23-07-2013, 07:59 AM
This article should be read with caution:
i) Someone is shifting the risks bearing responsibilities - from guaranteed min 4% to that of risks taking;
ii) Temasek can easily provide a risk taking option for special account since CPF $ are used to buy bonds issued by government;
iii) restrictions should stay with special account since its a sacred account while that imposed on ordinary account should be lifted. Unfortunately, the very reason why restrictions were imposed were due to bad investment track record by CPF account holders in the first place.
iv) lastly we cannot trust findings from consultants
'Lift CPF Special Account minimum for investment'
Investing in lifecycle funds earlier can raise savings: SGX-backed report
Published on Jul 23, 2013
Purchase this article for republication
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-- PHOTO ILLUSTRATION: ISTOCKPHOTO
By Chia Yan Min
FREEING up more Central Provident Fund (CPF) savings for investment by removing a minimum threshold amount in the Special Account could help boost the retirement income of Singaporeans.
A report released yesterday by the Singapore Exchange and consulting firm Oliver Wyman said allowing Singaporeans to invest monies from the Special Account, even if it is below the minimum balance of $40,000, in lifecycle funds will help them save more for their old age.
Lifecycle funds invest in higher risk-return assets when an individual is younger and in safer but lower-return assets as retirement approaches.
Currently, CPF members can tap the Special Account to invest in selected financial instruments approved under the CPF Investment Scheme only when the account's balance is above $40,000. Lifecycle funds currently fall outside the list of CPF-approved instruments.
CPF members receive a risk- free interest rate of 4 per cent on their Special Account.
The average Singaporean reaches the minimum $40,000 threshold balance for investing funds from the Special Account at around age 40 - or halfway through working life, said the report.
It suggested lifting the minimum balance restriction to allow individuals to begin investing in equities at a younger age, while progressively lowering their investment risk as they approach retirement through investment in lifecycle funds.
Such an extended time period for investment could give Singaporeans a chance to accumulate higher returns initially and curb the risk of market volatility.
In response to the report, the Ministry of Manpower said it has no plan to review the $40,000 investment threshold for the Special Account or that for the Ordinary Account. The CPF is a statutory board under the ministry.
CPF members can invest only Ordinary Account monies in excess of the minimum balance of $20,000.
The thresholds are in place to ensure "certain baseline amount of savings in the member's Ordinary Account and Special Account are invested in risk-free assets before allowing members to invest in riskier assets", said a spokesman for the ministry.
These thresholds "remain relevant... given today's low interest rate environment", he added.
But the ministry is open to reviewing the investment thresholds if low-cost life cycle products are deemed suitable for CPF investors, saying it recognises "the lifecycle approach may require higher levels of investment in risky assets when one is younger".
One financial adviser, however, said he typically advises his clients not to invest the money in their Special Account.
"It's earning a very good risk- free rate of 4 per cent... Even if the amount they have exceeds the minimum threshold of $40,000, we advise them to just leave it there," said Mr Alfred Chia, chief executive of financial advisory firm SingCapital.
In any case, Mr Chia added that the scope for higher investment returns for funds drawn from the Special Account is limited currently.
"If investors want to earn more than 4 per cent returns on their money, they will have to take on higher investment risk, and the current investment options under the Special Account don't allow for those kinds of investments."
Retiree Heng Choy Leng, 57, said he would have started investing money from his Special Account earlier if there had been no minimum balance requirement.
"It takes a long time to build up that amount in the Special Account," said Mr Heng, who invests "as much money as he can" using both his Ordinary and Special accounts.
The research was unveiled at the launch of a new investment product by POSB, which aims to make equity investment more accessible.
The POSB Invest-Saver allows the bank's retail customers to invest a minimum of $100 per month in a Straits Times Index exchange-traded fund, a financial instrument which tracks an index.
chiaym@sph.com.sg
Background story
MINISTRY SAYS
The lifecycle approach may require higher levels of investment in risky assets when one is younger.
- Spokesman for the Ministry of Manpower
________________________________________
FINANCIAL ADVISER SAYS
It's earning a very good risk-free rate of 4 per cent... Even if the amount they have exceeds the minimum threshold of $40,000, we advise them to just leave it there... If investors want to earn more than 4 per cent returns on their money, they will have to take on higher investment risk.
- Mr Alfred Chia, chief executive of financial advisory firm SingCapital, on the CPF Special Account
________________________________________
RETIREE SAYS
It takes a long time to build up that amount in the Special Account.
