The Online Citizen

CPF: How it ‘really’ works?

June 10
08:19 2014

ST infograph on CPF

By SY Lee and Leong Sze Hian

We refer to the infographics (above) on “CPF: How it works” published in Business Times.

More questions?

This latest information may raise some more questions about our Central Provident Funds (CPF).

Why did it take so long to tell us?

Since we now know that CPF is managed by the Singapore sovereign wealth fund, GIC – Why did it take so many decades to disclose this, despite questions over the years, including in Parliament?

What was the annualised return?

So, what was the GIC’s annualised returns in S$ terms, since its inception?

Who is “really” bearing the risk?

As to the Government bearing all the investment risk – are there any national pension funds that operate on such a rationale – not returning the actual excess returns to its citizens?

IE. even if for a particular year where the investment returns are above projected figures at 6%, citizens will still receive 2.5% for that year. Even after deduction of the expenses of managing the funds, the loading expenses should not have come to such an amount.

Linking pension rates to bank deposits?

Are there any countries which peg or link their long term pension interest rates to short term bank deposit rates?

Average overall rate of return on CPF accounts?

Instead of telling us that the Ordinary Account (OA) pays 2.5%, the Special Account (SA), Retirement Account (RA) and Medisave pays 4%, plus an extra 1% on the first $60,000 – Why not give the average overall rate of interest paid in a year on all the types of CPF accounts totalling $260 billion? Is it about 3%?

For the confused, say there are 5 account holders. Each with different amount of CPF funds in their account after 20 years of employment. The below table shows the interest rate earned by them in the respective accounts in their CPF.

interest rate for CPF

The extra 1% on the first $60,000 is credited to the MA, SA and the interest of the first $20,000 of the OA credited to SA. Above figures assume that the individual do not draw funds out for housing or medical fees. Update – Correction to the figures to the table

What was the average overall rate of interest on a year-to-year basis, for the last 25 years or so?

How much has Singaporeans been short-changed?

How much in total has Singaporeans lost, in a sense, if we had received the actual historical returns of the GIC, instead of what is probably the lowest real rate of return of all national pension funds in the world, over the last 25 years or so? (“Leong Sze Hian’s speech at CPF protest: Loss of $1 million by CPF account holders“, theonlinecitizen , Jun 9)

How many inactive CPF members at age 55?

With 1.88 million out of 3.53 million CPF members being active members – How many inactive CPF members were there who turned age 55 last year.

How many met the Minimum Sums in cash?

In this connection, with close to half of the active CPF members meeting the Minimum Sum including the property pledge – Is the number of all Singaporeans at age 55 who were able to meet the CPF Minimum Sum of $155,000 and the Medisave Minimum Sum of $43,500 – a combined total of $198,500, entirely in cash from their CPF, in 2013, only about 1 in 8?

  • Screwed Singaporean

    The govt really treats Singaporeans as quite stupid …. in the name of ‘transparency’ they reveal information which everybody has heard before. Instead of convincing with new reasons why policies are advantageous they parrot the same old lines as though they are answering the question. And all the while ignoring the actual issue.

  • LogicalSGGuy

    IIt doesn’t matter if God, Buddha, Christ, Muhammad etc were to issue a joint reply. Leong Sze Hian wouldn’t accept it.

    (1) What in the world has inactive members at 55 have to do with anything, is LSH going to ask why they are inactive, and why nothing is being done for them?

    (2) Why hasn’t LSH read the various information instead of mindlessly asking “Are there any countries which peg or link their long term pension interest rates to short term bank deposit rates?” (ya, it’s so very easy to keep asking questions … if LSH were to sit opposite us, we can also question him to death, and he won’t be able to answer our questions).

    (3) Is LSH willing to have higher income tax, higher GST, higher road and property tax, higher transport cost, higher healthcare cost, less housing grants, less childcare benefits.? Is LSH demanding that GIC uses its excess returns to give higher cpf interest (which I also want, as a cpf member), but who’s going to pay for the other public expenditures then? Would younger Singaporeans want to pay much higher income tax?

    (4) LSH says that GIC invests CPF money. If GIC makes a loss, will LSH guarantee to pay the deficit for cpf members? As a financial professional, he knows there’s no such thing as a free lunch. Can LSH recommend us any financial product with high returns and no possible loss?

    LSH thinks that we’re all stupid and can all be misled. He’s choosing to ignore all the info that’s available and he chooses to ask questions that’s obviously designed to confuse,

    • PikuChoo

      I think the more appropriate question to ask is:

      A) Do Singaporeans want the current system where no matter WHAT the performance of GIC/TH (Temasek Hlds), we get guaranteed (low) returns


      B) Will Singaporeans accept NO returns if GIC/TH make a loss (for the year) and better (much higher) returns when performance is good?

      For (A), Singaporeans should ask: If GIC/TH are making a loss, WHERE are they getting the money to still pay us?

      For (B), Singaporeans will also get the benefit of knowing when GIC/TH are actually making a loss. And if they KEEP making losses…..

      • Samson

        If GIC/Temasek keep making losses, what the hell do we want them for? Who is in business to make losses? No one!

  • GUSSIE91

    Singaporeans do not need the complicated blurring details diagram……………what for?
    We want good market result, money in our bank account…….. no more excuses.

  • john tan

    10 men in white invited a group of 100 to lunch, 10 men in white promised 10 of
    the 100 that because they are old and sick, free lunch for the 10 elderly. then
    the bastard 10 in white turned to the rest of the 90 , and told them the bill for the
    100men will be equally divided among the 90 !!! the smart bastard 10 in white
    went into the next room for their free lunch by the hotel , because bastard 10
    brought 90 paying customers to the hotel..

    • GUSSIE91

      woahlan……………….who are those smart b..t….d…………10 in white?

    • Samson

      And 60% of the 90 clap, thank and bow to the bastard 10 in white for giving them a restaurant to dine.