Low Thia Khiang: CPF funds too small to be invested alone?

By Terry Xu

Secretary General of the Workers’ Party and Member of Parliament for Alujined GRC, Low Thia Khiang asked two questions in Parliament during the supplementary question segment on Tuesday regarding the Central Provident Fund (CPF) and how it was invested, but got an answer that was hardly satisfactory.

Mr Low sought clarification from Deputy Prime Minister Tharman Shanmugaratnam about CPF money being issued as Special Singapore Government Securities (SSGS) and invested in GIC Private Ltd, a sovereign wealth fund, together with other assets of Singapore.

“He say that the CPF money managed and invested as an independent pool, it will not be able to enjoy the same investment returns as GIC,” said Mr Low. “I would like to know why is it so.”

He also pointed that there is about S$300 billion in the CPF funds and asked why this sum of money is not sufficient to be invested separately to provide the same or better returns.

Mr Tharman indicated that CPF money had to be pooled with the money from the government surplus as well as incumbent assets from the Singapore’s reserves to invest long term so as to achieve the high returns to CPF members.

“There is no private sector fund manager that will take up on that task because it is very difficult to the GIC. Because it is a large diversified portfolio that is aimed to invest in the long term and aims to do better than the SGS obligations.

But that is because the GIC is not just managing SGS obligations, not just managing CPF liabilities. If it was managing CPF liabilities and SSGS obligations where you must meet that obligations every year, it will need a conservative portfolio.

Meaning not much equalities, certainly no real estate, alternative assets. It will basically be a simple bond portfolio and it is not going to earn very much. It will aim to just minimise the chance of failure to meet obligations. Not maximise long terms returns. That is what would happen.”

However, Mr Tharman did not address Mr Low’s question on whether S$300 billion dollars was sufficient to be invested on its own. 


A financial adviser TOC spoke to felt that Mr Tharman’s explanation did little to clarify Mr Low’s question.

“It does not make any difference if the investment amount is $1 million or $1 billion. The investment portfolio can still be set at a similar risk and return portfolio. It is bewildering to think that funds are mingled together to achieve lower investment risk , but yet the different parties are not given the same investment returns.”

Mr Low also asked earlier if the government would consider allowing more flexibility in the withdrawal of CPF money for the CPF member to repay a small amount of housing loans when he reaches the age of 55.

Using the example of small-value withdrawals of about S$20,000, Mr Low said that the lump sum withdrawal could allow CPF members to pay off the outstanding loans of their houses and avoid paying unnecessary interest on their housing loans.

In response to Mr Low’s question, Manpower Minister Tan Chuan Jin expressed his concern about how the Retirement Account (RA) will be depleted if CPF members were to be allowed to withdraw money to pay off housing loans.

He said that the RA needs to be preserved in order to meet growing retirement needs, and promised tweaks to the CPF Act to improve the system. CPF members could also expect help from the Housing Development Board (HDB) on a case by case basis.