4 things that CPF fails at

4 things that CPF fails at


By Marcus Chua, DollarsAndSense

DollarsAndSense recently attended one of the focus group discussions held by the Central Provident Fund (CPF) to understand the scheme better. We noticed four recurring themes that kept coming up during the discussion, and have summarised them with the acronym “UPCC” for a truly Singaporean reading experience.

U – Understanding Singaporeans

P – Predictability

C – Clarity

C – Communication

Understanding Singaporeans

The CPF system fails to understand the very people people it safeguards. We can, to a certain extent, emphatize with this shortcomings though. The scheme was conceptualized taking people’s expectations, needs and requirements to be homogenous, but people are far from homogeneous creatures.

There is only one national social security system – the CPF, catering for all 3 million Singaporeans. Can any one system ever fit the needs and requirements of everyone?

This is a task that CPF has to shoulder. Should it cater to the average Singaporean with a gross salary of about $2500 to $3000? Or should it be adjusted to the bottom 20% of income earners who need a social safety net the most? What about those who are outside the system (i.e. the housewives, disabled, special needs)?

Should savvy investors be able to withdraw their money early to make use of it more efficiently? What about compulsive gamblers? Who gets to decide who is a savvy investor?


Predicting future cash flow is extremely important for personal finance planning, especially retirement. However, the sentiments on-the-ground are that the increment of the Minimum Sum (MS) has been excessively volatile.

According to CPF published numbers, the increment of the MS on an annual basis ranges from $4,500 to as high as $11,000 in the last 12 years. This has been seen as the government moving goalposts and remains one of the main cause of unhappiness that Singaporeans have of the system.

The truth is that we cannot appropriately manage our future cash flow if the goalpost keeps moving. If I expect to be able to withdraw $45,000 to buy an annuity plan at the age of 55 and the MS is increased before that happens, I get less money.

This makes it harder for personal finance planning to be done, even for those who are financially responsible. Due to that, some people make it a point to buy a property right before turning 55 as a way of spending before money gets “locked up”.


As Singaporeans become better educated, we have also become more knowledgeable and curious. We are asking questions that the previous generation did not. Questions like how CPF is managing our money? How is it allocated? Who are the underlying managers of the fund? What are the expenses of CPF? These are legitmate questions that all fund managers have to answer to their stakeholders. But not the CPF.

In this era, information in the market have become extremely transparent. Profits, losses, investment criteria and management expenses are all public information. It is time for CPF to stay with the time so as to regain the public trust.

We like to make a suggestion to the CPF board to provide a public domain where its beneficiaries can have access to and evaluate its performance. A great example would be following the footsteps of asset managers like Aberdeen, where there are information such as monthly factsheets, annual reports, interim reports, fund manager interview and if possible, a prospectus.

Unless of course there is something they wish to hide. And even if they don’t have anything to hide, the current situation makes it so easy to think there is.


Communication to the lay people in Singapore about the CPF is important given that the scheme seems to change so often. Despite all the unhappiness that Singaporeans seem to be putting having with CPF system, we have yet to find anyone who able to propose a system, used elsewhere in the world, as a better alternative.

CPF is definitely far from perfect and there are good ideas out there about how the system should be improved. A lot of these ideas are specific to the heterogeneous nature of a group of people (e.g. I am a good investor, I should take my money out to manage it better and be able to build a bigger retirement nest egg)

However, more options also means people need to be more educated. There is no point in having 10 different CPF options when most people are barely able to comprehend the one already in place. From what we observed, many Singaporeans simply do not have the time nor inclination to do the kind of learning required.

More active communication is required by CPF to engage its beneficiaries and to explain why CPF intends to embark on certain routes BEFORE options are being provided, or further regulation being imposed.

In a nutshell

The CPF has done terribly at “UPCC”. Every factor contributes greatly to the frustrations and unhappiness that Singaporeans feel. Whether our leaders are able to provide a “State-of-Art” national social security system remains to be seen.

At the end of the day, we agree that managing your own personal finance is part and parcel of each individual’s responsibility. How a person chooses to spend his or her own money is up to them. However, we must also remember that if an individual were to mismanage their own finances, it is the state’s responsibility to take of them.

This article was first published at DollarsAndSense.sg. DollarsAndSense.sg is a website that aims to provide interesting, bite-sized financial articles which is relevant to the average Singaporean. 


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