CPF LIFE

[Temperament]

CPF interest is sooo low

Yes! It's so low all these years. i have been wondering how come our neighbour's EPF interest rate returns are always so much higher than ours.
Is it their G is better than our G in managing our blood, sweat & tear money? (Correct me which year EPF interest rate return was lower than CPF. i have not googled).

Or are we definitely more daft then our Malaysian neighbours?
i think so because a certain OLD-MAN had called us daft.
i think he said that not for nothing.
i think we are daft not only by CPF compares to EPF alone.
What other things we are daft about?
Tell me, please.

[CY09]

One reason for your slight increase in monthly pay-out could be due to the fact that actuarial calculations for CPF life scheme accounts for annual inflation. Therefore CPF will increase its pay-out annually according to the core inflation.

That is why Minimum Sum always increases yearly, because one of the factor is that they are pegged to a 2003 dollar figure.

[Zelphon]

One reason for your slight increase in monthly pay-out could be due to the fact that actuarial calculations for CPF life scheme accounts for annual inflation. Therefore CPF will increase its pay-out annually according to the core inflation.

That is why Minimum Sum always increases yearly, because one of the factor is that they are pegged to a 2003 dollar figure.

It appears that Minimum sum is increasing at a rate of about 6% whereas pay out increases at core inflation figures of about 3%??

Something is definitely not right here...

[Caelitus]

CPF interest is sooo low

Yes! It's so low all these years. i have been wondering how come our neighbour's EPF interest rate returns are always so much higher than ours.
Is it their G is better than our G in managing our blood, sweat & tear money? (Correct me which year EPF interest rate return was lower than CPF. i have not googled).

Or are we definitely more daft then our Malaysian neighbours?
i think so because a certain OLD-MAN had called us daft.
i think he said that not for nothing.
i think we are daft not only by CPF compares to EPF alone.
What other things we are daft about?
Tell me, please.

Uncle Temperament, let me try to do a comparison. Please correct me if I am wrong.

The comparison is based on:

1. EPF Account 1 (meant for retirement only) versus the CPF Special Account (for retirement). Respective interest rates taken from EPF and CPF websites. No withdrawals made and balances are compounded.

2. Both accounts started with 100 units of domestic currencies.

3. Annual inflation rate for both countries taken from World Bank's website.

4. Time period start from 1997 to 2013. 1997 was chosen as SGD-MYR historical rates by Bank Negara stopped at 1997 (taken from Bank Negara). Exchange rate to compare relative purchasing power of goods/services between each other's markets.

Observations for the time period under consideration:

1. EPF started with 100 and ended with 252.25. This represents a gain of 152.25% for an annualised gain of 8.96%. CPF started with 100 and ended with 200.36 for a overall gain of 100.36%, annualised at 5.90%. Looking at this only, EPF out-performs CPF. EPF interest rates have been higher than CPT for every year in the period under consideration.

2. Using the mean SGD-MYR rates for 1997 (1.9565) and 2013 (2.5177), the MYR has depreciated 28.68% against the SGD. Interestingly, the MYR had free exchangeability at par with the SGD (1-for-1) till 8 May 1973! Besides the growth rates of each other's economy which might influence the disparity, can money supply also influence it?

3. In the 17 years of review, Singapore's inflation rate was lower than Malaysia's on 9 counts and the reverse on 7 counts. In 2009, it was on par. However, the trend of late since 2007 is that Singapore's inflation rate was higher than Malaysia's. An imported good costing say 100 units at the start will cost 36.23% more for Singapore and 50.03% more for Malaysia. This works out to annualised inflation of 2.13% and 2.94% for Singapore and Malaysia respectively.

My 2 cents contribution.

[Temperament]

One reason for your slight increase in monthly pay-out could be due to the fact that actuarial calculations for CPF life scheme accounts for annual inflation. Therefore CPF will increase its pay-out annually according to the core inflation.

That is why Minimum Sum always increases yearly, because one of the factor is that they are pegged to a 2003 dollar figure.

It appears that Minimum sum is increasing at a rate of about 6% whereas pay out increases at core inflation figures of about 3%??

Something is definitely not right here...

To be quite exact an increase of $10.63 is only 1.63% of my payout. i think i can't complain as long as there is an increase. Because if i stick to my MS withdrawal scheme, i will have fixed amount until age 85 but there are other pros to compensate.

[CY09]

Hi there are a few differences in EPF and CPF, I rmb this was discussed before.


1)EPF is a different structure from CPF.
Funds from EPF are invested directly into equities, shares of unlisted companies, issued as loans to organisations and bonds (aka like a fund manager managing a equities and bonds portfolio for you).

Funds from CPF are only invested directly into "special SG govt bonds"( aka like a fund manager who manages a bond portofilo for you). For this part, I will recommend reading up on the CPF statutory act.

2) The bonds invested in the respective funds are different
One of the major portfolio composition of EPF is in bonds. Being administer by the Malaysian govt, funds in EPF tend to be invested into Mal govt bonds. In Malaysia, the 10 yr coupon yields around 4% yield. Compare this to the 30 yr sg bond which yields at 3.375% and 10 yr SGS which yields around the low 2%s.

Remember the special govt bonds imentioned previously? Well the SG govt gives interest rates accordingly in 2.5%,3.5%,4% and 5%.

Therefore the above generally explains why our returns are different from EPF. Our CPF scheme is generally of a lower risk which invests in govt bonds in the range of 2.5-5%, while the EPF invests in equities/bonds etc. This results in the vast difference in returns. On a side note, one can say our CPF money is used to fund govt expenditure, whch alllows the govt to use money, which otherwise has to be spent on expenditure, to be invested in equities, take stakes in unlisted companies etc. Who enjoys the return of such investments in Singapore is debatable.

