CPF savings 'may not be enough for old age'

[tanjm]

someone once said cpf is just a cheap source of funds for investment corp let them try borrowing from capital markets at international rates.

Singapore can borrow in USD and freely swap to SGD using the very liquid interest rate swap market. And our SOR rates are currently very low and SG government is rated AAA. I don't know what 10Y swap rate is like now, but it should be close to the 10Y bond yield which is currently at 1.65%.

In other words, i don't think CPF is a particularly cheap source of funds.


Or.... let's put it another way.

Supposing the SG gov gets an average of 100 billion dollars at 2.5% for an average duration of 10 years. Where do you think it can put 100 billion dollars risklessly to earn more than 2.5%? The short answer is: it can't. The money that CPF members "lend" the government is just sitting on the books. Effectively, the government is giving you money via the interest.

[Contrarian]

The main problem is our Govt's stubborn stubborn refusal to accept alternative methods of treatment and prevention.

PM Lee did not mati after cancer treatment. Why? China despatch top cancer TCM surgeon to boost his immunity. He also learned meditation.

Charlie Munger said... 1 ounce of prevention, better than 10 tons of cure.

Best prevention is EXERCISE constantly... and look for TCM, Ayuvedic... Western doctors? Most expensive fire fighters... MOH approved, medisave allowed!!!




The main problem with healthcare services is the shortage of medical staffs, doctors and nurses. It is easy to build a hospital but it cannot run without medical staffs.

The number of nurses that Singapore trains is pretty high but so is the attrition rate. Most foreign nurses will move to private hospitals or overseas once their local contracts with public hospitals are over.

As for doctors, the building of medical school also requires the school to recruit enough teaching staffs.

Therefore, doubling of healthcare spending may not actually help. Got money but no people to take the money. Unless you want FTs to flood the local medical institutions.



[/quote]

[Bibi]

Supposing the SG gov gets an average of 100 billion dollars at 2.5% for an average duration of 10 years. Where do you think it can put 100 billion dollars risklessly to earn more than 2.5%? The short answer is: it can't. The money that CPF members "lend" the government is just sitting on the books. Effectively, the government is giving you money via the interest.

I heard that Malaysia govt is giving >4% of CPF interest. How is it our neighbour govt can give out such high interest while ours cant or refuse to?

[d.o.g.]

Supposing the SG gov gets an average of 100 billion dollars at 2.5% for an average duration of 10 years. Where do you think it can put 100 billion dollars risklessly to earn more than 2.5%? The short answer is: it can't. The money that CPF members "lend" the government is just sitting on the books. Effectively, the government is giving you money via the interest.

A look at the CPF Board's 2010 annual report is instructive:

http://mycpf.cpf.gov.sg/CPF/About-Us/Ann...F_2010.htm

The financial statements can be directly downloaded here:

http://mycpf.cpf.gov.sg/NR/rdonlyres/703...ements.pdf

Turn to page 4 and look at the list of assets. You will notice that out of the CPF Board's $188bn in total assets, only $675m is in cash. The bulk, $185bn, is in "investments". So what the heck are these "investments"? Let's go to page 19, where under Note 6 (a)(i) it is shown that $160bn is in floating rate special issues of Singapore Government securities.

What is so special about these securities?

From the annual report itself, verbatim:

The floating rate special issues of Singapore Government securities are bonds issued specifically to the Board to meet its interest and other obligations. They do not have quoted market values and the Board cannot trade them in the market. The interest rates of 2.50%, 3.50%, 4.00% and 5.00% (2009: 2.50%, 3.50%, 4.00% and 5.00%) per annum for the securities are pegged to the rates at which the Board pays interest to the members of CPF.

In other words, the Singapore government has borrowed $160bn from CPF members. It pays various rates of interest which match what the CPF pays its members.

The CPF Board cannot sell these special bonds. So if members draw down their accounts to pay for housing etc, beyond the cash on hand, the CPF Board can only pay these withdrawing members with money coming in from other members' contributions. The observant will immediately see the parallel with Ponzi schemes, where one person's withdrawals are funded by another's contributions. I am not saying that CPF is a Ponzi, just that the cash flow mechanics are similar.

Now, what could the Singapore government do with $160bn? Officially, the Budget is usually balanced or runs a small surplus, so the $160bn hasn't been spent. Logically, then, the government still has this money. WHERE could it put this money? The only government entities I know of that could possibly use such large sums of money are Temasek and GIC.

So the logical conclusion is that the government has borrowed money from the CPF members in order to give Temasek and/or GIC funds to invest. Have Temasek and GIC made more than 4% per year? According to published media reports, yes, which means Temasek and/or GIC may have made (and kept) excess profits.

If the bonds were created solely to allow the CPF Board to pay interest to its members, it seems like a very convoluted way to do it, since the Government could simply make a direct payment of the required interest to the CPF Board to pass on to its members, without having to go through the mechanism of creating these special bonds, issuing them, paying coupons, tracking maturities etc.

But by creating these bonds for the CPF Board to buy, the government can not only pay the interest to the CPF Board, but also get access to the principal sums that CPF members have socked away over the decades. $160bn is not small when you consider that Singapore's GDP is around $200bn. In other words, our national debt-to-GDP ratio is actually 80% even though we all think that Singapore is financially very strong etc.

Of course, since the debt is owed internally, to ourselves, the government can always print money if needed. This is similar to Japan which has a debt/GDP ratio of over 200% and most of the debt is held by Japanese. Fortunately, unlike Japan where the borrowings are used to fund the budget, and inability to borrow more could precipitate economic collapse, in Singapore's case the budget is funded from tax revenues, so if the government suddenly becomes unable to borrow more from CPF members, there should not be any material impact.

