Major CPF policy shift on the way

[fat al]

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

Appreciate if you can clarify on this? I don't quite understand your point of concern. It is always good to use numerical examples to illustrate. Thank you.

[investor101]

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

Appreciate if you can clarify on this? I don't quite understand your point of concern. It is always good to use numerical examples to illustrate. Thank you.

If you leave your CPF money untouched, the government will pay you yearly interest. If you take out CPF money for education or housing, you have to return the money back to CPF when you sell your house. That money would include interest you would have earned on your CPF if you left it untouched in the CPF account. You have to pay the interest that is meant for your CPF money, not the government. You are paying your own CPF returns out of your own pocket.

[investor101]

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!

Singapore's policy has always been 'Nobody owes you a living', or should I say 'you die, your own business'. I always keep this in mind throughout my NS and reservist, and I know what I must do if war ever comes.

In the meanwhile, more and more foreigners come here to work and live, and are ready to replace me in a heartbeat if I ever lose life or limb for the country.

There was a point when PRs had it much much better than citizens. Almost a citizen, but with none of the baggage that comes with it.

CPF is a bad idea now, because for the vast majority of people, their CPF is used to pay their overpriced HDB. If you can plot strategy about maximising your CPF monies, chances are, you are already a lot better than vast majority of Singaporeans. You can leave your money as it is and still retire very comfortably.

[touzi]

Singapore's policy has always been 'Nobody owes you a living', or should I say 'you die, your own business'. I always keep this in mind throughout my NS and reservist, and I know what I must do if war ever comes.

You should not wait until war comes. When there is war, things maybe chaotic or you could be bombed to pieces before you even put on your shoes. Like a good value investor, you should be forward looking. Serving reservist when you do not intend to stay and fight is like investing in a stock that you do not believe in. Each in-camp is like putting more money into a stock that you see no value.

[kichialo]

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!

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.

Haha these people who will do so will do it at any withdrawal age, be it 55 or 65 or 75. Just because of a few of such cases cannot be a valid excuse for holding the vast majority back.

[fat al]

...You are paying your own CPF returns out of your own pocket.

Thank you investor101,

I understand the mechanics but not the point of concern raised by 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.

1) The argument that homeowners are paying for their own CPF returns is technically correct but often read out of context. This is because when the funds are withdrawn for property purchase or payment to banks, CPF is not obliged to pay interest on withdrawn amounts. Put it another way, a 2.5% interest on balance of zero is zero. The 2.5% accrued interest should be viewed as returns from the investment of CPF funds, in comparison with dividend from stock investment, capital gains from gold etc. CPF does not continue to pay interest when funds are used for these other purposes. Nothing unfair or wrong about this.

2) As opmi pointed out, the accrued interest deducted from sales proceeds goes back to the homeowner's account. CPF board gains nothing and the CPF member loses nothing except for the loss of liquidity from cash to CPF funds. The easy guess is that this is just a policy decision to ensure members' funds continue to build up to meet retirement requirements (a balance between flexible use of funds and retirement requirements).

3) The argument that homeowners are paying interest twice, first to the banks and then as accrued interest back to their CPF is most fallacious. If you make mortgage payment (principal + interest) from your overdraft account, you would still need to pay interest on the overdraft account when you settle it sometime later. This is an example of interest compounding, the interest charged on the next period is based on the outstanding principal plus accrued unpaid interest up to the previous period.

Put it another way, if you use 200k from your CPF to fully settle your mortgage outstanding (Principal 197 k and accrued interest 3k) in Jun 2015, you will be obligated to return 202.5k (200k x 2.5% /2) to your CPF in Dec 2015 when you sell your property. Did you pay interest twice, seemingly yes, but not really. Interest of 3k up to Jun 2015 is paid to the bank. Interest of 2.5k during 2H 2015 is paid to fund provider which happens to be the homeowner CPF account.

No, I am not blindly 100% in agreement with CPF. However, it is difficult to come out with better alternatives if there is so much misunderstanding.

[corydorus]

The problem is people tends to view CPF monies not theirs despite the fact retiree do able to withdraw their monies. No full control of the monies do not mean is not yours. If this is not educated financially, they going to give wrong advise to their friends and relatives. The misconception is worrying which many people may regret later.

[Life is a game]

Actually everything is dependent on where you are standing. If you are badly in need of the money but cannot take out to use it's very frustrating. But for ppl who are financially independent, they don't see this limitation in cpf withdrawal or increase in min sum a problem to them. Nothing to debate bevause everyone has their unique situation. Who are we to say what is right or wrong in life. In the end, taking care of ourself and not causing undue worry to ppl around us is already the best we can do.

[Contrarian]

>The problem is people tends to view CPF monies not theirs despite the fact retiree do able to withdraw their monies.

This is true, because the planning is done for us. But it is for a GOOD intention, for those who are not good at managing their money, or who tends to be gullible to the convincing salesmen.

> There was a point when PRs had it much much better than citizens. Almost a citizen, but with none of the baggage that comes with it.

PRs now still enjoy lots of good benefits. They also enjoy Medishield life with some premium (dont know the surcharge over singaporeans). I am not sure if there are other countries that offer such a good scheme for its PRs?

[yeokiwi]

Hi yeokiwi,

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

Thanks for the correction
In terms of return, it turned out to be about the same.