Sunday, November 01, 2009

CPF & Retirement....

The other day someone asked me what I thought of CPF Life. The person is a graduate but can't figure out which is the best option in the scheme and what is needed for retirement. I jokingly told him that the best retirement plan is to have filial children and if they are not filial there is something known as the Maintence of Parents Act which forces children to take care of their parents. The govt has spared no effort to move the burden of retirement to individuals and their families. However, do all these result in an improved quality of life for retirees? The govt makes all these moves to shift the burden of retirement to the citizens but it refuses to do 2 important things that will significantly improve the financial situation of retirees. The 1st is providing affordable public housing - today Singapore's public housing, the most expensive in the world, causes individuals to be burdened with housing debt that takes 25-30 years to pay up limiting their ability to save for retirement. High cost of public housing has the the subject of much discussion on the Internet and newspaper forum - the govt has decided to little about it except to blame Singaporeans for being choosy and having unreality expectations when it comes to public housing. There has been enough talk about the cost of public housing so there is no need to discuss this further.

Singaporeans are uncertain if CPF Life is enough for retirement because they don't guarantee the payout and it is not clear what the inflation rate is going to be like in the coming years - it does not ensure that the payouts are sufficient if one takes into account inflation. The PAP govt locks up our CPF money giving us a fixed rate of 2.5%. We are told that this is risk free. This is not true. Money loses its value due to inflation and locking it up at a fixed rate means that your retirement is vulnerable to inflation. Based on figures from the World Bank, between 1961 and 1995, real compounded returns for Singapore's pension fund were 1.5 per cent a year, compared with South Korea's 5.4 per cent and Malaysia's 3.2 per cent. Based on those returns over the period 1 pension dollar in Singapore grew to $1.6 compared with $2.6 in Malaysia and $5.9 in S.Korea. In other words, the portion for their income Singaporeans have to set aside for retirement is roughly double that of Malaysians and about 4 times what the Koreans put aside. Returns on funds is more important that % of income put aside for retirement. Locking Singaporeans' retirement funds in low fixed return scheme puts Singaporeans at risk of inadequacy and a degraded the quality of retirement. Why can't the govt puts our CPF money in the hands of the best managers who can give higher returns as in other countries? A large number Singaporeans have low income and depend on CPF for retirement. They are now told to work longer and postpone their retirement (until after they die?) ...Singaporeans already live in a society with the largest income gap among developed countries and the CPF perpetuates this inequality through the retirement years by pushing responsibility onto the those who have the least ability to shoulder it. Where does the 2.5% return come from? The GIC borrows our CPF funds the low interest rate and uses it for its investments - the GIC claims it makes a long term average return of roughly 6% most of which it keeps as reserves.

Is CPF Life sufficient? It is just another tweak to a scheme with fundamental flaws.


Anonymous said...

I have discussed the CPF Life issues in depth with my friends who are all an Expert on financial matters. They have been working in the finance industry for at least 10 years.

All of them agreed that the CPF Life is a "SCAM" in which our esteemed governement has chosen to pass the buck to Singaporeans upon reaching a certain age.

The CPF Life scheme is shafted down the throat of Singaporeans but the Monthly Payment is NOT fixed and also not pegged to inflation which is going to get worst. Not to forget that the payment is not guarantee by the government in the event CPF Life scheme turns out to be insolvent.

Anonymous said...


It is not enough at all.

let tell u my mother story,

She did not work for all her life, so no CPF, no medical account, no special account.

she bought her house 3 rooms cost $14K and fully pay with the cash as my father also being told not apply for CPF as he is paid $300 a month back in 1960 to 1970.

So, she work as a baby sitter and
over the years her 4 sons give her money and she save up.

Now, my father passed away and one of my elder son is gone.

Every month, three sons give her $500 each so based on monthly income of $1500 she retired.

The three sons equal=CPF Life
with additional money during New year and also free yearly tour to US, EUROPE and China.

So your statement of good children is true.
I can't stand not taking care of the aging parents minimum at least in monetary terms.

You are right,

3 laws after the last election,

a. Mean Testing - to make you pay more,

b Parental act- Let the family sue each other don't come to me.

c. CPF life- is just another way to lock your money up before you ask the government for money.

CPF Life is the worst, trying to provide a pension with no guarantee and nobody knows what is the rate of return or at least inflation adjusted .

Look a the Special Account maximum Sum, it is adjusted for inflation!

Meaning when 2013, the actual sum
to set aside is more than 130K
After that what will happen?
Will it set another target?
Increase it 200K and on and on....

The low income will never reach the target and by 55 there is no money left for them to take
Worst CPF LIfe only start after 65
or maybe 70 ...75, future

Work and work, buy a house pay for 30 years and top up your CPF life and medical account and wait another for CPF LIfe which not inflation adjusted!

The government is very clever to wash their hands.

Anonymous said...

totally agree with Lucky. The only way to guarantee the adequacy of your pension is to have CAPABLE and FILIAL sons/daughters.

Pension fund like CPF gives a lot of promise when gov try to take away your hard earn money. When pay out time comes, you get so little and are blamed for everything.

my strategy is to max out my CPF for property and investment. But it is too bad now as gov have closed this loophole.

Charles said...

"The PAP govt locks up our CPF money giving us a fixed rate of 2.5%."

