Thursday, November 13, 2008

Govt wants you transfer money into CPF SA...why?

There are advertisements everywhere in Singapore asking people to transfer their money into CPF special accounts.

The transfer earns you an extra 1.5% but is IRREVERSIBLE. Have you ever wondered why the govt is so eager to give you that extra 1.5% to lock up your money? Why are they advertising to give you this extra 1.5%?

Higher returns means higher risks. So when somebody tells you, ‘you get 1.5 per cent at the bank, I give you 5 per cent’, read the small print carefully.” - MM Lee (ST Online, “Lehman investors ‘aware of risks’”, 11 Nov 2008)

I was tempted but after listening to what MM Lee said about investments that return 5% per annum and how people deserve to lose their life savings going for 5% returns...I decided to give this transfer thingy a miss.

How does the CPF generate its returns anyway? CPF gets its returns lending money to the GIC. GIC then invests this money in bonds, stocks, foreign assets etc to generate this return and give it back to the CPF. By moving your money into SA, your money can be lent out to the GIC for longer periods. I was trying to find the prospectus for GIC so that I can read the fine print and go in with my "eyes open". However, there is not much Singaporeans can know about GIC except some of its speculacular investments in western banks and occasional release of its performance averaged over many years so you can't tell how it is doing for a particular year and what it is doing with your money exactly.

I'm really curious why there is so much advertising urging people to transfer their money to the SA.

".....because how can they pay you 5 per cent unless they are in dire need of the money?" - MM Lee, 11 Nov 2008

"Sir, did you ask that question when Citibank offered to pay 7% for the $10B GIC invested in their convertibles" - Lucky Tan.

In the US, when a stock falls below $10 it is a bad omen. The chance of it getting back above $10 is small. Citibank's stock fell below $10 yesterday and it trading at $8.75 right at this very moment. Although the GIC bought "ethernal" convertibles rather than stock...the fall in Citibank's stock can trigger a downgrade that will make the 7% return look like a raw deal relative to the risks.

UPDATE: Yesterday night while you were sleeping the DOW went up something like 550pts, one of the largest one day gain in history. Citigroup, however, was unable to close up falling to $9.45. I really wonder what is on the books of Citibank?....


AlphavilleSG said...

Something is amiss... Temasek selling state assets, Chartered rumored to be in merger talks and this piece of news. Should we also question whether the PAP govt. can guarantee all bank deposits?

Where's the transparency and accountability mention days ago? Where's our money Mr Goh! Show us the money!

LuckySingaporean said...


Temasek's cash infusion in the past into Chartered is really a lesson learnt in not throwing good money after bad. Chartered was a pepertual industry loser and in the end cost taxpayers billions invested via Temasek. and that place hired so many foreigners it did create much employment for Singaporeans.

Right now they are going to have a firesale.

Anonymous said...

Transfer MY money into CPF i get MONTHLY CPF statement?

“Every month, when I receive my CPF statement, I feel so rich and the best part is, I know the CPF money won’t run away. CPF will still be around for a long, long time to come… Not only is it earning good interest, my capital is protected.”

Sgcynic said...

Be careful. Your capital is protected, not guaranteed.

Anonymous said...

Interesting - Town councils today apologised for the 2 cleaners wasting water.

Disciplinary actions will be taken against them.

What about the mayor who invested Town Council money in minibonds. Any action? Any apology?

Typical - stamp on the lower level, elevate the higher level. Let us move on.

Anonymous said...

alphavillesg... I feel it in my bones too. 2 days ago SMGoh was saying that he discussed with Donald Tsang on the issue of lifting the blanket guarantee of deposits in the banks.This guarantee is to last till end 2010, but he seems to be in a hurry to see the guarantee lifted.

College Student said...

Dear Lucky,

Can you explain the concept of "ethernal" convertibles, which I have not heard before? Thanks.

Anonymous said...

Citi bank has the largest Level 3 assets amongst the US bank Mr Lucky Tan.

Level 1-All liquid.
Level 2-Not liquid but pricable
Level 3-Not liquid and not priciable.

Check their Financial Statements

Anonymous said...

What about SRS contributions? POEMs are having free talks about using this for investments this month in its various hubs.

Onlooker said...

A thought:
Could it be that our CPF money was used as a type of hedge fund by gamblers (except it is required by law that employers pay this amount while reducing our take home pay).
All I can see is the decision makers are indecisive in cutting losses and protecting the citizens interest.(while taking home millions)

Anonymous said...

All eyes are fully opened during elections, especially the univ educated ones. So now if the PAP govt fails in its duties, only the people should be blamed.

Anonymous said...

The latest joke about our CPF funds is as follows :-

One foxy Mentor cum schrewd lawyer then instructed his equally crafty Ministers to come up with a scheme that can pay themselves millions of dollars in annual salaries without being labelled as corrupt minsiters. The only conditions were that it must be legal and the rewards must be lucrative.

So this Hen Minister came up with this Coffin Money Annuity Scheme whereby this whole reservoir of the nation-wide Coffin Provider Funds can only be released to its members only when they are old enough to buy their own coffins.

