Design flaws of the Central Provident Fund

The recent increase in the attacks on the CPF policies have shaken up many Singaporeans from their slumber but what really cements the increasingly negative perceptions on the CPF policies is the PAP government's inability to fend themselves. Historically, the typical PAP's 3Cs response to any criticism - Conversation, Counter-information and Charading, used to work on Singaporeans, but not in this case when real stories of retirees struggling for a living are seen everyday happening on the streets. As such, Singaporeans are more likely to believe the inadequacies of the CPF than the rookie Minister who makes blanket statements.

However, the CPF may not be a failed scheme by itself have it being supplemented and coordinated with other policies especially in the area of manpower, housing and immigration. The current CPF system is unsuitable for the environment it is in, even though we all agree that the fund should be self-sustaining and not cause a deficit in every year's Budget.

Here are some of the design flaws of the CPF:

1) Minimum Sum without Minimum Wage

The CPF Minimum Sum was set upon and increased by an incorrect barometer - inflation rate. This has caused much grievances especially when salaries have not kept paced with inflation. How should we determine the Minimum Sum when we do not have a Minimum Wage? The PAP worry that businesses may be unsustainable because of a Minimum Wage, but they do not worry if Singaporeans' lives would be sustainable with such a high Minimum Sum. Singapore should set a Minimum Sum which is based on a Minimum Wage that it should have implemented since ages ago. The right idea of a Minimum Sum of $155,000, is that the PAP government tops up whatever MS shortfall for those who do not meet the MS, say, by the age of 50 (or a few years before retirement), and not expecting people to face the inhumane choice of meeting the MS or continue working.

2) CPF interest rates pegged to market interest rate
The CPF Ordinary Account interest rate is pegged to the 12 month fixed deposit and savings rate of the local banks. This is a recipe for disaster because if not for the legislated minimum amount of 2.5%, our CPF OA rate will be 0.21% per annum. Interest rate is vital because it not only helps to grow the CPF fund so we could depend less on wage growth, it preserves the fund value so it will not leak out to yearly inflation. The purpose of the CPF is to provide a retirement for account holders, and not to become a market-based saving account which pegs itself to the market interest rate and 12 month fixed deposit interest. Based on this mission, the CPF interest rate should rightfully peg to, arbitrarily and modestly speaking, 1% higher than that of the yearly announced inflation rate.

3) Retirement/Withdrawal Age pegged to average longevity

It is a fallacy to believe when people are living longer, their employment age and economic-viable period magically lengthens. Raising the Retirement/Withdrawal Age must be justified with relevant facts that can prove Singaporeans elderly are getting healthier, lesser Singaporean elderly need more healthcare, the job markets are paying better and hiring old people etc. The longevity or median deceased age is not relevant and doesn't justify why should the average Singaporean be working longer.

4) Allowing CPF OA to purchase Housing

When this rule was first introduced in 1989, HDB prices shot up and never came down since. The other unreported news was that the retirement fund of Singaporeans went down and never came up too. It is a zero sum game - the amount of wealth did not change. The resulting inflation of the HDB prices was marketed as "Capital Appreciation" of which homeowners will get to downgrade and earn a tidy sum for retirement, this however is what I would liken to a Ponzi fairy tale, where the later generations or later buyers will eventually find themselves in a position where no new buyers could afford their exorbitant HDB flats without destroying their retirement needs. Some would question if I would promote the other extreme, that to make people pay for their housing through cash and not by CPF, I would say yes because that was how our parents' generations bought their first HDB flats for two decades before 1989.

