Wednesday, November 25, 2009

Expert Defense of CPF : FLAWED

In Oct 2009, Mercer's Global Pension Fund Index gave the CPF a 'C' grade. The full report is found here [Link].

The CPF did especially poor in adequacy and integrity (3rd from the bottom among 11 countries). In response to the Mercer report, an 'expert' who was involved in designing CPF Life defends the CPF in today's Straits Times. Most netizens would like to hear from a expert like Leong Sze Hian, but we get this expert from the National Longevity Insurance Committee tell us how good our CPF is. Is the CPF so complex that ordinary Singaporeans cannot understand the scheme and need a government expert to tell us how good it is? If the expert says it is good, then it has to be...Mercer's report is flawed, CPF is the best! I suggest you read what this expert says about the CPF in the Straits Times and see if you agree with her.

"...confirm will have report say the (Mercer) report is misleading not accurately blah blah blah"
- Hardwarezone forum 16 Oct 2009[Link].
I'll be back to do a line by line analysis of what the 'expert' has said.


Anonymous said...

Hey lucky, hate to mention it, but I think the mercer report is rubbish.... It does not highlight the fundamental flaws of cpf, 35% tax rate and inadequate reteriment income?

Its point is that we should put more money into cpf. I dun think they did a careful analysis. Our ponzi scheme is no where near as good as Japans... I think D or E is the right rank.

Anonymous said...

In earlier years the CPF is good. HDB flats are cheap and withdrawal is at 55. Hence sufficient funds left for retirement and property fully paid up by then.

Now these good things are gone. Also the special, medisave and retirement account interest will most likely drop next year.

So no need complex analysis. Just above can tell simply and clearly already whether CPF is still good.

LuckySingaporean said...

anon 8:59,

That Mercer report says CPF is bad but actually fails to highlight the real flaws. The expert defense of the CPF has even more holes! I explain my view of the whole picture later and why there is a need for reform of the CPF. Asking people to work longer and longer is just not a good solution - it only makes the govt's job easier and our lives harder.

Anonymous said...

Thanks Lucky appreciate your hard work all this while to enlightene the blogosphere. CPF has been ranking bottom of many countries for a while... don't need some fake govt expert to tell us how good it is.

LuckySingaporean said...

anon 9:00,

My sentiments exactly...the housing-cpf situation is not good, burdens the ordinary Singaporean excessively and that does not take an expert to point out. It takes a lot more expertise to convince people that something is good when it is actually not. That is why the need an expert!

Charles said...

Mercer agrees with me: Singaporeans are spending too much of their CPF prior to their retirement (read: "Singaporean should stop buying into the real-estate bubble!")

But if the government were to apply Mercer's recommendation (reduce the CPF share that can be used for housing, increase CPF contricutions), two things would happens:
One: the real-etstate market would go down (and it is something that would show how bad their policies have been).
Two: Singaporeans would complain "gahmen steal out money, and it is so unfair because we have to serve National Service for 2 years" (see anonymous 1 who prefers D or E ranking).

I back to my earlier solution: stop buying into real-estate bubble, keep your CPF for when you will actually need-it.

Anonymous said...

I have a theory sometime back that the inflated HDB prices are a way of further locking up our CPF...instead of "growing wealth" as stated, its actually "Trapping wealth" of the younger generations. Similar to the COE, we spend an unearthly amount of money on things produced by the gov at next to a fraction of price, hence ensuring that the money remains in the gov's hands through one agency or another(CPF board/HDB)

Anonymous said...

For a start just halt the use of CPF for housing loan payment. That would put a long needed rectification into the works.

Anonymous said...

Hah, hah people stupid, use cpf for housing....

That is a really simplistic argument.... While cpf helps stoke the housing bubble, you cannot blame cpf alone for the housing bubble. It is the govts artificial support of the housing market that keeps prices high and forces people to use their cpf to buy houses.

Mercer put the cart in front of the horse.... Can't really blame them though.... how are they to know. Singaporeans should know better.

Anonymous said...

If the price of rice is inflated so that it is very high and people have to use their cpf money to buy rice. Do you think that the solution is to prevent use of cpf to buy rice? And laugh at people for buying into a rice bubble.

Hey charles, do us the respect to use your brain before adopting a know it all attitude.

