MPs offer ideas to improve CPF

[thefarside]

Thanks for the feedback!

The data I referenced is drawn from here
http://www.singstat.gov.sg/statistics/br...ation.html
- Statistical Tables from Yearbook Table 3.3

If the probability of survival is that high for current cohorts, then the drawdown age makes sense.

[Temperament]

i only know each of us will choose what we think best for us practically, when the day comes.

i am fortunate i can afford to delay my MS DD as long as i want.
i refuse to join CPF Life until last year (age 65) because if i join CPF LIFE earlier, it pays me less slightly than my MS DD/month. And also i know i have to sacrifice my bequest(becomes zero) if i live to 75 or 80 or 85. I can't be bother to check now. i also know roughly CPF LIFE benefits me only if i can live to at least 80 or 85. It's really not a very good scheme. It is really only benefited those whose family's DNA has LONGEVITY.
So each of us, our circumstances are different. When the time comes for you, i am sure people in this forum who are mostly graduates can choose practically the best for themselves.
Even i think i have, only NTC 2 who dares to be here.

PS:-
i am sorry. i forget for people who are born later than a certain year can not choose anymore. Sorry.

[tanjm]

Thanks for the feedback!

The data I referenced is drawn from here
http://www.singstat.gov.sg/statistics/br...ation.html
- Statistical Tables from Yearbook Table 3.3

If the probability of survival is that high for current cohorts, then the drawdown age makes sense.

Ah.... i see that. Actually that table is just a simple sum of people in each age group taken in a particular year. It can't be used in this calculation at all as it contains people in multiple birth years.

In fact you need to segment people by their birth year.

I can't be absolutely sure theoretically, but I believe estimating survival given age 65 using this data is equivalent to a weighted average from the entire range of birth years. In any case, I suggest just using SingStat data (they've done the hard work) directly.

[tanjm]

Don't you think its marvellous that our average birth to death lifespan has increased by about 20 years since 1957 ?

According to http://www.theguardian.com/society/2012/...world-rise, life expectancy around the world has risen by an average of 11-12 years in the last 4 decades. In Singapore, it is a 20 year increase in 5 decades or so and indeed we have one of the worlds highest life expectancies.

[Zelphon]

Don't you think its marvellous that our average birth to death lifespan has increased by about 20 years since 1957 ?

According to http://www.theguardian.com/society/2012/...world-rise, life expectancy around the world has risen by an average of 11-12 years in the last 4 decades. In Singapore, it is a 20 year increase in 5 decades or so and indeed we have one of the worlds highest life expectancies.

This is because we moved from 3rd world to 1st world during this period...
How many countries achieved that?

Alas, that is all in the past....
No point reminiscing about it..

[specuvestor]

First principle is that CPF is for retirement and secondly how much real return is reasonable without compromising the first principle? For example letting people invest 100% in stocks is out because it defeats the first principle unless it is guaranteed return.

One should not be too quick to dismiss suggestions like that. E.g. CPF's official rules state that one can only withdraw the savings upon hitting 55 provided one meets the conditions for withdrawal. However, exceptions do apply on medical grounds.

Therefore, my suggestion to CPF is that as long as one can meet the minimum sum, say in the Special and Medisave Accounts, one should be allowed to invested the remainder of the savings in property or stocks.

i second that. i think it's quite fair. But they just have to increase SA and MA. every year to keep up for inflation, lel.

Another view of cpf

http://www.theonlinecitizen.com/2014/05/...g-monster/

By SY Lee and Leong Sze Hian

....

Consumer Price Index (CPI) for 2013 averaged 2.4 per cent. So why is it that the minimum sum is being increased by 4.7%?

Similarly, why is the Medisave Minimum Sum being increased by a whopping 7.4%, from $40,500 to $43,500?

....

Two points to clarify which I thought Mr Leong Sze Hian should step forth to assuage the 'fears' of the general population instead of pursuing that track.

