A proposal for discussion

[Musicwhiz]

CPF Ceiling
Apr 2000: $6,000 to $5,500
Jan 2005: $5,500 to $5,000
Jan 2006: $5,000 to $4,500

Incidentally, CPF Ceiling will be raised again come Sep 2011 from $4,500 to $5,000. This will increase the contributions to OA even if % remains the same.

My view is still - too little, too late.

[Jared Seah]

Just a reflection on the dilemma and pitfalls of cherry-picking.

Once upon a time, there was lots of criticism that CPF is unfairly "locking" up hard earned money. Cannot use CPF to fund children education; cannot use it to grow our wealth ourselves - CPF interest rates so low. Cannot use CPF to pay for medical expenses.

Stop treating us like children.

If we now say property prices too high, we curb CPF funds available for it. What if gold prices go up higher? What about bubbles in equities? Should we review the CPF investment scheme? Withdraw it? If medical costs go up, would scrapping medisave and insist patients pay cash help?

Hmm..... Are we now going back to Nanny state? We don't trust ourselves. It's like blaming Govt if we lose money in equities using CPF funds. Let Govt lock up our CPF and only release them when we are 55 or 65?

Yes, increasing the interest rate would help. Funds may be diverted from property to other investment vehicles. But if interest rates too high, some companies may struggle if they are over-extended in loans..... Property prices become affordable, but now we have some people who can't afford them as they have been retrenched..... Why during recessions no one complains about affordability of property prices?

Hmmm, should we engineer a recession? Spain, US, UK, and Ireland managed to halve their property prices; it can be done. We experienced it before too during the 1999 Asian financial crisis - although the price decline was not so severe like in the west today.

Anyone interested to migrate to US? That's another possible solution - migration means less Singaporeans to bid up our property prices.

Just my small contribution to this healthy discussion. Life is indeed not black and white.

[hakfong]

the problem i see here is the always changing cpf withdrawal age. it's like a moving goal post. u think u are about to score and before your final kick is taken, the goal post gets moved further back and u have to start running with the ball again.

so, quite a few people are resigned to the perceived fact that they will not see their cpf funds in the future and will rather use whatever they have now in cpf for housing for eg.

[tanjm]

Pension funds in the US and Europe are already under severe pressure to reduce benefits and/or raise the pensionable age. CPF is not alone in this regard. On the government locking away CPF, well unfortunately, I see this as necessary, knowing the nature of many Singaporeans.

People are living longer and longer. Once you hit age 65, you are expected to live to a mean age of 85 (see Singstat.gov.sg). And that's an average life span at that. On average, you will see the money, but it may not be enough, especially if you withdraw it for various purposes.

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I have personally transferred excess funds from my OA to SA, just to get the added risk free interest. Its really hard to beat CPF SA return on a risk adjusted basis. How many people will do this?

[etan]

I was just wondering...

If upon reaching 55 yrs, your cpf money gets lock in for retirement funds, and you still owe the bank some housing loan, and you have reached the Valuation Limit, what are you going to do? You need to fork out cash for the remaining loan. Assuming couples married and have children at age 30 - 35 yrs, by age 55 yrs, their children would be in the 20s, and in uni, all the more they need more cash at this stage.

To some, the income level may be on the downhill. So I think banks and HDB should cap the housing loan at age 55 yrs, not any longer. As everyone knows, HDB prices is shooting sky, not the public housing that we know long ago.

Life is hard in Singapore, work and work, pay and pay, till no end...

Now our PM realised the ground is not so sweet, the seriousness of many problems that went unnoticed and unsolved, so have to apologise and say 'sorry', hoping to pull in more votes, so someone is sleeping on their job...

[corydorus]

People always have the misconception that other developed countries systems are in trouble and ours better. My question to you is who is harping on this ?

There are different way to look at things. Western Pension funds are always in pressure since XX years ago. Not that i support pension fund, but the point is this is mainly government to worry and find a balance way out. In singapore, all this problems is pushed to you to bear at your expenses while they seat easy and recieved top salary compared to any other sensible national governments in the world.

While their governemnt works hard and stressed, to resolve and let their people have Quality lifes, ours put you in Stress, Threaten, Humilate and make you Poorer.

Be Smart on who is Lord and who is Servant.


Cory

[nsengkia]

I have a slightly different perspective on the interaction btw CPF Policies and Housing Prices.
One of the major drivers of rising housing prices is low interest rates. CPF and bank deposit interest rates may be low but it is the bank LENDING rate that is key to driving up housing prices. Bank lending rates are low because housing is a ZERO risk lending proposition for them. Even a US subprime scale magnitude 9.0 property crash will only affect them LAST because BANKS HAVE A FIRST LIEN ON YOUR PROPERTY AND (YOUR) CPF ONLY THE SECOND. So in the event of a major crash, the population's CPF retirement savings will be wiped out first before the Banks loose a single cent. On top of that, loans in Singapore are full recouse to the borrower so the owner, after loosing all his CPF (which if you leave untouched in your CPF account is protected from all lawsuits), may also end up owing the bank.
If you agreee with the above analysis, one solution to moderate housing inflation would be to reverse the order of priority of the lien i.e. (your) CPF has first lien and the bank only the second. The full recourse can stay so that borrowers beware but they will not end up destitute without CPF in their old age. The banks will become more careful on their valuation limits and interest rate chargeable so the amount of cash chasing property will be reduced. The only downside is that the banks become exposed to an economic slump and that may not be acceptable to the most business friendly government in the role even at the expense of their own citizens retirement or lack thereof.
P.S.: And I do not need a $2+ million salary to be able to come up with the above policy suggestion.

[tanjm]

I have a slightly different perspective on the interaction btw CPF Policies and Housing Prices.
One of the major drivers of rising housing prices is low interest rates. CPF and bank deposit interest rates may be low but it is the bank LENDING rate that is key to driving up housing prices. Bank lending rates are low because housing is a ZERO risk lending proposition for them. Even a US subprime scale magnitude 9.0 property crash will only affect them LAST because BANKS HAVE A FIRST LIEN ON YOUR PROPERTY AND (YOUR) CPF ONLY THE SECOND. So in the event of a major crash, the population's CPF retirement savings will be wiped out first before the Banks loose a single cent. On top of that, loans in Singapore are full recouse to the borrower so the owner, after loosing all his CPF (which if you leave untouched in your CPF account is protected from all lawsuits), may also end up owing the bank.
If you agreee with the above analysis, one solution to moderate housing inflation would be to reverse the order of priority of the lien i.e. (your) CPF has first lien and the bank only the second. The full recourse can stay so that borrowers beware but they will not end up destitute without CPF in their old age. The banks will become more careful on their valuation limits and interest rate chargeable so the amount of cash chasing property will be reduced. The only downside is that the banks become exposed to an economic slump and that may not be acceptable to the most business friendly government in the role even at the expense of their own citizens retirement or lack thereof.
P.S.: And I do not need a $2+ million salary to be able to come up with the above policy suggestion.

All that will do is increase the credit risk to the bank lending you the money. When that happens expect the bank to ask for more collateral, higher value to loan ratio (e.g. 50% downpayment), higher interest rates or to simply refuse to lend you money.

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Not that i support pension fund, but the point is this is mainly government to worry and find a balance way out.

There is no free lunch. More benefits given to you without corresponding increase in income means resources have to come from somwhere, whether in higher taxes now, or your children having to bear the burden of funding your benefit.