5) Separation of OA, SA and MA when you actually have so little

The idea of fund segregation works if you have at least half a million sitting in your CPF after paying off the house, but to the average Singaporean who could only have barely up to $250K in CPF after working up to 67 years old, it is unlikely that you will be able to satisfy any single purpose of your needs in housing, retirement or medical. You will find that you are stuck in nowhere - too little in OA to buy a flat, too little in SA to retire and too little in MA to financially survive a major operation. For those with low CPF funds, they are often barely surviving with take-home cash i.e. a cleaner taking home $800 for a $1000 salary, which leaves you really stuck in the daily cost of living too. We should consider a CPF-lite version for the low income earners, where at least 2 out of 4 needs could be sufficiently met while the other 2 aspects will have to rely on social benefits.

Cheated Singaporean

Alex Tan

Reply to Cass Owary's reply to Roy's reply to CPF's reply to Singaporeans

Cass Owary's is your typical Internet Brigade, or more infamously known as the PAP troll. They are not interested in a sound debate, they are there to defame your character so whatever reasoned arguments you make will be invalid. Ad hominem attacks like this is a very common strategy used by the PAP troll. They make big claims about others' credibility using names like Warren Crass, Bryan Ti or in this case, Cass Owary(name of a bird, google it up). What caught my attention this time is Cass Owary's attempt to be logical, and he could have passed this off easily to the untrained eye.

Below is my reply to "Cass Owary"'s reply on Roy:

Thank you for starting off the your first paragraph calling Roy's speech "full of emotions but short on facts". It actually attracted my attention and made me read more what you have written. However, I will not make any snide remarks like you did and simply leave the judgment to readers. To better size up the fallacies in your reply, I have numbered them as follow:

1) Government's cash inflow does not come from CPF funds, it comes from the profits made from CPF funds. This in essential is taxation because rightfully, whatever amount in excess made from CPF funds should be returned to the rightful CPF account holders who lent them the seed capital.

2) Budget surplus is not given away to TH, GIC or MAS to invest. They are tucked away in the Reserves. The Government does not invest, it issues bonds called SGS.

3) CPF funds are lent to TH and GIC through the CPF Board. How could PM Lee, as the Government, not know the amount of funds CPF Board loaned out, and at the same time, as the Chairman of GIC, not know the amount of funds GIC borrowed from CPF Board? If he doesn't even know the basic of how much is loaned or borrowed on the two organizations on the same transaction, how much further clueless is he? Money is fungible indeed, but there must be accountability and transparency from the CPF Board, because the CPF is the people's hard-earned money and not yours for the PAP to keep.

4) Roy Ngerng is making something out of nothing, probably out of ignorance." - snide remark yet again

5) Transparency or Accountability? Let me quote you quoting Roy:

“So I ask again, did the GIC and Temasek Holdings use our CPF money?How long have they been using our money to earn for themselves?How much money have they earned with our CPF?We want full reports. Not just from today. But for all the years since 1974, when Temasek Holdings was first started.What have they done with our money?”

The question Roy asked is about accountability. What have they done with our money, and more explicitly, the excess profits made from the CPF seed capital? Telling me TH scoring 10/10 on Transparency sheds no light about Accountability and where that excess profits have gone to. You don't get all sorts of information from TH and GIC as Cass Owary claimed.

6) Roy did not say Temasek makes 16% profit every year, he said Temasek Holdings earned a 16% return for the past few decades since inception and the fact is that Singaporeans did not get 16% interests in their CPF since Temasek Holding's inception. CPF's interests is made from Temasek Holdings' returns, but not every cents of Temasek Holdings' returns goes back into CPF's interest. Cass Owary have simply capitalized on the semantics to make Roy look bad.

7) Rate of return is not guaranteed, so are interests rates. When a bank goes bust like the recent Lehman Brothers (a listed bank since 1887), or when governments like Iceland and Spain went bankrupt in 2008, no capital were guaranteed let alone interests. It is a fallacy to assume the Singapore government, CPF Board, Temasek Holdings and GIC are safe. Nobody is safe. Over leverage and you risk default, but we don't know how leveraged TH and GIC is. One thing we know the Singapore government has one of the highest debts in the world and we can safely call the Singapore government "over-leveraged".