Anonymous said...

no need to see Mercer oso know cpf is the worst among countries

a miserable 2.5% return when even inflation is higher? somemore got so many complex rules all acted to make withdrawal difficult and costly

cpf was originally meant to provide for retirement, and yet can't fulfull this baisc function.

in essence: cpf = temasek's kitty fund

Ghost said...

CPF Life is a joke. Age for withdrawal has increased. Property prices are far above what we have in our CPF. CPF is a product that is past its use-date.

Charles said...

Here they are!
I was wondering where the insult bearing bad mouthed had gone...

Forgot to mention: CPF is not a 35% tax rate: first there is a cap at 5000, second, it is not a tax (although through some mandatory scheme like the "shields" and CPF Life part of it is a tax).

If Singaporeans were not putting so much money into buying real-estate, for sure the government would have to increase some other tax to compensate for the revenues in land-sales and property taxes.
So of course the government is happy that Singaporean spend their money in real-estate.

Anonymous said...

guys, so if i have $250k in my cpf, what do u think i should do? buy a property and use them as downpayment or hang on to them to collect the measly interest?

Anonymous said...

Mercer give a C grade because the C stand for Con. Citizens, you are been conned by CPF scheme. Be forewarned.

Anonymous said...

"guys, so if i have $250k in my cpf, what do u think i should do? buy a property and use them as downpayment or hang on to them to collect the measly interest?"

Buy a property, but not HDB.

Anonymous said...

Charles you are truly a humorous guy. You say Singaporeans should be smarter and not buy into the real estate bubble. Instead keep the money in CPF "for when you actually need it".

Firstly, where are Singaporeans going to stay if they don't "buy into the bubble"? Even if you suggest that they wait for the bubble to burst first, do you have any idea how long that can potentially take, if ever? Esp with our govt ramping up immigration yet controlling housing supply.

Secondly, using CPF to buy property is one of the few ways to unlock the money and earn rates above the measly OA 2.5%. Though I concede, unlocking the value in property is another issue.

Thirdly, are we really able to use our CPF money "when we actually need it"? I hope you are not thinking of the measly and non-inflation-linked CPF Life payouts.

Anonymous said...

To clear up some misconceptions.

Firstly, CPF takes money from us now and slowly gives it back to us in the distant future. Taking into account the time value of money, they are arguably returning much LESS than what they took from us. If this is not taxation then what is? But to be fair, the "taxation rates" are not as high as the full 35%.

Secondly, a CPF cap of $4000 is actually benefiting the rich people more than the poor. I'm very sure our million dollar ministers won't wish to see 35% of their million dollars squirreled away at >4%pa, and only getting to see it at retirement.

Thirdly, employER contributions are just a marketing gimmick. A student in basic economics would realize there is no real difference between employER and employEE contributions, and that workers will bear most of the burden of this 35% "taxation".

Anonymous said...

This blog corrupts people's mind. This blog tells you that your life sucks. I think if you hear SUCK everyday then you are EQUALLY SUCK.

Anonymous said...

In earlier years the CPF is good. HDB flats are cheap and withdrawal is at 55. Hence sufficient funds left for retirement and property fully paid up by then.

Do you mean sufficient fund for your womanising activities in gaylang? LOL

Anonymous said...

There is no way they can reduce the amount of CPF contributions for housing without reducing HDB prices drastically, probably collapsing the myth of asset enhancement through HDB ownership.

And without reducing the portion of CPF for housing, there is no way CPF savings will ever be enough for retirement.

Both solutions, reducing HDB prices or reducing CPF for housing will not be feasible at this point, even too late to fathom.

So many people have said it so often, we have mounted the tiger without knowing now how to dismount. Singaporeans' retirement dream has been swallowed up by the HDB monster. Just work until death.

Anonymous said...

"Singaporeans' retirement dream has been swallowed up by the HDB monster. Just work until death.

25/11/09 15:49"

no need so drastic. just vote out the expensive clowns and CLAW BACK people's money.

Anonymous said...

"this expert from the National Longevity Insurance Committee tell us how good our CPF is."

Imagine someone told you how good it is for him to control your money where you can't even say "GET LOST" to good practical effect.

"no need so drastic. just vote out the expensive clowns and CLAW BACK people's money."

I guess this is the only game plan left.

Anonymous said...

"So many people have said it so often, we have mounted the tiger without knowing now how to dismount."

Not that hard to dismount. A reverse of CPF policy on housing and HDB's pricing policy. The balance or gap is then then filled by drawing on the reserves. It is feasible but you know the PAP will flip over it. Solution? Vote out the PAP.