I thought the Minimum Sum is increasing faster than the inflation rate because it needs to catch up to the original target of S$120,000 (in 2003 dollars). When the minimum sum was S$80,000 back then in 2003, if it had just kept pace with inflation, it would have maintained parity with S$80,000.

Next, with medical advancements, the cost of medical care will increase as more sophisticated procedures/medications come on-line. Keeping pace with inflation would not be sufficient.

We will also have to factor in that the life expectancy of the Singaporean is increasing with better nutrition and access to medical care.

If we take the above 3 points, we will understand the need to work longer (hence the gradual increase in retirement age), stay healthy, and to make our monies work for us. I like the idea of forced savings as it ensures that the less-disciplined amongst us do not tax those who have squirreled away monies.

The first principle is that CPF was formed so that the citizen can fund their retirement. The other way to look at it is also that the govt does not want to take up the aging Singapore liability. We have to remember CPF was set up when the govt mentality is "No Safety Net" as we couldn't afford it. Those old enough will remember.

Caelitus is right that the increase in MS is more than inflation. In fact if we just calculate it, $1k a month in 20 years' time even if we have $150k MS is hardly enough.

The truth is that the MS will be increased INCREMENTALLY so that EVENTUALLY it will be enough. Guess what would be the backlash if MS was announced to be $200k back in 1980. Anyone who has done a formal financial planning would know that the amount needed to save so that you can have a retirement nest egg that would support a 70% last drawn pay is quite "mortifying"

It is a mathematical game of principal and returns to meet retirement income needs.

The other policy mistake is as tanjm said, making too much CPF available for housing, and worse investing because IIRC CPF data shows most people lose money investing. The few forumers that makes money does not mean that the govt will not fret for those who not only can't gain one step forward but instead make one step back. Because end of day govt has to socialise these eldercare costs

Here's an earlier thread with a specific proposal. http://www.valuebuddies.com/thread-1011.html

[Freenasi]

As someone said, dont sell your HDB as it is a rising asset. The problem is that, the elites didnt know that most of the people will not benefit from high HDB/properties prices. Those elites and rich ones, not the majority, can squeeze profits and extra income thereby hedge against inflation. But most people only feel the inflation and rising cost due to rising HDBs/properties.

[Behappyalways]

Why is CPF lending out at a lower interest if someone is borrowing at a higher interest rate?

http://www.temasek.com.sg/investorrelati...masekbonds

[kw2496]

First things first, Temasek borrows at a higher rate because it isn't given the mandate to manage CPF money, which comes under GIC's purview. See: (http://www.temasek.com.sg/abouttemasek/faqs and http://www.singapolitics.sg/news/what-go...y-goes-cpf)

A question you might then ask is why Temasek isn't given CPF monies to invest to keep borrowing costs as low as possible- since both GIC and Temasek's returns flow to the government coffers anyway. My guess is that organizationally it is much simpler to account for CPF monies if they were held by one entity, and GIC was preferred as it was initially staffed with more talent and a wider investment mandate.

There is no conspiracy here. Recent SGS bonds (20 year) by MAS offered the same rate as the Temasek bonds (30 year). (see http://www.sgs.gov.sg/~/media/SGS/SGS%20...V%20Reopen)

[HitandRun]

Why is CPF lending out at a lower interest if someone is borrowing at a higher interest rate?

http://www.temasek.com.sg/investorrelati...masekbonds

I think the reference to CPF is a red herring. E.g. would you charge the same interest rate to Li Kashing and his son, Richard Li? AFAIK, Temasek is not guaranteed by the Govt, it is just a company owned by the Govt with a lot of assets. On the other hand, the SSGS (as owned by CPF) are guaranteed by the Govt.

Nevertheless, I believe that the real point that folks like "Behappyalways" are trying to drive across is why the Govt cannot provide with a higher return on CPF funds? The answer is simple, the return on investments each year is a fixed number. The only thing that Govt can try to vary is the distribution between CPF holders, annual fiscal Budget and savings for a rainy day, etc. The more return CPF holders get, the less the Govt gets. So which "management" or government would want to crimp its own budget voluntarily?