MPs offer ideas to improve CPF

[touzi]

Actually, there is NO NEED to give a higher return to EVERY CPF member. For a more equitable society, those who have lower income should have a higher return for their CPF. I am quite alright if the lower income Singaporeans get a higher return or topup yearly in their special accounts. It will help them to build up their retirement funds.

For those rich folks, 2.5% or 3.5% do not matter much at all.

Very well said. That is the attitude Singaporeans must have, whichever party you support. I wish more people will think like this. It cannot be that if the policy doesn't benefit me it is bad; if I am good at managing my own money, CPF is bad, doesn't matter if the average Singaporean is not very good with his/her own money.

[Megatop]

I think our country should have just ONE sovereign wealth fund. And most importantly, the name should be recognisable and something Singaporeans can easily relate to.

Currently, there is a perceived lack of transparency and fairness. Not to mention the web of relationships, which IMO is quite confusing for the layman.

Norges Bank Investment Management could be a good starting point.

http://www.nbim.no/en/

[Drizzt]

Hi CY09,

Actually, I have invested my CPF OA funds under CPF-IS scheme into Lion Global's Infinity US 500 and Infinity European stock index funds. These funds feeds into Vanguard ETFs. I am still holding onto these funds but they are no longer available under CPF-IS scheme. The problem with these funds is that nobody bothers to market them, resulting them having low fund size which defeats the purpose for an index fund (which is low cost) since expense ratio will be high and returns will be lower. I don't think CPF Board will allow one to invest directly into Vanguard ETFs as they are not listed on SGX.

For ETFs, currently those available under CPF-IS scheme include STI ETF, S'pore bond ETF and a gold ETF. For unit trusts, I do agree that their performance are mixed but with careful selection, one will still be able to beat the CPF-OA rate of 2.5%pa. Some of the better funds include those managed by Aberdeen, Schroder S'pore Trust etc.

For CPF-SA, besides bond funds, one can invest in balanced funds. Some balanced funds do have long track record and can beat 4%pa rate. But it is a tough ask as one have to take a higher risk of underperformance in some years. Some of the balanced funds with good track record and can possibly beat CPF-SA rate include First State Bridge, FTIF Templeton Global Balanced etc.

the expense ratio is .95%. there are sales charges. cost is a big factor and this can be improve alot.

[Drizzt]

the returns of the cpf oa is not low. its a risk free return that is as a short duration bond. if the government stick to that we should be getting less than 0.5%. but they were generous to stick with 2.5%

same as sa. they peg it to the 10 year sgs bond rate. we should be getting 2.9%

[Drizzt]

Just putting down my irks with the current CPF scheme, they may have already been talked about in previous posts, so I am just saying my thoughts aloud. Below are my personal views only

1) Returns are not sufficient.

Basically MOF has spoken out that CPF proceeds are invested in SGSS and subsequently channeled to GIC to manage, given that they are not allowed for govt spending. If so, why not simply proceed to put it straight into GIC's management; bypassing the need to put it in SGSS? It is worth noting GIC has produced 6.5% returns over the past 20 years, I believe this figure is good enough to smooth out volatility in returns from good and bad years.

Perhaps MA and SA returns can be pegged close to GIC 20 yr returns, while OA's rate are increased from 2.5% to 3.0%. OA rates should not be pegged to GIC's return as they will affect the housing loan rates which will make borrowing for housing difficult.

2) Lack of investment products available as alternatives for SA and OA.

Many of these accounts/ unit trusts are terrible in performance where they are unable to match mkt averages in my view. My recommendation is to introduce more ETFs into the scheme. Vanguard is a perfect example where they have ETFs to not just Singapore but global exposure and are of one of the lowest fees (this is their moat). Alternatively, is to ask GIC to open a fund which can be invested by members. It will be nice to ask aggregate value fund to participate in the CPF-IS scheme, their fee structure is almost perfect, just that perhaps they have to lower their 250k threshold, perhaps make it 50k for CPF board members?

SA account only allows bond funds. I will like to recommend for account members to be allowed the option of purchasing ETFs. This deliver better market returns, with compounding helps us to reach the min sum and medisave min sum at a quicker rate. The SA should not be allowed for bond funds only.