Sorry, I thought the rate was 4.5% until recently, if not more?

Charles said...

What about CPFIS?
You could invest some of your CPF and make more that govt rate?

For me the biggest issue remains the HDB prices: one generation made gold, the next will suffer

Anonymous said...

When was the last time the govt came up with a social service that genuinely benefitted the people?

I bet this CPF life would profit the govt much more than it would profit the pensioners.

You can trust our govt to take care of its own bottomline first before you.

Which makes me wonder why I should even bear arms for this govt?

Anonymous said...

Another one of your blow hot air article.

You sure like to manipulate people with words hor?

Those who can understand what you're talking about should have the brain to make enough money to prepare for retirement.

Those who cannot understand what you're talking about, nobody can help them, definitely not the gahment. How dare you put people's stupidity at the responsibility of the gahment to provide a good life for them?

I feel very insulting to read this article leh.

Anonymous said...

Guys guys guys, if you have the brain to think, NO MATTER HOW MUCH GAHMENT DO FOR YOU, it will NEVER be enough because humans are greedy.

Lucky is here just to feed you guys your ego. Blow hot air. If you really eh sai, go and prove it to us, don hide become a nick here. Go make singapore a better place. Then we will really kudos to you. If you can find prblem but not give us solution, then we can do without you. Nothing is perfect in this world. I do not want to hear what's not perfect, I want to hear how you can do your part to make this place a better home for us.

parrot said...

Elections must be coming. Clod anonymous-es defending the gahmen and demanding detractors make positive suggestions and contributions to the nation.

Anonymous said...

Actually, I do not really believe in the schemes introduced by the government.

Base on past records, such as changing law regarding CPF without people consent, building casinos without listening to the public opinion, rises GST without giving a thought of the lower income group, tell me, how can I trust them with my parents' money?

"HOTA" age limit 60 has already dropped. I doubt a lot of us do know about this. Quietly, they implemented.

Again, how can I be sure that the hard earn money from my parent will not be make harder to take back?

I told my parents to consider carefully. I told them, the money is yours when it’s with you. The money is not yours if it is with others. Law can be changed anytime. I feel that CPF is just another “company” that does business.

Anonymous said...

I wonder why Singaporeans so quiet this time. When the PAP first tried to amend the CPF withdrawal age in the 80s, lots of people shown unhappiness and they had to shelf the scheme.

Rajaratnam said at that time that they had to withhold the amendment because they realised that "when it comes to money, Singaporeans hold it very tight to their chest."

What happen now? Singaporeans not tulan anymore? I guess the reason is in the 80s, there was no GRC and they were still afraid of losing a few more seats.

Now, they know they can do anything they want, cause all the strong oppositions have been fixed and everything has been put in order.

Anonymous said...

these pap anonymous guys just won't leave us alone. got guts to come to lucky's web-site to brainwash us. please go away!

Anonymous said...

The solution to solving ALL our woes is very simple - vote out the PAP and unwind their stupid policies. Things can be improved easily, but first we must get rid of PAP.

Anonymous said...

The CPF Life payment calculations is based on current 4% interest for Special, Medisave and Retirement account.

The 4% will change next year when it is pegged to the yield of 10yr Govt bonds. Currently it is around 2+ %.

So we may receive much less in future payouts if the low interest rate trend continues for a long time.

Or if too many people are still alive in their 80s, 90s or even 100s.

Anonymous said...

Im lucky (not LUCKY)in that I am in an age group that fall outside this complusory SCAM. I have totally lost respect for all MPs, including those Opposition, given that they allowed this bill to be passed without a whimper. Sure, there were some mild protests from Halimah and another, but this was just asking questions to demonstrate that it was indeed debated. This is an important issue that deals with our retirement and I feel cheated that so little was discussed. Instead they rather have time to debate on Ms Singapore.

Anti Siao Gao said...

to the moron anony 21:11 and 21:13...
If you really wanna talk sense... please put forward good reasoning instead of sprouting shits to taint Lucky's column...
Freaking hell hiding behind a nick is also much much better than u... who dun even have the guts to leave ur nick in here...
Go get a life a**hole...

Anonymous said...

On hindsight I think we should have just allowed them to amend the CPF withdrawal age to 60 or 65. At least some of us would have a reasonable chance of taking out a fair amount at 60 or 65 from the CPF.

Of course, the relentless increase in HDB prices will put paid to most of our dreams, even more so if there were no minimum sum scheme to hollow out whatever we have in there. HDB prices might even be much higher.

Most people believe, or are sure that the CPF is out of money and is desperate to prevent lump sum withdrawals by hook or by crook.

You can see that young people nowadays are taking out as much as they put in to pay for their homes, so where does the CPF find the money to lend to others to earn a return? The CPF life scheme takes care of part of the problem for them for sure.

Alan Wong said...

When we started joining CPF, we were led to believe that our CPF contributions would be released to us when we reach 55. How can they just change the original CPF plan without giving us any options as to our own preference.

Now our PAP leaders has forced it on us to accept these compulsory changes without any option to allow us to stick to the original complete withdrawal at 55, isn't this a kind of admission that our CPF is a failure after all these years.

And a sense of betrayal that our PAP leaders have completely let us down into believing that our CPF schemes will take care of our retirement needs. Anyway, it was just another one of PAP's biggest lies afterall.

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