8) For a fair comparison, we should compare CPF returns to a 30 year bond like the Korea's 30 year bond which yields a 4.14%. Cass Owary compared it to a 1 year bond, but we all know we can't even touch our CPF in 30 year's time for most of us, let alone 1 year.

9) High income per capita coupled with high inequality simply means the rich are getting richer and the poor are getting worse. 26% of Singapore's population are below the unofficial poverty line (PAP denies the need for a poverty line but we set it to UN's standard of less than half of the median salary's at $3500). If Singaporeans are so rich, why do we rank so poorly on the domestic purchasing power index?

10) Singapore's unemployment rate for Singaporeans is 3.1%. This figure has been massaged by the PAP government because about 40,000 of the NSFs are included in as "employed". So are retirees, while unemployed retirees are not part of the unemployment stats because they are, well, retirees. So are unemployed mothers, well, they are "housewives". The real unemployment rate is actually a lot higher when you factor these people in. I'm not saying MOM is lying, but I seriously doubt their methodology.

11) Home ownership is third highest in the world, so are debts. Singapore's debt to income ratio is at a dangerous 2.1 times, and at least 20% of us are in 40-60% debt. This is a prelude to a credit crisis, again, overleveraged.

12) When an old man squandered away his CPF savings in a year, does it mean everyone is doing it too? We get idiots all the time, but fortunately they are a minority. This is just another flimsy lame story cooked up to lock up your CPF. I could turn the argument: if all the money are kept by CPF, wouldn't Temasek Holdings and GIC squandered them away in a short time like this $58 Billion loss?

Alex Tan

The 3 idiots in the CPF debate

The CPF is a disaster after numerous tweaks and short term planning made by the PAP government. Contrary to what a typical PAP supporter may claim, the CPF retirement scheme one of the many social/economic/judiciary infrastructures and systems passed down by the British Colonial Government. One simple comparison of what the original CPF looked like is to read up and compare with Malaysia's present EPF system which have hardly changed if at all. Of course, given the amount of propaganda peppered in Singapore, the typical PAP supporter can even tell you Lee Kuan Yew invented the HDB, CPF and even the internet. That being said, today's topic is about the simplicity of the PAP MPs and how shallow their knowledge in CPF is actually preventing them from making the right proposals to the government. Read through this Today's article, and it reflects how astoundingly ignorant PAP MPs are in the CPF aspect:

1) Use less CPF for housing and you can retire!

Ang Mo Kio GRC MP Inderjit Singh suggested that, in tandem with more affordable housing, the CPF Board could allow Singaporeans to use less money from their OA to buy a property. “If we use less for housing, we will have more for retirement. We start earning 4 per cent (interest rate) earlier,” said Mr Singh, who also suggested raising the interest rates, which currently stand at 2.5 per cent per annum for the OA and 4 per cent for the RA.


Basically, Inderjit Singh said: Use less in OA means more for retirement. The next question to him is then what happened to home ownership? Are Singaporeans going to pay more in cash for HDB flats with such ridiculous prices? Fertility rate is already at all time low and denying Singaporean couples their love nests is going to worsen that. Bad idea, stupid MP, NEXT

2) CPF Board is your trusted Fund Manager!

Chua Chu Kang GRC MP Zaqy Mohamad proposed an investment-linked plan managed by the CPF Board to pool together investments from different members and provide higher returns. Mr Zaqy noted: “What Singaporeans are looking for are higher returns but, at the same time, they know there is someone trusted like the CPF watching their backs.”

Did the CPF board make it to the Forbes' Top Hedge Fund Managers list? If Singaporeans prefer ILPs, they should go to the private banking sector or even the insurance giants like Prudential and AIA. Zaqy is simply reinventing the wheel.

Mr Zaqy also called for greater flexibility in the Minimum Sum scheme, which requires Singaporeans to set aside a certain sum in their CPF, so they can receive monthly payouts when they reach the draw-down age. The Minimum Sum has been increased over time to account for inflation.