By extending the maturity period for these coffin funds, the annualised 17% returns are now more than enough to pay for the extra 1.5% plus the promised bonuses for the ministers.

Isn't this a much better way than to be corrupted ?

That's why this Hen Minister later said "It's not that simple".

Anonymous said...

Believe me....
I think many investors would like to enter the asses of MM Lee, SM Goh and PM Lee WITH EYES WIDE OPEN.

kwayteowman said...

Always the shit-stirrer aren't you? :-P

GIC doesn't need a fund injection. Worse come to worse, they just lose money.

That said, the current economic meltdown presents unprecedented opportunities.

If the KTM got time, maybe he will also go raise money to go and buy up stuff on the cheap in the next year or two when the market is bottomed-out and everyone is scared. :-P

You once boasted you have a million dollars of assets. Given the stuff you've been spouting recently, the KTM finds it hard to believe. :-P

Hope that all it well with you and that your money remains safe during these turbulent times. :-)

Anonymous said...

Advocating for democracy, transparency, accountability and justice is nonsense?

Anonymous said...

"Always the shit-stirrer aren't you? :-P"

Same can be said of KTM.
Isn't KTM "Always the shit-fryer, aren't you? :-P"

Anonymous said...

shit stirrer -

hey, KTM - is Tan Kin Lian going to be in trouble? You were once in civil service?

Anonymous said...

CPF savings are invested in Special Singapore Government Securities.

LuckySingaporean said...


Wah suddenly you appear. The govt (you mean GIC) does not need cash infusion and the worst is that it loses money? I think you miss the parliament session when LTK asked what is the relationship between GIC & CPF....CPF money is loaned to GIC as special govt securities. Without the CPF money GIC wouldn't even exist in any significant way.

In light of what MM Lee said about investments paying higher returns. My post is basically about where to read the fine print on to keep my "eyes open" and how to understand the risk before I put my money into the special account which will limit my options on what I can do with the money. Unfortunately, like most Singaporeans I can't find enough info. about the GIC and will give this transfer a miss...WHY should I do something I can't understand fully.

What have I been spouting that "you can believe". ...? Feel free to point it out.

Anonymous said...

KTM suffered more than a bruised eyes in MrWangSaysSo sometimes back so he's probably licking his oily wounds all this while.

Falcon said...

Maybe they will only give you the full prospectus after you have signed on the dotted line? I heard thats what happened to those highnotes investors. Did they give you a form to find out your investment risk profile already?

FeedMeToTheFish said...


This is good!

Love the joke from Anon of 11:25 PM

Having passed 55, I been there and done that (ie. screwed by CPF), I appreciate what you've written.

Dear Singaporeans,
Ask not what CPF (the Govt) can do for you.
Be proud of the fact of what you've done for them.

If not for you, there will be no obscene million dollar ministers.

If not for you, there'll be no funky gambling of Shincorp, Merrill Lynch, UBS and ABC Learning by Temasek & GIC.

If not for them, we'd be rightfully enjoying our hard earned savings when we need it most.

If not for them, democracy, freedom and self-respect would have been a way of life.

If not for them and their social engineering, we would have been much happier!

Then again, you still have a choice.

Let there be love, peace, less hubris and less "father-knows-best Chui kong lumpar song"!


J&J said...

unless I have so much hard cash in hand and dun see the need to use my CPF acct money, I do not see myself putting money into the SRS acct.

Reason is clear, if I m going to "lock" my money which can only be used when I m old (not even when there is any emergency needs!) then I am expecting much more in return!

As it is now, we are already seeing that many may only get S$ 5000 when they reach 62 because of the "minimum sum" set aside, to tie yourself to even longer period is definitely a choice of mine.

Even with the returns i expect materalised, I still cannot do so as i do not have "spare money"!

J&J said...

sorry, my previous message typo error

i mean " As it is now, we are already seeing that many may only get S$ 5000 when they reach 62 because of the "minimum sum" set aside, to tie yourself to even longer period is definitely NOT a choice of mine"

Sgcynic said...

"The current economic meltdown presents unprecedented opportunities." Yes, provided we have the funds. Unfortunately, our GIC and TH plunged in early with their eyes open and are now losing money. Getting stirred :-P

Well fortunately, "GIC doesn't need a fund injection" as government funds operate on a principle of fungibility. Very complex. Not for man in the steet, like hawkers and ordinary Singaporeans.

Sgcynic said...

I don't mind LKY and LHL lose money. Don't mind at all, so long as it's not OUR money. It always doesn't hurt when we lose other people's money, doesn't it? We just charge it to our learning experience, be nonchalant about it and move on. Just ask some of the bankers and our Town Councils. Come on, it's just a few percent [that took ah peh and ah ma a lifetime to accumulate].

Li Shi Min said...

Consider the high inflation rates in Singapore over the last couple years. Then consider the high likelihood of higher inflation regimes to come for the next couple decades. Put that in perspective and you will know that whether it is 2.5% or 4.5%, our CPF monies in real term is shrinking.

It is also likely that the Sing dollar will also shrink in value for the next few years.

All in, our absolute wealth will shrink and shrink fast.

It is about time we review the CPF system as a whole.

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