To zelphon,

The rise in 6%, can be explained by 1) inflation factor and 2) the govt increasing the MS in 2003 dollar figure to a target of $120,000.

The link for this can be seen here: http://mycpf.cpf.gov.sg/CPF/my-cpf/reach...ch55-2.htm

[Caelitus]

One reason for your slight increase in monthly pay-out could be due to the fact that actuarial calculations for CPF life scheme accounts for annual inflation. Therefore CPF will increase its pay-out annually according to the core inflation.

That is why Minimum Sum always increases yearly, because one of the factor is that they are pegged to a 2003 dollar figure.

It appears that Minimum sum is increasing at a rate of about 6% whereas pay out increases at core inflation figures of about 3%??

Something is definitely not right here...

Zelphon, the minimum sum in 2003 was $80,000 and the target was $120,000 in 2003 terms. Therefore, the minimum sum needs to increase more than the inflation rate to catch up.

[Temperament]

Hi there are a few differences in EPF and CPF, I rmb this was discussed before.


1)EPF is a different structure from CPF.
Funds from EPF are invested directly into equities, shares of unlisted companies, issued as loans to organisations and bonds (aka like a fund manager managing a equities and bonds portfolio for you).

Funds from CPF are only invested directly into "special SG govt bonds"( aka like a fund manager who manages a bond portofilo for you). For this part, I will recommend reading up on the CPF statutory act.

2) The bonds invested in the respective funds are different
One of the major portfolio composition of EPF is in bonds. Being administer by the Malaysian govt, funds in EPF tend to be invested into Mal govt bonds. In Malaysia, the 10 yr coupon yields around 4% yield. Compare this to the 30 yr sg bond which yields at 3.375% and 10 yr SGS which yields around the low 2%s.

Remember the special govt bonds imentioned previously? Well the SG govt gives interest rates accordingly in 2.5%,3.5%,4% and 5%.

Therefore the above generally explains why our returns are different from EPF. Our CPF scheme is generally of a lower risk and thus our investments returns are very much lower. On a side note, one can say our CPF money is used to fund govt expenditure, whch alllows the govt to use money which otherwise has to be spent on expenditure to invest in equities, take stakes in unlisted companies etc.

To zelphon,

The rise in 6%, can be explained by 1) inflation factor and 2) the govt increasing the MS in 2003 dollar figure to a target of $120,000.

The link for this can be seen here: http://mycpf.cpf.gov.sg/CPF/my-cpf/reach...ch55-2.htm

We all understand usually higher return means higher risk. i think we all can understand and accept that.
i just like to know why Next door G's different way of investing EPF seems to always beat our G's way of investing our CPF. Ya! CPF is guaranteed return by our G, so say our G. Does our neighbours' EPF has no guaranteed return? Even if so, why EPF returns seem to be always better than CPF.

And then our G "turn around" and allow us - if you want more return for your CPF you can invest in SGX stocks or local properties or what? It's O. K. do it yourself at your own risk. G can't take the risk for the people. It's true. i agree. But then, still why EPF RETURNS seems to be always better than our CPF? Neighbour's G is better at investing than our G? Or Neighbours' G is better at mitigating investment risks for better returns?

[edragon]

Do you have an option too?
If so have you joined?

i join because i know this scheme will work as more and more younger workers are forced to join as they reach retirement age.

And also my initial payout rate by CPF LIFE is more than my monthly installment rate which should last till 85 that is if CPF (RA) keeps the 4% interest rate. This rate is not guaranteed too.
But how nice now CPF life increase my payout by $10.49 cents.
i think the possibility of decreasing payout by CPF life is remote because of the large pool of workers "forced to join" every year. imho.

Thanks for the insight. I have the option but I have decided not to join.
My rationale is that it will be disadvantage to give up the guarantee especially both scheme derives the profit from the same interest mechanism. My second thought is that the reason they forfeit the guarantee is that the life expectancy is much longer than when the CPF was mooted years ago. In future, many will live to 100 maybe so they must protect themselves for this risk.
Also, I speculate that at a certain point in time, it may be privatised and management fees will come into play if it does take that course.

Of course, that is my personal view and I invest accordingly.

[Temperament]

Do you have an option too?
If so have you joined?

i join because i know this scheme will work as more and more younger workers are forced to join as they reach retirement age.

And also my initial payout rate by CPF LIFE is more than my monthly installment rate which should last till 85 that is if CPF (RA) keeps the 4% interest rate. This rate is not guaranteed too.
But how nice now CPF life increase my payout by $10.49 cents.
i think the possibility of decreasing payout by CPF life is remote because of the large pool of workers "forced to join" every year. imho.

Thanks for the insight. I have the option but I have decided not to join.
My rationale is that it will be disadvantage to give up the guarantee especially both scheme derives the profit from the same interest mechanism. My second thought is that the reason they forfeit the guarantee is that the life expectancy is much longer than when the CPF was mooted years ago. In future, many will live to 100 maybe so they must protect themselves for this risk.
Also, I speculate that at a certain point in time, it may be privatised and management fees will come into play if it does take that course.

Of course, that is my personal view and I invest accordingly.

"In future, many will live to 100 maybe so they must protect themselves for this risk".

Unquote:-
This is a high possibility if research on longevity is successful to a certain degree. The rich and powerful definitely has an interest in it. (aka i am too if i belong to this class).

Ha! Ha! This remind me of the first emperor of China? History said that he was after living forever or at least Longevity of life.
If i am not wrong, scientists already know how we die of old age to a certain extend. So what's the next step?
Imagine if the secrets of longevity is discovered and make available to everyone, how it going to turn our financial world upside down. All financial books have to be rewritten. Yes? No?
Anyone buying Annuity for longevity?
i thought that's the purpose in the first place.
Ha! Ha!