How can you account for inflation by locking up more funds? Raising interest rates should be the long term solution to inflation, not raising the Minimum Sum. This is really the apex of stupidity, Zaqy has really done himself in in an area where he is not familiar with. Yet another out of touch PAP MP, NEXT


3) Making the people pay more for CPF will enhance savings!

National Trades Union Congress deputy secretary-general Heng Chee How reiterated that raising CPF contribution rates is only one way to enhance savings.

What a talent... Thank you Mr Obvious.

Citing the plight of workers who have low disposable incomes, unionists said employers should bear higher CPF contribution rates.

PAP-appointed unionists are really stupid, what makes them think the employers will not account for these CPF contribution rates and lower the take-home pay?

So before the PAP apologists blast me for blindly criticizing, here are my REAL solutions:

1) Solve the structural dissonance of CPF, Temasek Holdings/GIC and real returns
Nationalize Temasek Holdings and GIC, and make them pay back all profits made from SSGS bonds (aka your CPF money). CPF interest rates can only be raised by raising the lending rate of SSGS bonds, henceforth, Singapore should open up the SSGS bonds to reputable private fund managers like Aberdeen and Templeton, and explore the option of direct lending to finance student education loans and housing loans.

2) Abolish the Minimum Sum, combine OA, SA and MA
How much you have in CPF is how much you get to spend in the areas of housing, medical or retirement. This is a shift in financial responsibilities and correcting the perception of bankruptcy. Do you know when you emptied your MA, you must pay in cash even when you have hundreds of thousands in OA and SA? Or you have to pay your housing loan in cash when you emptied your OA despite having hundreds of thousands in SA and MA? This is the design flaw of the CPF. Money management should be handled by individuals contributing monthly to the fund, not the CPF. Why are Singaporeans entrusted to handle a rifle at the age of 18 but are not entrusted with their own money at the age of 55?

3) De-regulate CPF, propose alternative retirement package from private sector
How good is CPF when it doesn't have competition? By simply comparing it with Retirement Schemes in other countries, the CPF actually sucks in terms of returns. It is time we privatize the nationalized retirement scheme, like Singtel, Singapore Powers and SMRT (maybe not the public transport network as the PAP government privatize the profits and nationalize the losses)

Ideally, CPF should be converted to a nationalized pension scheme with universal healthcare and the CPF contribution rate a form of tax. That of course is out of the picture given how hopelessly subscribed Singaporeans are to the PAP doctrines.

3 reasons why Singaporeans can never save enough CPF

Currently, we have more than 55% of the CPF account holders not able to meet the Minimum Sum. For Singaporeans who are not comfortable with numbers, you can simply have a little walk down the streets and look at the abject poverty happening live. Some of them could be working as cleaners, while the unfortunate ones will be picking cardboards or cans from bins to bins. It is clear most of these poor people are old people who are well above their CPF Withdrawal Age of 55, which begs the question: What happened to the CPF system?

For the reasons why CPF funds for most Singaporeans is inadequate, Singaporeans please do not bash yourselves for not saving enough (in fact we are among the world's highest savers). The PAP may try to quash your ego claiming you are worse off than the foreigners they brought in, the fact is they are pretty good at bullshit.

Here are the 3 real reasons why:

1) "Liberation" of CPF funds to use for housing
Take a look at this chart of the housing price index from the late 1980s.

In 1989, the CPF was "liberated" to allow Singaporeans to use its Ordinary Account to purchase a HDB flat. This easy credit resulted in a surge in HDB prices and has since never came down. The artificial hyperinflation of the HDB prices resulted in more Singaporeans having lesser in their CPF for retirement. And so, this is what happened to the CPF first.

2) CPF Interests depressed
Some years later after the property surge in 2002, Ho Ching became the CEO of Singapore's sovereign wealth fund company Temasek Holdings. Her husband, Lee Hsien Loong, became Prime Minister about a year later.