Lastly in the current CPF system, it is unlikely we will be able to withdraw most of our SA/MA proceeds at 55. The govt has to take the perspective that the SA/MA will be lock in from the age of 25 to the time of death. Since we are unable to withdraw most of the fund, the govt should consider to manage it in the view of a portfoilo of VC/equities/bonds (similar to GIC), instead of the myopic view of bond like products only. This is because the former portfolio outperforms bond like products. Thus, my strategy will result in SA/MA being able to fund the min sum by itself enabling OA to still be used for housing purchases/installments.

Lets use an example here, we have a 25 year old grad who enters and is employed throughout his life till 55. Lets say he is able to put in 5k each yr into his SA and MA account. Assuming a 5% returns (CPF SGSS rates), at 55, he will have 348k. but at 6.5% returns (GIC returns), it is 459k. This means putting funds into GIC like funds will enable an individual to use his CPF MA/SA amount to sufficiently fund his min sum (155k) and medisave min sum (40K) figures for retirement as of 2014 figures.

Note: If the govt decides to make CPF's return close to GIC's returns, then point 2 can be considered to be scrapped.

Note 2: For an individual to be able to contribute 5k into his MA/SA yearly, he is only needed to earn 3.4K a month. It is worth noting my calculations excluded the very high possibility of getting AWC and performance bonus. It also excludes yearly wage inflation, pay hikes and promotions. Therefore a 5k annual contribution to CPF SA/MA is highly probable if one is employed.

i echo the sentiments. they have the strength to do research on what really matters, what are good products, but they chose to nuture the finance companies rather than the people. why not just bring in the GOOD products. who wouldnt want good products??

[Temperament]

Just putting down my irks with the current CPF scheme, they may have already been talked about in previous posts, so I am just saying my thoughts aloud. Below are my personal views only

1) Returns are not sufficient.

Basically MOF has spoken out that CPF proceeds are invested in SGSS and subsequently channeled to GIC to manage, given that they are not allowed for govt spending. If so, why not simply proceed to put it straight into GIC's management; bypassing the need to put it in SGSS? It is worth noting GIC has produced 6.5% returns over the past 20 years, I believe this figure is good enough to smooth out volatility in returns from good and bad years.

Perhaps MA and SA returns can be pegged close to GIC 20 yr returns, while OA's rate are increased from 2.5% to 3.0%. OA rates should not be pegged to GIC's return as they will affect the housing loan rates which will make borrowing for housing difficult.

2) Lack of investment products available as alternatives for SA and OA.

Many of these accounts/ unit trusts are terrible in performance where they are unable to match mkt averages in my view. My recommendation is to introduce more ETFs into the scheme. Vanguard is a perfect example where they have ETFs to not just Singapore but global exposure and are of one of the lowest fees (this is their moat). Alternatively, is to ask GIC to open a fund which can be invested by members. It will be nice to ask aggregate value fund to participate in the CPF-IS scheme, their fee structure is almost perfect, just that perhaps they have to lower their 250k threshold, perhaps make it 50k for CPF board members?

SA account only allows bond funds. I will like to recommend for account members to be allowed the option of purchasing ETFs. This deliver better market returns, with compounding helps us to reach the min sum and medisave min sum at a quicker rate. The SA should not be allowed for bond funds only.

Lastly in the current CPF system, it is unlikely we will be able to withdraw most of our SA/MA proceeds at 55. The govt has to take the perspective that the SA/MA will be lock in from the age of 25 to the time of death. Since we are unable to withdraw most of the fund, the govt should consider to manage it in the view of a portfoilo of VC/equities/bonds (similar to GIC), instead of the myopic view of bond like products only. This is because the former portfolio outperforms bond like products. Thus, my strategy will result in SA/MA being able to fund the min sum by itself enabling OA to still be used for housing purchases/installments.

Lets use an example here, we have a 25 year old grad who enters and is employed throughout his life till 55. Lets say he is able to put in 5k each yr into his SA and MA account. Assuming a 5% returns (CPF SGSS rates), at 55, he will have 348k. but at 6.5% returns (GIC returns), it is 459k. This means putting funds into GIC like funds will enable an individual to use his CPF MA/SA amount to sufficiently fund his min sum (155k) and medisave min sum (40K) figures for retirement as of 2014 figures.

Note: If the govt decides to make CPF's return close to GIC's returns, then point 2 can be considered to be scrapped.