- Retiree Heng Choy Leng, 57, who says he would have started investing money from his Special Account earlier if there was no minimum balance requirement
i) Someone is shifting the risks bearing responsibilities - from guaranteed min 4% to that of risks taking;
ii) Temasek can easily provide a risk taking option for special account since CPF $ are used to buy bonds issued by government;
iii) restrictions should stay with special account since its a sacred account while that imposed on ordinary account should be lifted. Unfortunately, the very reason why restrictions were imposed were due to bad investment track record by CPF account holders in the first place.
iv) lastly we cannot trust findings from consultants
'Lift CPF Special Account minimum for investment'
Investing in lifecycle funds earlier can raise savings: SGX-backed report
Published on Jul 23, 2013
Purchase this article for republication
Buy SPH photos
-- PHOTO ILLUSTRATION: ISTOCKPHOTO
By Chia Yan Min
FREEING up more Central Provident Fund (CPF) savings for investment by removing a minimum threshold amount in the Special Account could help boost the retirement income of Singaporeans.
A report released yesterday by the Singapore Exchange and consulting firm Oliver Wyman said allowing Singaporeans to invest monies from the Special Account, even if it is below the minimum balance of $40,000, in lifecycle funds will help them save more for their old age.
Lifecycle funds invest in higher risk-return assets when an individual is younger and in safer but lower-return assets as retirement approaches.
Currently, CPF members can tap the Special Account to invest in selected financial instruments approved under the CPF Investment Scheme only when the account's balance is above $40,000. Lifecycle funds currently fall outside the list of CPF-approved instruments.
CPF members receive a risk- free interest rate of 4 per cent on their Special Account.
The average Singaporean reaches the minimum $40,000 threshold balance for investing funds from the Special Account at around age 40 - or halfway through working life, said the report.
It suggested lifting the minimum balance restriction to allow individuals to begin investing in equities at a younger age, while progressively lowering their investment risk as they approach retirement through investment in lifecycle funds.
Such an extended time period for investment could give Singaporeans a chance to accumulate higher returns initially and curb the risk of market volatility.
In response to the report, the Ministry of Manpower said it has no plan to review the $40,000 investment threshold for the Special Account or that for the Ordinary Account. The CPF is a statutory board under the ministry.
CPF members can invest only Ordinary Account monies in excess of the minimum balance of $20,000.
The thresholds are in place to ensure "certain baseline amount of savings in the member's Ordinary Account and Special Account are invested in risk-free assets before allowing members to invest in riskier assets", said a spokesman for the ministry.
These thresholds "remain relevant... given today's low interest rate environment", he added.
But the ministry is open to reviewing the investment thresholds if low-cost life cycle products are deemed suitable for CPF investors, saying it recognises "the lifecycle approach may require higher levels of investment in risky assets when one is younger".
One financial adviser, however, said he typically advises his clients not to invest the money in their Special Account.
"It's earning a very good risk- free rate of 4 per cent... Even if the amount they have exceeds the minimum threshold of $40,000, we advise them to just leave it there," said Mr Alfred Chia, chief executive of financial advisory firm SingCapital.
In any case, Mr Chia added that the scope for higher investment returns for funds drawn from the Special Account is limited currently.
"If investors want to earn more than 4 per cent returns on their money, they will have to take on higher investment risk, and the current investment options under the Special Account don't allow for those kinds of investments."
Retiree Heng Choy Leng, 57, said he would have started investing money from his Special Account earlier if there had been no minimum balance requirement.
"It takes a long time to build up that amount in the Special Account," said Mr Heng, who invests "as much money as he can" using both his Ordinary and Special accounts.
The research was unveiled at the launch of a new investment product by POSB, which aims to make equity investment more accessible.
The POSB Invest-Saver allows the bank's retail customers to invest a minimum of $100 per month in a Straits Times Index exchange-traded fund, a financial instrument which tracks an index.
chiaym@sph.com.sg
Background story
MINISTRY SAYS
The lifecycle approach may require higher levels of investment in risky assets when one is younger.
- Spokesman for the Ministry of Manpower
________________________________________
FINANCIAL ADVISER SAYS
It's earning a very good risk-free rate of 4 per cent... Even if the amount they have exceeds the minimum threshold of $40,000, we advise them to just leave it there... If investors want to earn more than 4 per cent returns on their money, they will have to take on higher investment risk.
- Mr Alfred Chia, chief executive of financial advisory firm SingCapital, on the CPF Special Account
________________________________________
RETIREE SAYS
It takes a long time to build up that amount in the Special Account.
- Retiree Heng Choy Leng, 57, who says he would have started investing money from his Special Account earlier if there was no minimum balance requirement
