MPs offer ideas to improve CPF

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#1
Really wish that they allow us to use cpf funds to invest in indices etf..


Mr Zaqy: suggests a govt-backed investment plan that tracks inflation
[SINGAPORE] Members of Parliament came up with ideas to tweak the Central Provident Fund (CPF) system such that it could provide enough for Singaporeans during their retirement.

Chua Chu Kang GRC MP Zaqy Mohamad suggested that the CPF could consider a government-backed investment plan that tracks inflation, above the existing Ordinary Account and Special Account interest rates.

Mr Zaqy, who kicked off the debate on the President's Address yesterday, noted that the existing CPF-approved investment funds were currently left to the market, which often has financial risks beyond what the ordinary CPF member can understand.

"A government-led plan may come somewhere in between, in that it is a trusted plan, with standard terms and the objective of tracking inflation to protect one's savings for the long term," said the backbencher.

Having such a plan would help improve returns on CPF savings, he said. This, he added, could reduce citizens' unhappiness with the "changing goal posts" of the CPF Minimum Sum amount.

Earlier this month, it was announced that the Minimum Sum would be raised to $155,000 for those turning 55 between July 1 this year and June 30 next year. This is $7,000 higher than last year's Minimum Sum of $148,000.

Mr Zaqy noted that only half of all Singaporeans can meet the Minimum Sum requirement.

"Much of the frustration I encounter with the Minimum Sum or the Retirement Account after a certain age is due to the inflexibility when one falls into the difficulty of using funds to pay for their mortgages or changed property as a result," he said.

Nominated MP Tan Su Shan said that it was probable that Singaporeans had to factor in a higher rate of inflation when calculating their retirement adequacy.

This, given the fact that CPF members enjoy a risk-free interest rate of 2.5 per cent per annum on their Ordinary Account savings, but bearing in mind that inflation in Singapore has averaged 4.1 per cent over the last three years since the economic restructuring journey began.

"This is double the historic average inflation rate of about 2 per cent and will erode our CPF savings," she said, adding that it would be "useful" for the government to provide a medium-term projection of the country's inflation rate.

Ms Tan, a banker, noted that since the Monetary Authority of Singapore had chosen to maintain a strong and stable Singapore dollar, it was likely that most inflation costs could come from domestic pressures.

"Being able to project the growth rate of our cost of living expenses will help us make the right choices, outside of parking our surplus funds in cash deposits," she said.

In his speech at the re-opening of Parliament on May 16, President Tony Tan Keng Yam had said that the government would improve the existing CPF savings and CPF Life annuity schemes to ensure that older Singaporeans would have enough to last them through their golden years as life expectancy goes up.

The authorities will also develop more options for Singaporeans to unlock the value of their homes in their retirement, said Dr Tan.

Ang Mo Kio GRC MP Inderjit Singh called for caution against overly emphasising the role of the home in providing for retirement adequacy.

"To achieve this goal of a home being a source of retirement funding, asset appreciation would be beneficial. However, the appreciation of housing prices can cause serious anxiety among the young who are looking to settle down and start a family," he wrote in a speech posted on his Facebook page yesterday.

"Even though my home price has increased constantly over the years, I am not any richer till I dispose of my property. But in that instance, I would have to purchase a replacement home, which would of course be more expensive. Constantly increasing property prices, in my opinion, are not a good thing for our country," he said.
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#2
Open the CPFIA Agent banks to more competition. Eg SGX. Still charging the same fees after all these years. Transaction processing should be cheaper with technology. Besides CPFIS agent banks are redundant if SGX CDP can handle everything including insurance and unit trusts.


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#3
Actually, we have always been made aware that we have two teams of experts at Temasek and GSIC to manage the nation's reserves. Is it so difficult for either team to set up a higher risk fund to help CPF members achieve a higher rate of return given that CPF funds are long dated with limited withdrawal flexibility unless stringent criteria are met?

Most layman don't have either time or knowledge to learn to be a Buffet but certainly our experts at Temasek and GSIC can help their own fellow citizens. As the product is coming out of the same organisations, costs of management will also be quite low in the logical sense.