Note 2: For an individual to be able to contribute 5k into his MA/SA yearly, he is only needed to earn 3.4K a month. It is worth noting my calculations excluded the very high possibility of getting AWC and performance bonus. It also excludes yearly wage inflation, pay hikes and promotions. Therefore a 5k annual contribution to CPF SA/MA is highly probable if one is employed.

i echo the sentiments. they have the strength to do research on what really matters, what are good products, but they chose to nuture the finance companies rather than the people. why not just bring in the GOOD products. who wouldnt want good products??

All along we know CPF is a scheme that "you look after yourself".
Put it in layman's terms, our G generally always look after themselves much, much more than they look after you.
It's alright G has to look after themselves first if not there is no Singapore. But Singapore after many years of BUDGET SURPLUS, how the citizens fare compare to our G? I'm sure many citizens are not too happy about it? But then the last GE seems to say it's still very tolerable leh?
Let's see what going to happen in this coming GE?
Still very tolerable to barely tolerable or not tolerable anymore?
My guess is still we have to choose between a "ROCK AND THE HARD PLACE". All because opposition parties can't see eye to eye. But i suspect it's because the people in different opposition parties all want to be the leaders of Singapore. i wish if only different opposition parties can coalesce into a single party. Or at least many opposition parties can come together to form one viable alternative party to disallow Papys to "Rubber Stamp" policies in parliament, as and when they like.
i think the day they(oppositions) can do that then Singapore will really have a 2 party system in Parliament. A real alternative voice in Parliament. A real Democratic Parliament country. Not the only "you look after yourself" party in parliament.
Now, the citizens of Singapore are really having Hobson's Choice
Wake up Singapore citizens!
You have been sleeping for too long already!
My 2 cents.

[HitandRun]

Very well said. That is the attitude Singaporeans must have, whichever party you support. I wish more people will think like this. It cannot be that if the policy doesn't benefit me it is bad; if I am good at managing my own money, CPF is bad, doesn't matter if the average Singaporean is not very good with his/her own money.

That is why I am suggesting to Govt that I do not need any return on my CPF OA. Just allow me to invest 100% in stocks! In case forumners think that they will have to subsidise my retirement if I lose all that money, don't worry, my CPF SA is already > CPF minimum sum.

[funman168]

I second that, I too wish to invest 100% of my OA into stocks

Very well said. That is the attitude Singaporeans must have, whichever party you support. I wish more people will think like this. It cannot be that if the policy doesn't benefit me it is bad; if I am good at managing my own money, CPF is bad, doesn't matter if the average Singaporean is not very good with his/her own money.

That is why I am suggesting to Govt that I do not need any return on my CPF OA. Just allow me to invest 100% in stocks! In case forumners think that they will have to subsidise my retirement if I lose all that money, don't worry, my CPF SA is already > CPF minimum sum.

[Temperament]

Very well said. That is the attitude Singaporeans must have, whichever party you support. I wish more people will think like this. It cannot be that if the policy doesn't benefit me it is bad; if I am good at managing my own money, CPF is bad, doesn't matter if the average Singaporean is not very good with his/her own money.

That is why I am suggesting to Govt that I do not need any return on my CPF OA. Just allow me to invest 100% in stocks! In case forumners think that they will have to subsidise my retirement if I lose all that money, don't worry, my CPF SA is already > CPF minimum sum.

i second that.
But alas even after 63+(retiree) as long as your money is in OA, it is subject to OA 's rules for investment. And you have to contribute to MA every year too from your OA. But i am not complaining about OA money to MA.

[CityFarmer]

I second that, I too wish to invest 100% of my OA into stocks

Very well said. That is the attitude Singaporeans must have, whichever party you support. I wish more people will think like this. It cannot be that if the policy doesn't benefit me it is bad; if I am good at managing my own money, CPF is bad, doesn't matter if the average Singaporean is not very good with his/her own money.

That is why I am suggesting to Govt that I do not need any return on my CPF OA. Just allow me to invest 100% in stocks! In case forumners think that they will have to subsidise my retirement if I lose all that money, don't worry, my CPF SA is already > CPF minimum sum.

I would like to refer a post of Mr. Tan Chuan-Jin in a blog, on CPF

"Unfortunately, most savers are unable to achieve good returns with low risk. Many have lost money because they chose the wrong products to invest in, or because of market downturns that occur in their retirement"
- from the recent issue of The Edge

Should CPF policy be individualized? May be too difficult, if not impossible technically? How to access the able and unable? Hm...