000 percent.

Consumers only need to worry about what price they pay.

And choose.

In this case of course, no choice....so the anger is understandable.

 

[Papsmearer]

those days, $500 for legal fee for a flat that cost less than $30k for a 5 rooms was very high, a daylight robbery by the familee...will be good to know how much was robbed by the familee then.

anyone any idea how many flats were bought during those years?

At the peak of HDB flat construction in the 70s and 80s, as many as 40,000 units was build a year, and every year, there were almost 35,000 build. u just have to look at how many total overall flats there are. there are about 1 million flats now in singapore. At one time, they were all new, and Lee and Lee had 90% of that conveyancing business. So, 900,000 X $500= $450 million. And this does not include resale flats which also need conveyancing and Lee and Lee has a fair chunk of that business. they also put the lowest paid, newest lawyer to do this sort of duty. hence, big profits for Lee and lee.

 

[Papsmearer]

For national security and business competitive reasons always makes sense not to disclose certain things. Currently only MAS and Temasek's reserves / assets are disclosed but not GIC. GIC is our war chest.

Though the CPF component is the largest of 2 investment inflows, and the fact that we use 3 investment vehicles, the GIC size will still be hard to be determined. If the govt provides only the average historical returns from all three as a composite figure and attested by accountant general, that would be a good step forward.

I have yet to see a logical explanation as to why there is a competitive reason or a national security reason to keep it secret.

 

[kukubird58]

I have yet to see a logical explanation as to why there is a competitive reason or a national security reason to keep it secret.

hahaha....it is not that there is no logical explanation.....anyboby with half a brain will know that in the financial world, u don't make money by telling the whole world what you have done and plan to do...
i do not see the need to elaborate as you never change your position despite overwhelming evidence....
you are basically a bapok and stubborn empty vessel..