1 cent worth that will be loss in the great ocean of convincing political debate.
GG
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#4
^^ Interesting idea but a political unfeasible and thankless one. There is high reputational & political risk if returns for a year become say <2.5% when "voters" forget to look over 10 years.

Pegging CPF returns to inflation indexed bonds could be a good idea as well. In times of high inflation government budget would also feel the pinch from higher interest cost.

Inderjit again hit the nail on its head. Unconventional but right view IMHO... as we discussed in other threads. I wonder if Goh responded because it is a direct challenge to his 1996(7?) landmark speech to Chiam.

Ang Mo Kio GRC MP Inderjit Singh called for caution against overly emphasising the role of the home in providing for retirement adequacy.

"To achieve this goal of a home being a source of retirement funding, asset appreciation would be beneficial. However, the appreciation of housing prices can cause serious anxiety among the young who are looking to settle down and start a family," he wrote in a speech posted on his Facebook page yesterday.

"Even though my home price has increased constantly over the years, I am not any richer till I dispose of my property. But in that instance, I would have to purchase a replacement home, which would of course be more expensive. Constantly increasing property prices, in my opinion, are not a good thing for our country," he said.
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#5
A very hot topic now . May continue to boil till next GE.
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#6
Well, the increasing property price that we are facing now is going to spark another round of cooling measure.
I bet that TDSR will be tighten/lower to 50% soon.

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#7
First

The idea that upgrading of homes means selling the current home and buying another
equates to 'upgrading'.

Second

This fits into the overall policy of 'Asset enhancement'. Where land prices are auctioned off with high reserve prices.

It has become an obsession to have 'new' things. From wallets, shoes, mobile devices to cars and even big ticket items like homes. The Gov is bent on creating property as the engine to power consumption. The add-on effect is huge.

I know many friends who have moved homes at least twice, and each time they happily use the cash portions to buy new cars, go on holidays. This just falls into a consumption trap and when it comes to the crunch: No more CPF and then scream that the Gov is to blame... well it seems they are right!
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#8
(27-05-2014, 10:20 AM)greengiraffe Wrote: Actually, we have always been made aware that we have two teams of experts at Temasek and GSIC to manage the nation's reserves. Is it so difficult for either team to set up a higher risk fund to help CPF members achieve a higher rate of return given that CPF funds are long dated with limited withdrawal flexibility unless stringent criteria are met?

Most layman don't have either time or knowledge to learn to be a Buffet but certainly our experts at Temasek and GSIC can help their own fellow citizens. As the product is coming out of the same organisations, costs of management will also be quite low in the logical sense.

1 cent worth that will be loss in the great ocean of convincing political debate.
GG

GIC returns not great. Temasek returns not repeatable coz the past returns was in the context of SG changing from emerging to developed country.

http://www.gic.com.sg/en/faqs/search/199...returns#28

What are the returns of the GIC Portfolio?
In its annual report for 2012/2013, GIC reported 5, 10 and 20-year annualised nominal returns in USD terms of 2.6%, 8.8% and 6.5% respectively. It also reported a 20-year real rate of return of 4.0%. The rolling 20-year real rate of return is the primary metric for the Government to evaluate GIC’s investment performance.

http://www.temasek.com.sg/investorrelati...erformance

Anyway, an investment fund is that run/oversee by people concerned about political career risk, will performs badly.
"... but quitting while you're ahead is not the same as quitting." - Quote from the movie American Gangster
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#9
For a man-in-street, i have always think why all these years EPF returns always better than CPF? Correct me if I am wrong. Is it because their bank FD even now is > 3% therefore their EPF has to operate/invest differently. So it seems their G has to take the higher risk for EPF. And our G just want to sit on the fence?
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#10
(27-05-2014, 12:40 PM)Temperament Wrote: For a man-in-street, i have always think why all these years EPF returns always better than CPF? Correct me if I am wrong. Is it because their bank FD even now is > 3% therefore their EPF has to operate/invest differently. So it seems their G has to take the higher risk for EPF. And our G just want to sit on the fence?

Uncle , you should know who is/are the borrower(s) of the CPF monies, as borrower , you want to pay lower or higher interest to lenders ?
“risk comes from not knowing what you’re doing.”
I don’t look to jump over 7-foot bars: I look around for 1-foot bars that I can step over.
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