CPF interest rate has been depressed at 2.5% ever since the Lee Hsien Loong and Ho Ching combo came into effect. With inflation rate outpacing CPF interest rate, Singaporeans naturally will not be able to have sufficient funding for both the overpriced housing and retirement.

3) SSGS
SSGS are called "Special Singapore Government Securities". What made them special? Well they are cheap loans (at 2.5% and 4%) given exclusively only to Temasek Holdings and the GIC.

How awesome is 2.5% and 4%? Just imagine if your university education loan is at 2.5%, or your car loan and mortgage loan permanently stuck at 2.5%. Mature adults servicing these loans will know how many thousands in savings you will have in a year.

Why did the PAP Government appoint Temasek Holdings and GIC as the sole fund management companies? The answer is political, and hence the problem is political. It is so politically sensitive I may be haul up to jail or face a letter from Drew & Napier on the very next day if I dare publish this.

Bursting of the Population Bubble in Singapore

Singapore is overpopulated. This is neither an issue up for debate, nor a biased perception held by Singaporeans - it is a fact backed statistically in terms of population density (ranked 2nd in the world), anecdotal evidence in the continuous breakdowns in public infrastructures and the resulting inflation from the increase in domestic demand. Being the only one responsible entity culpable for the bubble, the PAP government brought in an influx of foreigners calling them talents, so they could depress wages, bring up property prices and rapidly increase the government revenues and salaries of the Ministers and MPs. The result is everything any government wished for and the PAP became obsessed with the amount of taxes and CPF they are collecting each day. The PAP created the population bubble and it is now bursting.

The key question behind a population bubble is what happens when it burst. Like the housing bubble and credit bubble, the sole similar financial impact that concerns every one is a heavily damaged economy that will take years to recover. The artificially inflated domestic demand will eventually cause a runaway cost of living, which already tops the list of grievances of Singaporeans. Resulting from the similar demand, the public infrastructures are giving way and causing more inconvenience. Competition for jobs and wages intensified and created an employment environment based on cheap wages and low productivity as employers become more interested in getting foreign worker quota than improving their company operations or getting new machines to be productive.

The social costs from the population bubble is more prevalent. Stories like employers terminating Singaporeans in preference for cheap foreign workers become a norm, and it is no surprise that the yearly-released statistic shows that Singaporeans unemployment rate is always higher than Permanent Residents.

Most unhappy people in the world? Checked
Least engaged workers in the world? Checked
Highest income gap among comparative economies in the world? Checked
Highest poverty rate among comparative economies in the world? Checked
Lowest wages among comparative economies in the world? Checked

Highest number of elderly employed? Checked

"In 2009 as well, employed older persons (aged 65 and above) made up about 3.1% of the resident Singapore workforce. This was an unprecedented high compared historically." 

~Ministry of Community's paper on Elderly Singaporeans

Without factoring inherent structure unfairness in terms of CPF and National Service, it is clear Singaporeans across all ages have paid heavily in terms of social costs for the formation of the population bubble at the current number of 5.5 million.

The bursting of the population bubble will result in higher crime rate and intense polarization of society between the rich and the poor, Singaporeans and foreigners. Xenophobia and racism will be rampant as they continue to be fanned by PAP's pro-foreigners policies. The bursting will see more rebellious acts like an open street protest and fights between the Police and Singaporeans. Presently, the Police has admitted they are understaffed, and eventually, they will be overpowered. Once the Singapore Police loses its control over the population, there will be no law and order. Anonymous acts of sabotage or even terrorism against the PAP Government or their supporters will intensify. In a country where there is oppression of the people, assassination is only a matter of time, even though at present, the bodily harm did against PAP politicians are done by mental cases. Politically-motivated crimes will shoot up - some will be caught of course, but how many people can you jail? Employees, both foreign and locals, will stand up against exploitation through strikes and riots. The country will continue its chaotic state until the day the PAP loses power.

