ST: 'Lift CPF Special Account minimum for investment'

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#1
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

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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
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#2
Hmm... I saw something interesting..,

(23-07-2013, 07:59 AM)greengiraffe Wrote: 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.

Went to search further. Article from CNA,

SGX, POSB launch new Invest-Saver product

To encourage more Singaporeans to start investing early for retirement, the Singapore Exchange (SGX) and POSB have come up with a new product that allows one to invest in exchange traded funds while also saving for retirement.

SINGAPORE: To encourage more Singaporeans to start investing early for retirement, the Singapore Exchange (SGX) and POSB have come up with a new product that allows one to invest in exchange traded funds while also saving for retirement.

SGX added that it is on the lookout for potential partnerships that can make long term investing more accessible for their customer base.

Ninety-seven per cent of Singaporeans’ retirement funds are tied up in fixed deposits, property and insurance, and the remaining three per cent are in equities, mutual funds or unit trusts, revealed a SGX-Oliver Wyman study on retirement savings.

A low interest rate environment and rising inflation has eroded the dollar value of one's savings, especially retirement savings. Far more retirement savings in Singapore are still held in fixed bank deposits than in many other countries, said the SGX-Oliver Wyman study.

Only 12 per cent of investible CPF savings are held in equities versus the 50-70 per cent in a range of other countries including US, UK, Hong Kong, Malaysia and Australia.

Research shows that 41 per cent of Singaporeans have never saved specifically for retirement while 60 per cent of Singapore's working adults save less than 20 per cent of their monthly income.

With families becoming smaller, experts say it is increasingly less viable for Singaporeans to depend on their children for financial support in their retirement years.

By the time Singaporeans reach retirement age, CPF savings will only be sufficient to meet 68 per cent of their pre-retirement income, revealed the SGX-Oliver Wyman study.

But with the new POSB Invest-Saver product, a combination of a regular savings plan and exchange traded fund, saving for retirement could start from as little as S$100 a month with no brokers involved.

An exchange-traded fund is an investment fund traded on stock exchanges, much like stocks.

Potential investors can subscribe for the product via any of 1,100 ATMS islandwide.

The POSB Invest-Saver is linked to the Nikko AM Singapore STI ETF, an exchange-traded fund that tracks the performance of Singapore’s top 30 blue chip companies.

DBS, the largest local bank in Singapore, hopes that the product will make long term investing more manageable for young Singaporeans.

Tan Su Shan, managing director and group head of Consumer Banking and Wealth Management at DBS Bank, said: "Singaporeans are a little bit barbelled in their investment approach. We either have cash or we have properties, so either very liquid or very illiquid and possibly not enough in fixed income or equities. So this speaks to the asset diversification that we're trying to promulgate right now."

Chew Sutat, executive vice president of SGX, said: "If you look at the amount of cash savings we have, both in CPF systems and banking deposits, every year we as a nation are potentially leaving S$3-5 billion of investment returns on the table by not investing.

"As long as we have like-minded partners who share common goals of wanting to bring more accessible investing to their customer base… we'll be happy to support them."

Potentials investors in this latest product could expect to reap an annual average return of between 2 and 3 per cent.

- CNA/jc
Luck & Fortune Favours those who are Prepared & Decisive when Opportunity Knocks
------------ 知己知彼 ,百战不殆 ;不知彼 ,不知己 ,每战必殆 ------------
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#3
Quote:"As long as we have like-minded partners who share common goals of wanting to bring more accessible investing to their customer base… we'll be happy to support them."

Talk so much, why don't they remove the 1000 share per lot restriction. It makes investment so much more accessible.

For those who are interested. More info on POSB investsaver.
http://www.posb.com.sg/personal/landing/...pid=vanity
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#4
(23-07-2013, 08:58 AM)yeokiwi Wrote: Talk so much, why don't they remove the 1000 share per lot restriction. It makes investment so much more accessible.

Totally agree - many times, I opted out of script dividend because of the resulting odd lots.
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#5
(23-07-2013, 08:58 AM)yeokiwi Wrote:
Quote:"As long as we have like-minded partners who share common goals of wanting to bring more accessible investing to their customer base… we'll be happy to support them."

Talk so much, why don't they remove the 1000 share per lot restriction. It makes investment so much more accessible.

For those who are interested. More info on POSB investsaver.
http://www.posb.com.sg/personal/landing/...pid=vanity

Also, OCBC Blue Chip Investment Plan (BCIP)

I think UOB will be pressurised to come up with something similar soon...Tongue



(23-07-2013, 09:03 AM)egghead Wrote:
(23-07-2013, 08:58 AM)yeokiwi Wrote: Talk so much, why don't they remove the 1000 share per lot restriction. It makes investment so much more accessible.

Totally agree - many times, I opted out of script dividend because of the resulting odd lots.

I used POEMS and sell via 'UNIT SHARE' and amalgamate with whole lots to work around this.
Luck & Fortune Favours those who are Prepared & Decisive when Opportunity Knocks
------------ 知己知彼 ,百战不殆 ;不知彼 ,不知己 ,每战必殆 ------------
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#6
Lift restriction will once again mainly benefit financial insitutions, brokerages, and peddlars of financial products.
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#7
(23-07-2013, 09:04 AM)KopiKat Wrote: I used POEMS and sell via 'UNIT SHARE' and amalgamate with whole lots to work around this.

I am using POEMS also; but I find the bid/ask spread too big to my liking in the unit share market
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#8
Juz leave the sa $$ there in case people start having problems with their mortgage payments then can use sa to save the day
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#9
(23-07-2013, 09:12 AM)egghead Wrote:
(23-07-2013, 09:04 AM)KopiKat Wrote: I used POEMS and sell via 'UNIT SHARE' and amalgamate with whole lots to work around this.

I am using POEMS also; but I find the bid/ask spread too big to my liking in the unit share market

I managed to convince my brain by looking at the difference in % terms. For example, the main shares has hit my target price and I'm selling $10k worth and the odd lots will be typically at most, worth a few hundred dollars. The bid/ask spread for the odd lots may be large but when equated to dollar value (usually at most a few tens of dollars), it forms only a tiny % of the total transaction...

Alternatively, since there's no CDP holding charges anyway, I may just keep the odd lots to keep me interested in that stock.
Luck & Fortune Favours those who are Prepared & Decisive when Opportunity Knocks
------------ 知己知彼 ,百战不殆 ;不知彼 ,不知己 ,每战必殆 ------------
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#10
(23-07-2013, 09:04 AM)KopiKat Wrote: I used POEMS and sell via 'UNIT SHARE' and amalgamate with whole lots to work around this.


is the amalgamation automatic or u have to inform your broker?
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