"To a question by opposition MP Low Thia Khiang (Hougang) on whether the Government of Singapore Investment Corporation (GIC) uses funds from the CPF funds to invest,
Dr Ng said: "The answer is no."
"Later he rose to add: "The relationship is not so simple".
Yes, it is not so simple. The MoF takes our CPF money to buy bonds issued by GIC essentially lending our money to GIC at an interest rate of 2.5%. See how complex it is it takes a total of 20 words to explain this relationship.
It is for Singaporean's own good that their CPF money returns a rate of 2.5%. If our beloved PAP did what the Chilean govt did and put our money in the hands of investment professionals, returning 11.8% per annum since its inception 18 years ago, that would undermined Singaporeans' work ethnic tremendously by keeping retirement age at 55. With a return of 2.5% Singaporeans now enjoy longer productive working lives something they can be proud of.
Yes, I heard the honorable minister say this 2.5% is risk free and our GIC bears all the risk that is why it gets a higher return of 9.5%. So the GIC deserves the 9.5% & CPF holders deserve 2.5%. But like our minister said the "relationship is not so simple". If the GIC borrows our CPF money, invests and make losses....how does it pay back. It will have to tap its cash reserves to pay us back. But the GIC money belongs to the Singaporeans so when it loses money, it merely passes its losses to Singaporeans whenever it has losses. See Singaporeans bear all the risk of GIC losing money, getting only 2.5% back in return. Now some smart alec would argue if the GIC makes the right bet and gain 20% from its investments, that would mean Singaporeans have earned a higher return via the GIC....but the relationship is not so simple, the govt has not articulated how the GIC money will be returned to Singaporeans...I believe most of will die without getting much from the GIC.
We are all at this wonderful state because CPF was liberalised for housing. If CPF is not allowed used for housing, Singaporeans will typically have one or two hundred thousand S$ in the CPF and they would have a home too because it is the mandate of the HDB to provide affordable housing. Thanks to the liberalisation of CPF for housing, HDB is able to set higher prices and have bigger surpluses...where does the surplus go to?....Our reserves which is managed by the GIC. As we end up with less money in the CPF using it for more expensive housing, the GIC ends up with more money....see the relationship is not so simple......
.....When compulsory annuity is in place, the govt can always argue for the contributions to be increased to help the old...remember the GST increase is to help the poor. This will help to strength our work ethnics as our CPF money shrinks. Some of you would like to believe the money held in the GIC/Temasek belongs to ordinary Singaporeams and is meant to help ordinary citizens in the time of crisis. You may think that your time of crisis is when you reach 85 when you exhausted your savings, too weak to hold down a job as you march slowly towards death - you'll see none of the money from the GIC/Temasek and have to take money from your fellow citizens, those who have died earlier and forced to contribute to this annuity from their CPF. The PAP has prepared a wonderful productive future for you, you should be happy that you have such a considerate govt that provides so much motivation for you to work harder and longer.