Wednesday, September 26, 2007

CPF. GIC and Annuities!!!!

"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 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.


Anonymous said...

Eh harlow! 20 words is alot ok! very chim 20 words means that don't ask this question, because we peasants don't need to know so much!

Anonymous said...

Well put in simple english that any retarded Singaporean (I'm referring to the 66.6%) can understand!

I always enjoy reading your posts, keep it up!

Anonymous said...

thank you so much for explaining very clearly how singaporeans eventually bear the risks for the investments made by gic.

i've been trying to explain this picture to my husband for the longest time, but he still liak bo kiew. perhaps you can provide some references to the link between cpf funds and gic?

stay cool~
one of your biggest fans

Anonymous said...

Thanks Lucky for helping me to understand what our million dollar minister could not explain except to say "it's not so simple". What an insult to my intelligence.
It's really very simple isn't it? My CPF money is theirs to use as they please.

Anonymous said...

It is really simple, but they made it out to be complicated so that lowly educated peasants cannot understand. And peasants are not allowed even to know what is happenning with the money in GIC/Temasek.

Anonymous said...

Thank you for explaining so clearly..its that sample!

Anonymous said...

Lucky knows best. He avoids causes for defamation and he keeps his true identity secret

Remember Sintercom. Even now some political bloggers are being quietly closed down, suddenly switching to less political subjects or even appear rather turncoat - much like one famous lecturer who used to critique the govt.

Keeping anonymity on the web and not telling even close ones about one's blog exploits, are I feel very essential for political bloggers if they want to go far.

It is not a game. The powers that be know the power of blogs.

Anonymous said...

LKY once said that Singapore could not fit the definition of a nation.

Some reasons he proffered included the fact that it was too small, lacked racial homogeneity and historical culture.

These features remain.

So if it is not a nation to him, what other concept can he and his party now hold about Singapore?

That is an interesting question to explore.

My guess based on their numerous citizenship-does-not-matter policies is that they treat Singapore just like a company - hence Singapore Inc, a term coined by them.

They are the top executives of Singapore Inc, people are the workers.

As such, it does not matter to them whether the workers are citzens or not, so long as Singapore Inc makes money.

So even if a great many unhappy Singaporeans were to emigrate, there is not shortage of FT & immigrants to replace them.

With less disgruntled citizens (who have left) to vote against PAP, the better for PAP.

Furthermore if FT and immigrants also feel uncomfortable and leave, there is no shortage of more from abroad to replace them.

Just like workers joining and leaving a company - the Singapore Inc.

Only the vote can make a difference to the case. Unfortunately the vote has also become a victim of PAP's carrot-and-stick policies.

Thus Singapore Inc remains intact for PAP.

Anonymous said...

So it is CPF carry trade by GIC.

Borrow cheap fund from CPF and invest in risky product.

"CPF carry trade", I coin this phrase, no bad huh!

Anonymous said...

That is why the pap government is so rich and the average Singaporean so poor. They have been siphoning the wealth of Singaporeans thru the CPF.

Corriflute said...

Make perfect sense to me, MOF gets regular dividend from triple A rated Temasek Holdings, which is utilised as part of the Gahmen budget to build beautiful and free recreational park, subsidised upgrading scheme to prevent older estate running to the ground like Potong Pasir, provide lift stops on every floor, making life easier for everyone.

Every investment carries a risk, apparently in this case, the principle is guaranteed a return of 2.5% which is nevertheless above rate of inflation. Even so, one can also opt to put money into the retirement account which provide a healthy 4%. I have never encountered a scheme that so vehemently protect the value held in trust.

So happy I am not to be ruled by tin pot dictators like Mugabe.

Anonymous said...