Anonymous said...

"This blog corrupts people's mind. This blog tells you that your life sucks. I think if you hear SUCK everyday then you are EQUALLY SUCK."

Why come here to sulk? Go to PAP-controlled bloggs and websites lah. They'll tell u everything sucking good!

Anonymous said...

Dear ppl,

CPF has been here since a few decades ago.. Singaporeans already know how to make use of it, and they shld know it is not reliable on what it was originally meant to do..

Like some of the anons here said, buying properties is the way to unlock our money inside the CPF, your money grows with the asset.. That's what almost all singaporeans are doing..

let's not talk about what's the government's intention and the concerns of the next generation..

This is the way to be, if you want to avoid losing out.. the CPF is truly flawed if you use it as a retirement plan.. you shldn't depend on it for your retirement..

Just my 2 cents, a 24yr old chap..


Anonymous said...

Agree with anon 9:34, since everyone suspected or know now that CPF is flawed, then we should have alternative plans. We should save more than just what is in CPF anyway and not spend every cent we have on branded items and overseas holidays.

Since most Singaporeans use CPF for housing, it is a no brainer that there won't be much left for retirement except for a hopefully overvalued house. If you then cash in the house, what do you do? Mathematically, it is just possible to have retirement savings and keep a house at the same time. Don't blame the government. Blame yourself for being so naive and blind.

At the end of the day, CPF is only enough for very basic level of subsistent living in old age. Go do the maths if you don't believe me. Save while you can, don't depend on CPF. For those earning too little to save, whether there is CPF or not makes no difference. That is a question of minimum wage which is a totally separate issue. For the rest, if you don't save while you are young, you deserve to be destitude when you are old. We all make our choices with the money we earned. The government may not have told you this but CPF is not enough for old age. Especially, if you are used to a high level of comfort. Think for yourself. Don't expect the government to tell you how to live your life. Treat CPF as a supplement. Too late for some I know. For those who still have time, it's time to re-look at your lifestyle and decide where you want to be when you retire. Collecting cans and cardboards for recycling is a very real prospect. Such is life in Singapore.

Charles said...

Not sure CPF would have been inadequate had Singaporeans not been so much trying to unlock their monies and made HDB so crazyly expensive.
Take out housing expenses, CPF is not a bad retirement plan.

Anonymous said...


Unlocking CPF for housing had the intended effect of allowing more citizens to own their own homes. It also resulted in a steady increase in property values over the years as people suddenly feel richer and are willing to pump in their retirement savings to chase the lifestyle they don't deserve. If we had been prudent. If only a reasonable portion of CPF savings can be used for housing. Perhaps we would not have such over-inflated house values as we have today and the unintended consequence of inadequate retirement savings.

It is easy to point out the fault on hindsight. But the million dollar question is, when did the policymakers realised the unintended consequence of low retirement savings? Why was nothing done when the fact was known? Given the calibre of our policymakers, unmatched anywhere in the world judging by the salaries they command, they should have seen this coming decades before the likes of us mere mortals.

Even if that is not the case, the bare facts staring them in the face now, something should be done to slowly wind back the damage. It is never too late to fix the mistake. Why are we allowing a runaway traing going off the cliff? Their million dollar salaries are not just compensation for protecting the nation's reserve, which they harped so much about but also to protect the citizens compulsory retirement savings, which in my point of view they have failed miserably. There is totally no accountability and they will be no one to take them to task for sleeping on the job. That is the kind of democratic country we live in.

Anonymous said...

Are talking about a problem that is not yet found! It is flawed, not FAIL! Have u done anything BETTER than them?

Anonymous said...

I can never understand why LKY is so intended to ask foreigners to buy into Little Red Dot Singapore!

It is obvious that as a nation,at this stage,we dont need foreign money,although we do need foreign money that can also bring in technical expertise and global market connection ,apart from that,what do foreign money really do to our country?

It creates asset bubble,and the real economy depends to a very large extent on the rental or property prices.I cant really understand why the folks of PAP,are so proud that Singapore houses are so expensive and seem to be eagerly looking forward to the day when a 3 room HDB would cost a cool S$1 million,but are they also looking forward to the days when a local cleaner can earn $10,000 a month?you bet!

In a nutshell,that is why I humbly conclude all those IVY league PAP ministers are just pure idiots,nothing more and nothing less.

