Major CPF policy shift on the way

[Drizzt]

^^ full withdrawal would be classified as a major shift. But will also be classified as a major mistake. And also tells us that we never learn from our past when 50% was being paid out

Cease paying property with CPF will be a major shift and a correct move to increase retirement payout

i stand by my view that CPF LIFE is a good scheme to establish a floor to provide against common folks from outliving their money. numerous alternatives whether bonds or equities have shown that traditional methods are good for wealth accumulation but not foolproof for wealth de-accumulation.

by returning partial it is a theoratical mistake in my view

[CCUV]

Alot of financial engineering in cpf....for e.g most cpf holder use cpf to pay for housing loan but how come they are charged an interest for using their money? Effectively cpf holders are funding the governement portions of interest payment.

the interest 'charged' goes back to your own CPF OA, not Govt. not funding anyone except yourself.

If you believe government money is your money and it make not different if the interest on cpf is paid by the government or by yourself

[CCUV]

The major shift is a lppl,taking your money and give you back is consider an improvement? A change of language in how cpf min sum is called is not going to solve the problem of not having enough for retirement,having higher return may.

[Temperament]

That's a good demonstration of hard to please electorate.

Yes, we are all different ma. But do you know in the past , a certain number of years when banks's FD rate were higher then CPF's O A rate then what did our G did then? You were left on, your own device then. What risk free return from our G at that time? Nothing O. K. You had to take risk then or happy with 2.5 %{IRRC}.

If bank FD interest is higher than CPF OA, we can just deposit our CPF OA into bank FD, right?

I keep on saying CPF rate is just floor rate and you are free to get a better return yourself, and people keep on ignoring that or misunderstanding that. So right now, I'm smiling.

That's exactly what i am saying but only in a different way. i even say (one step further) that for those who can't learn to invest, just too bad. Don't expect our G to be your housekeeper.

"I'm your Landlord not your housekeeper"
Now who says that to Singaporeans?
Ha! Ha!

[kichialo]

^^ full withdrawal would be classified as a major shift. But will also be classified as a major mistake. And also tells us that we never learn from our past when 50% was being paid out

Cease paying property with CPF will be a major shift and a correct move to increase retirement payout

i stand by my view that CPF LIFE is a good scheme to establish a floor to provide against common folks from outliving their money. numerous alternatives whether bonds or equities have shown that traditional methods are good for wealth accumulation but not foolproof for wealth de-accumulation.

by returning partial it is a theoratical mistake in my view

More flexibility is always better.

[Temperament]

The major shift is a lppl,taking your money and give you back is consider an improvement? A change of language in how cpf min sum is called is not going to solve the problem of not having enough for retirement,having higher return may.

But then if everyone knows he is going to be taken care of from "cradle to grave" (aka very efficient welfare state), how many of us left willing to work very hard for those who likes to watch the tide comes in. Tide watchers don't need to work or work as little as possible to qualify for the welfare, as they are happy with what they have. So PAPYs or Successful Western Welfare G's country? Or somewhere in between state? Is there an ideal?

[CY09]

That's a good demonstration of hard to please electorate.

Yes, we are all different ma. But do you know in the past , a certain number of years when banks's FD rate were higher then CPF's O A rate then what did our G did then? You were left on, your own device then. What risk free return from our G at that time? Nothing O. K. You had to take risk then or happy with 2.5 %{IRRC}.

If bank FD interest is higher than CPF OA, we can just deposit our CPF OA into bank FD, right?

I keep on saying CPF rate is just floor rate and you are free to get a better return yourself, and people keep on ignoring that or misunderstanding that. So right now, I'm smiling.

That's exactly what i am saying but only in a different way. i even say (one step further) that for those who can't learn to invest, just too bad. Don't expect our G to be your housekeeper.

"I'm your Landlord not your housekeeper"
Now who says that to Singaporeans?
Ha! Ha!

Hi temperament,

I like this post. Essentially the government is saying to the not financially savvy group (about 90% of the population). Ok this plan is to help you in your retirement. You can put your money with me, and I will return in the range of 2.5% to 5%. You can trust me on this! But whatever I do with your money get investment returns of 6.5%, it is not your business and don't bother debating if the policy is fair or otherwise. You can follow what I am about to say to the next group.

Turning to the financially savvy group, the government says: "Guys i know you are good but you are required to set aside min 40k in SA+MA and 20k in OA just in case, the rest you can invest." Of course, I have listened to the govt and now am investing my excess 20k OA lol. So yup, there is some flexibility presently

Also, the govt will never allow a full withdrawal at age 55 because they realized in the past, majority will wither away their lump sum very quickly. There are instances where people took up 1 year loan at 54, promising to repay their debtors the sum at 55 from their lump sum withdrawal.

[yeokiwi]

Essentially the government is saying to the not financially savvy group
While to the financially savvy group,

There is only one message. Invest at your own risk.

And, 6.5% is in USD.
The actual return from GIC is around 4.1% for the last 20 years.
http://www.gic.com.sg/images/pdf/GIC_Report_2014.pdf

So, there isn't really a lot of meat left.

A simple comparison with EPF.
http://www.kwsp.gov.my/portal/documents/...tistic.pdf

Assuming $10,000 each is deposited into both EPF and CPF in 1992 and we compare the final sum in 2012

For CPF, the compounded return in OA(2.5%) is
SG$16386.

For EPF the compounded return is
RM$32588 or SG$12069 based on SG1 to RM2.7

If SA is used for comparison, the difference will be even wider.

[CY09]

Hi yeokiwi,

Thanks for highlighting, do note that 4.1% is the real rate of return (which means inflation adjusted). I do not know what is CPF's real interest rates, but if I were to venture a guess: the range is 0.3% to 2.7%.

The calculations of EPF is a bit wrong because the assumption made is putting $10,000 in CPF and EPF in their local currency. A more appropriate method will be putting SG $10,000 in CPF and RM $16,500 in EPF respectively in 1992, based on RM1.65 = 1 SGD in 1992. Subsequently, we tabulate how much will the amount be in 2012. Do note in their report, for some time periods, the annual returns are the same therefore it is reported under the same row. So in 1992 to 1994, the annual return reported has to be multiplied three times

Using the above steps, EPF will be RM $57,150 (SG $21,813) at today's rate of RM 2.62 = 1 SGD. If we use FX rate at 1 Jan 2013, the figure will $23,138. For CPF, if we are to assume a compounded rate of 4%, it is SG $21,911 at 2012.

I took the liberty of adding 2013 and 2014 returns, from 1992 to 2014, the EPF will have grown to RM $64,882 (SG $24,764). While CPF, at 4% compounded returns, it will have grown to SG $23,698.

Hopefully this post will clear up the previous debate over CPF and EPF. Adjusting for exchange rate, there is not much difference between Malaysia and Singapore's retirement scheme. Ok there is a small positive difference towards EPF but the gap is closing.

[yeokiwi]

Hi yeokiwi,

Thanks for highlighting, do note that 4.1% is the real rate of return (which means inflation adjusted). I do not know what is CPF's real interest rates, but if I were to venture a guess: the range is 0.3% to 2.7%

However, I do agree that more money should be forked out for the lower income families. But, it should not be for all since it does not make sense to give $1000 or PG card to UOB chairman emeritus?