The emergencies is not for the citizens when they reach 85 years old. The ST forummer says it is for real emergencies like - global warming - we need to build dams and dykes - in case we get a New Orleans flooding. Salvaging / Buyout PSA and its workers in case the ships bypass Singapore and travel up north. Again, I am sceptical - at that time of a real crisis, the government will still die die hold on to the reserves and up taxes and GST to pay for all these items. Recall SARS - what did the government do? All the citizens donated to the SARS fund - govt says thank you and help disburse / manage the donations. (Any accounting of the funds now?) Did we take out from the reserves? No. The people all suffered another pay cut / CPF cut to stay employable. Senior citizens had CPF reduced to remain employable - foreign talent flooded Singapore. Actually I believe the government does not have any plan to disburse the reserves - even in the future. It is a plaything for GIC / Temasek / Lee family.
Like MC hammer says - you can't touch this. Watch Mr Brown show for another National Education

Kaffein said...

Don't play-play with government's money hor. It's NOT so simple, ok?

Yeah, yeah. Just these words will convince me.

To quote Mr Lee:
"You have a dumb govt in Singapore, you are done for. And you want to quarrel about $20 million over a $4-trillion economy? I say, rubbish... You mismanage this, it's not your shareholders who will lose money, 4 and a half million people will suffer - of whom 3 million plus are Singaporeans, of whom 80 per cent cannot migrate.'

We don't have a dumb government. We only have dumb Singaporeans. At least 66.6% of them. You want to quarrel with me about the $250 to $290 justification for the poor debates?

Also the $20 million is shared by only a small percent (the ministers only) as compared to the whole population? Do you think it is fair?

"Pointing to the often-heard wish of the highly-educated young to migrate to greener pastures, Mr Lee urged them to consider the plight of their fellow citizens who are not so mobile."

Question: Who are the REAL shareholders of the $4-trillion economy, pray tell me?

You can also read here

Anyway, good post.


Anonymous said...

corriflute :
1.The HDB needs to be upgraded because the pap government did a bad job. Estates and flats were badly designed and build. For e.g. only in HDB that lifts don't stop at every floor. The government is only correcting what it should have been provided for in the first place.
2.Many American universities endovement funds also carry risks but their return is over 20%.
3.Singaporeans CPF balances are also risky as they can be prevented from withdrawing what is theirs. In fact it is more risky than others as holders cannot even have access to it when they needed it most.

Anonymous said...

Singapore's economy is NOT $4 trillion. It is only about $220 billion. Australia with a population of 21 million only has an economy of A$1 trillion which is about half of the whole Asean economy.

Anonymous said...

With a $4 trillion economy we will be the third largest economy after the US and Japan. Then we may need to pay the ministers 20 times more. Makes me wonder?

Anonymous said...

Keep up the good work. Well analyse. We need more people like you to check on the gahmen.

Anonymous said...

i was shocked that the minister replied from his seat "No" when questioned if CPF is a source of (cheap)funds for the gahmen. he proceeds to "recontextualise" how CPF is used.

However, this "recontextualisation" doesn't change HOW the gahmen USES the CPF as a source of SLUSH FUND. It doesn't change this fact at all!

Was he trying to decieve HIS citizens? Was he trying to make us normal Singaporeans look like idiots?

His agitated (and seemingly aggressive) reaction to Mr Low's comment of CPF being a source of cheap funds is more than proof of the gahmen's attempt to decieve its people from the true intent of new policies.

It is common knowledge that taxes we pay help fuel the economy. if you would "recontexualise" CPF nowadays, it is actually an additional "income tax" we need to pay. This "income tax" is supposed to aid us during old age (IMHO if your over 50 years old, you automatically qualify) and help us pay for our medical bills (it should pay our medical bills IN FULL since the gahmen is too stingy to heavily subsidise our medical care in the first place.)

Apart from the freebies they give out during election year, what else have they done to (really) help us?

Anonymous said...

not only the state wants your money. religion wants your money too. all these are acquired for your good, they reasoned. it is for your 'salvation', said the prophets. so they shook hands and capital flowed to build a rock solid foundation in the land of prosperity.

i must say god is indeed looking down favorably on the inhabitants. great showers of blessings await those who are obedient.

we must be the luckiest people this side of the world.

now, don't need to wait till chinese new year for tua pek kong to rain gold nuggets on us. every week, many students will soon have the privilege to visit a new location near them and prosper like our highly paid..... "heavenly ministers".

Anonymous said...

Jiak Ba Ei Lang Bang Pui

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