By Leong Sze Hian & Yeo Toon Joo

We have been told by the Government the Budget has been in surplus most years – and “$2.8 billion a year of investment income” had not been spent.

Where did that sum go? Did it end up as “cheap” funds for Temasek and GIC to invest?

Why not use a negligible fraction of that surplus from year 2042 to help Singaporeans who live beyond 85 instead of enforcing the unpopular Longevity insurance scheme?

If our country has $2.8 billion a year in spare cash why can’t our Government pay just $300 a month from 2042 to a small number of poor Singaporeans endowed with longevity?

$2.8 billion is only one per cent of the annual return on Singapore’s reserves which, if returned to CPF members by way of higher interest, is about a one per cent increase in the current CPF interest rate for contributors.

The compounding effect of this one more per cent could translate into tens, if not hundreds, of thousands more in returns for every Singaporean when he or she retires.

For example, $60,000 now plus $500 monthly CPF contributions from age 30 to 65, at 5 and 6 per cent will grow to $914,436 and $1.2 million, respectively. So, a one per cent rise in CPF return (for a worker earning $1,450 monthly at the current CPF contribution rate of 34.5 per cent) translates to $288,894 more when he retires.

Isn’t this far better than giving a one-time housing grant that may be consumed by the risks of servicing a 30-year HDB flat mortgage, or giving a few hundred dollars of occasional top-ups to our CPF account? And are such so-called grants really subsidies when prices of HDB flats rise faster than the so-called housing grants?

“We are not stingy”, Govt rebuts its own rebuttal on CPF funds and changes!

In the following news articles, “Should you invest your CPF savings elsewhere?” (Sunday Times, Sep 30), “Govt spent $2.8b over last 5 years to fund grants, subsidies” (ST, Sep 29), “CPF changes needed to tackle future problems: PM” (ST, Sep 24), and the Ministry of Finance’s reply “Govt investments de-linked from CPF funds” (ST, Sep 29), (link), it was reported that:


“The Government has spelt out just how much it spends on grants and subsidies that go into people’s retirement savings in a rebuttal to criticisms that it is tight-fisted. Over the last five years, it ploughed back an average of $2.8 billion a year of investment income into the Budget.”


The main thrust of the Government’s rebuttal could be the best “self-rebuttal” against its own rationale for the CPF changes.

The Government has also said it does not depend on CPF funds which, it claims, are not cheap but “expensive” money, and, if it needed to borrow, it could do so more cheaply by issuing government bonds.

On the contrary, if not for the large CPF funds supplied by the people, tapping the market may increase the cost of its borrowing due to its much higher volume of borrowing.

The people’s funds in CPF, in a way, paradoxically enables the current official practice of selling subsidised HDB flats to Singaporeans – at ever increasing prices!

If you look at recent HDB property launches over the last two years you will note the tremendous rises in prices, e.g. the hike in the last three launches of new 4-room HDB flats at Fernvale was more than the increase in the CPF Housing Grant (HG) or the Additional CPF Housing Grant (AHG).

The average price increase over the last 2 years was $62,500, which was more than the entire maximum CPF Housing Grants!

On 25 October, just one month after the Fernvale launch, the HDB launched Telok Blangah Towers – with $402,000 the highest price for a 4-room flat, a whopping 60 per cent rise over the highest priced $252,000 at Fernvale. This, I believe, is a record high for new 4-room subsidised public housing! (CNA)

What kind of housing grant is this if your flat prices rise more than the grant? How can the HDB housing loan subsidy be called a subsidy when it takes in CPF from Singaporeans at 2.5%, then lends it back to them at 2.6%?

Why build so many high-priced flats when many can afford only cheaper smaller ones?

In the articles “HDB glut shrinks in rising market” and “More 2-room, rental flats soon” (ST, Oct 18), it was said that “It (HDB) resumed offering two-room flats for sale last year and has launched 539… “

In the next six months, it will offer 4,500 new flats under the build-to-order (BTO) system, which places flats on the market only if there is sufficient demand.

So far, in the first nine months of the year, HDB has offered 2,700 new flats under BTO. It will also release another three new Design, Build and Sell Scheme sites, which will yield about 1,500 flats.

There are, I understand, about 200,000 households with monthly income of $2,000 (the income ceiling for two-room flats) or less. Why then is the HDB building so few two-room flats (539 since last year, and only after not building any for many years)?

And, why is it building many times more flats that are bigger and at rapidly increasing prices (as much as 40% higher than 2 years ago for new 4-room flats at Fernvale)? (link)

Funding Singaporeans’ retirement savings through ad-hoc and piece-meal housing grants and subsidies, goes against the core principle of self-reliance that has been the bedrock of our pensions system.

Instead it should grant higher CPF returns, as it will reinforce the need and desire of Singaporeans to plan and save for their retirement.

Is it any wonder then that no amount of top-ups or lucky draws has succeeded in persuading the self-employed to contribute to CPF accounts! Could it be that returns are just too low?

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