CPF

[egghead]

If so, one way is to smooth the returns over the long term. Using 6.5% p.a as benchmark, it is possible for the govt to "promise" returns in the range of 4.5-5.0% returns aka providing a weighted average return of 4.75%. Insurers have done similar methods, where they make approx 7% from proceeds by investing and subsequently return policyholders in the range of 3.1-4.75% (past track records). However, in the process of doing so, insurers make billions out of it. I am hoping the govt can adopt a similar method albeit at lower or even no profits.

How then can we use this weighted avg return increase to benefit the low/middle income more than high income? Well for one, we can increase the additional 1% to 2% for the first $60,000 of the combined balances. The second way is instead of bumping up the weighted avg from 3.6% to 4.75%, excess investment proceeds are used to top up CPF balances of low income workers straight away instead of promising higher returns.

With lesser investment channeled to the budget as a result, one way to offset is to increase taxes in the sin category or slightly higher income taxes for the rich.

This solution provides allows Singaporeans to know they are able to meet the min sum adequately, thus alleviating the current problem. Increasing the annual returns by 1% is a lot, especially when compounding it over 40 years

I'm sure all your ideas can be considered. If insurance can really solve this problem, why didn't NTUC volunteer to take it up? I suspect not so easy.

Anyway, for all you know, Govt is crunching the numbers now so that PM can unveil the changes to CPF come 9 Aug.