But wait a minute,let me correct muself,their idea of Spore citizens in 20-30 years time are not those who are born and raised in Spore,but RICH foreigners who worship the ability of LKY to look for money!

Anonymous said...

YES!!!It is flawed. I don't think it deserve a C. But the main problem now is that Spore government does not have any credibility at all. Therefore, few people trust the government to handle their money. Fund? I doubt so. With such poor management, I think it is safer to put the money in the bank. At least, we know the money can be withdrawn when we retire.

Anonymous said...

Anon 16:40, a flawed system has a high chance of failure if nothing is done to rectify the problem.

We can't turn back time but the best we can do is to wind back some of the damage done. For a start, slowly reduce the amount one can use for housing. This will also have the effect of cooling the property market.

It would also help to come clean and tell the members that CPF alone is not sufficient to maintain their desired lifestyle when they retire. So it would be good to start saving more on the side. This will have a dampening effect on discretionary spending. Some sectors of the economy may be affected by this. But hey, something has to give. Besides, most of us are living beyond our means anyway, if we are to factor in the years when we are not gainfully employed and have to live of CPF and savings (if any).

Personally, I have always saved more than my CPF contributions since day one of working life. I have also paid off my property more than just the monthly CPF deduction. When the property is fully paid, the rest of the savings will go to retirement fund. At the end of the day, CPF is just one of the sources of my savings. I definitely will not depend it to sustain my lifestyle after retirement.

Caleb said...

So much talk but all crap. Just ask yourselves, what would happen to Singapore if there is no CPF. You all say the govt is stupid, but please remember that the average Singaporean is even more stupid and cannot take care of their own finances!

So how can CPF be made better? Surely the government cannot just produce money to distribute right? In the end its still the citizen's money!! So how is CPF bad?!

CPF is bad if it is forcing people who can take care of their own $$ to deposit. But it is good if it is forcing stupid people to save.

The only way for CPF is improve is to find a way to distinguish the 1% smart people from 99% stupid people! And whatever way they come up with, the 1% smart people will produce "10 year series" sort of things to teach the 99% stupid people how to cheat the government!

Think about it. We need CPF because we are stupid.

Micheal said...

Somedays when I sit quietly in my room in this country, amidst its stressful living conditions - even though it appears peaceful on the outside - I can't help putting a bullet through my head. The government pays itself horrendous amount of money. They're literally capitalist and who are we kidding here? They are stressful? With that amount of money, they can even buy the antidote to their stress. So, don't for once tell me, it is hard for them to run the fucking country. We're seeing capitalist cum politicians today.

Anonymous said...

As a ccountry, I'm amazed we could have led this happened.

Anonymous said...

"This blog tells you that your life sucks. I think if you hear SUCK everyday then you are EQUALLY SUCK."

But does it make any truth less truer.

As for positive blogs, there should no problems setting up more of it. As for audience, you may want to tell us why certain people just do not venture into these blogs for more enlightenment, if it is so positive afterall.

One can say only so much, ultimately reality is flying in front of your eyes for your own observation each and every single day, with or without blogs that tell you that life sucks.

Goh Meng Seng said...

Dear Lucky Tan,

I guess I am late again. ;)

I have raised the vital link between HDB and CPF but fall short of commenting on CPF just yet, though I have mentioned about the inadequacy of retirement financing. I am waiting for the right time to put forth the flaws in this whole system which has betrayed the original philosophy and direction of CPF. Alas, someone like you beat me to that. ;)

Anyway, NSP is gathering articles for the next issue of North Star, would you be interested to contribute your article to us? ;)

The fundamental flaw is that PAP's CPF system is supposed to be a self-adequate retirement financing. It is different from pension scheme which is a cross-generation financing scheme for retirement. PAP has said CPF is the best because each and everyone should be responsible for his own retirement savings. However, when they start to abuse the CPF to allow it be used for housing and healthcare, the whole system of retirement financing is slowly collapsing.

Thus, they have subtly turned into "shared responsibility" similar to the traditional pension scheme via the CPF Life annuity. This is the glaring evidence of failure of its initial boast of the superiority of CPF.

Well, I will let you do the further analysis. :)

Goh Meng Seng said...

It will not succeed as a matter of fact, that is what I consider.

StevemrOB said...

For a start just halt the use of CPF for housing loan payment. That would put a long needed rectification into the works.

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