CPF LIFE

[specuvestor]

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.

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?

I think Caelitus and CY09 had given a good overview on the difference between CPF and EPF

EPF was 43% invested in equities
http://www.pionline.com/article/20140216...on-ringgit

Anyone who invested in Malaysia equities know many stocks are owned by EPF. That is one of the reason why Msia stocks had become more illiquid after AFC (no typo) and PE keeps hovering around 15X. When times are good it's fine but I'm not too sure how they are going to get out of those positions since US already got out almost all since GFC.

And yes they can continue to print MYR to support the market and NEVER defaults, just like Zimbabwe "never defaults".

But in the long run the inflationary and real spending power of the economy gets translated into the currency pairs. I'm sure Temperament remembers 40 years ago SGD and MYR was on par, we adjust our clock to match KL, and people travel to Malaysia to do business.

I think it is likely that we will see SGDMYR 1:3 by end this decade.

Answer to this grumble is actually quite simple: since we are saving for retirement ie say 30 years down the road, which forumer if given a choice will keep that money in EPF and which will keep in CPF?

Personally I'll stick with CPF with the lower rates of 2.5% which is legislated. I only hope they don't take away this minimum freebie from us anytime soon.

[yeokiwi]

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.

Singapore government runs a surplus budget most of the times and therefore it does not require to raise money via bonds for government expenditure. Even in a slight deficit budget, it can cover the deficit with income from previous years.

So, technically, all money that are collected from gov bonds will be invested.
Quite likely, most of the money will be channeled to GIC for overseas investment although it was not revealed how the fund was invested.

[Temperament]

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.

Singapore government runs a surplus budget most of the times and therefore it does not require to raise money via bonds for government expenditure. Even in a slight deficit budget, it can cover the deficit with income from previous years.

So, technically, all money that are collected from gov bonds will be invested.
Quite likely, most of the money will be channeled to GIC for overseas investment although it was not revealed how the fund was invested.

Exactly!
Why can't a little of our CPF's money be invested in equities by our G. to give us little better return? Oh yes! Then there will be no more guaranteed 2.5% return, i suppose.
Actually i should not complain, as i am allowed to DIY in CPFIS. which i did.
But what about for those who don't know how to DIY with CPFIS?
Don't they got a right to complain?
i don't really know?