It is at Singapore's best interests that the PAP lose power by 2016, because retaliation will be stronger as the PAP continues their anti-Singaporean policies in the name of GDP. The problem of the population bubble is political, and hence interim tweaks and fixing of policies and ramping up of infrastructures will never be the solution.

The solution itself must be political, the message must be anti-PAP.

Why is PAP defending Philippines Independence Day

Gone are the days when we could rely on the PAP to protect our interests.

Prime Minister Lee Hsien Loong and rookie Minister Tan Chuan Jin have thrown in their support behind the Filipinos and condemned Singaporeans who have spoken up. The argument from the PAP point of view has of course been simplified to vilify and demonize those Singaporeans who are actively defending their country's sovereignty. The PAP believe the Philippines Independence Day is just like any other cultural festivals. They make special references to "Singapore Day" events held overseas and shame Singaporeans for being xenophobic and even calling us a disgrace. This is a very huge accusation which is heavily discounting his credibility as a leader of Singapore, Singaporeans, with the exception of immature voters, are simply not going to take in such a superficial excuse. The Philippines National Day should be contained to within their embassy compound, the same way the United States and other foreign embassies does.

Flying your flag in another country right in the middle of the city is certainly inappropriate. It doesn't reflect us as a multi-cultural society, instead it confuses Singapore's national identity. Tourists and Singaporeans alike will be asking if Orchard Road has become the second Manila, but it appears Lee Hsien Loong is proud to have Manila in Singapore.

The mainstream media have picked up the article from The Real Singapore and are actively publishing pro-Philippines opinions to sway public perception. Fortunately, this has amounted to little effect. Singaporeans who started the activism are not even a little disgraced as Lee Hsien Loong wanted them to be. It is a good sign for country that there are Singaporeans who are proud of their heritage and are willing to go the extra mile to preserve what's left of their National Identity, especially in today's time of pro-foreigners employment environment. Keep it up Singaporeans, do no succumb, claim your space back.

No permit needed for Philippines Independence Day in Singapore?

Under the Public Order Act 2009, any public assembly or procession of one or more persons, held in any public place to which members of the public have access as of right or by virtue of express or implied permission and intended to:

1. Demonstrate support for or opposition to the views or actions of any person, group of persons or any government;
2. Publicise a cause or campaign; or
3. Mark or commemorate any event

will require a Police permit unless otherwise exempted.

Did the Singapore Police issue a permit to congregate to the Philippines Independence Day organizers?

The question is pertinent because it will establish if Foreigners are indeed given special treatment as compared to Singaporeans. For Singaporeans, the above Public Order Act is imposed strictly and actively observed. Founder of unemployment support site, Gilbert Goh, has his share of first hand experience with the PAP government. During one of his protests against public transport fare hike, Gilbert Goh was told by the Singapore Police that if he burns the effigy of Minister Lui Tuck Yew, he will be "arrested on the spot". Contradictingly, in an article by PAP-controlled media Today, it was the Singapore Police force who did not object to the idea of burning effigies in the protest site.

If the Filipinos are given the right to congregate without a permit and none of them are arrested, Singaporeans like Gilbert Goh should enjoy equal liberty to conduct a massive demonstration outside Ngee Ann City calling for Lee Hsien Loong to step down.

Aside from the permit to gather, Section 3 of the National Emblems ruled that the public display of any foreign flag in public is deemed illegal. Did the Filipinos apply another special kind of permit that allow them to fly their flags and sing their national anthem on Singapore soil? As no such permit could be found, is the Singapore Police going to create a special permit for them or simply pretending ignorance?

What about the positions of the PAP leaders? None of them have spoken up regarding the issue of Filipinos disrespecting Singapore. Are they too busy checking the ceilings of coffee shops in Opposition wards?