This is not meant to induce a panic among CPF members. But they should understand that the statement of accounts the CPF Board sends them is completely fake - the various balances are mere paper entries and the money is not there at all - it's been lent to the government. Of course, the same can be said of bank statements, that the money is just book entries, but at least you can take out your bank account balance in physical cash... whereas with the CPF you have all sorts of restrictions, among them the Minimum Sum.

[sgd]

someone once said cpf is just a cheap source of funds for investment corp let them try borrowing from capital markets at international rates.

Singapore can borrow in USD and freely swap to SGD using the very liquid interest rate swap market. And our SOR rates are currently very low and SG government is rated AAA. I don't know what 10Y swap rate is like now, but it should be close to the 10Y bond yield which is currently at 1.65%.

In other words, i don't think CPF is a particularly cheap source of funds.


Or.... let's put it another way.

Supposing the SG gov gets an average of 100 billion dollars at 2.5% for an average duration of 10 years. Where do you think it can put 100 billion dollars risklessly to earn more than 2.5%? The short answer is: it can't. The money that CPF members "lend" the government is just sitting on the books. Effectively, the government is giving you money via the interest.

using that guesstimate 100 billion at 2.5% is 2.5 billion a year, 25 billion in 10 years.

If as you say the money is on the books and garmen giving me money via interest then my next question is where are they getting money to pay us if they are not investing the money? It Doesn't make sense.

My own guess is they have our cpf invested here and there, the bulk of which is in US treasuries - safest investments in the world(until very recently ) - it has to be and according to wikipedia singapore holds 62b worth of US treasuries.

The remainder of the money is in various investments around the globe probably another guess here in long term investments that support population growth like china banks stocks, telcos stocks in the region and real estate properties that generate rental income.

So yes I still think cpf is a cheap source of funds for government. They can access it anytime on pretext of "investing on our behalf".

[pianist]

no wonder using cpf vs using cash to buy stocks has a different meaning.

[rafflesplaceguy]

To D.O.G: Some parts of your arguments, seems slightly flawed to me.

On the section where you mentioned about members withdrawing their CPF monies for purposes such as housing, in the books of the CPF Board, a withdrawal by a CPF member from his account is a reduction in the liability (i.e. a debit) of the CPF Board. From the accounting pov, since CPF Board cannot sell the bonds it is holding, the CPF Board must record a credit somewhere and I can only think of recording as a transfer to the Govt (e.g. HDB Board) or a transfer to the banks (for members who are servicing their mortgages from their OA account). While members continue to contribute to their CPF accounts, one should also not forget that most of the members also withdraw from their CPF accounts for a variety of reasons, especially for housing. And property prices being where they are now, I don't think it is unreasonable to assume that whatever monies that goes into the OA, is quickly withdrawn to service mortgage payments.

And finally, on your assertion that CPF statements are completely fake, I think you should have been careful with your choice of words. (And no, I don't mean from a legal point of view). Would one call their own bank statements fake then, since we all know that at any one point of time, the bank doesn't hold all the depositors' balances in cash.....And going by the logic of your arguments, should we also then label banks' operations as "parallel with ponzi schemes, where one person's withdrawals are funded by another's contributions.... that the cash flow mechanics are similar."?

[freedom]

someone once said cpf is just a cheap source of funds for investment corp let them try borrowing from capital markets at international rates.

Singapore can borrow in USD and freely swap to SGD using the very liquid interest rate swap market. And our SOR rates are currently very low and SG government is rated AAA. I don't know what 10Y swap rate is like now, but it should be close to the 10Y bond yield which is currently at 1.65%.

In other words, i don't think CPF is a particularly cheap source of funds.


Or.... let's put it another way.

Supposing the SG gov gets an average of 100 billion dollars at 2.5% for an average duration of 10 years. Where do you think it can put 100 billion dollars risklessly to earn more than 2.5%? The short answer is: it can't. The money that CPF members "lend" the government is just sitting on the books. Effectively, the government is giving you money via the interest.

check SG 10 year bond rate pre-2007 or SOR, whatever swap rate pre-2007. it was easily 5 - 10%. but CPF rate is still 2.5%.

---

someone once said cpf is just a cheap source of funds for investment corp let them try borrowing from capital markets at international rates.

Singapore can borrow in USD and freely swap to SGD using the very liquid interest rate swap market. And our SOR rates are currently very low and SG government is rated AAA. I don't know what 10Y swap rate is like now, but it should be close to the 10Y bond yield which is currently at 1.65%.

In other words, i don't think CPF is a particularly cheap source of funds.


Or.... let's put it another way.

Supposing the SG gov gets an average of 100 billion dollars at 2.5% for an average duration of 10 years. Where do you think it can put 100 billion dollars risklessly to earn more than 2.5%? The short answer is: it can't. The money that CPF members "lend" the government is just sitting on the books. Effectively, the government is giving you money via the interest.

using that guesstimate 100 billion at 2.5% is 2.5 billion a year, 25 billion in 10 years.

If as you say the money is on the books and garmen giving me money via interest then my next question is where are they getting money to pay us if they are not investing the money? It Doesn't make sense.

My own guess is they have our cpf invested here and there, the bulk of which is in US treasuries - safest investments in the world(until very recently ) - it has to be and according to wikipedia singapore holds 62b worth of US treasuries.

The remainder of the money is in various investments around the globe probably another guess here in long term investments that support population growth like china banks stocks, telcos stocks in the region and real estate properties that generate rental income.

So yes I still think cpf is a cheap source of funds for government. They can access it anytime on pretext of "investing on our behalf".

the holding of US treasuries of Singapore, is probably not CPF money, but the foreign reserve in USD.

CPF is SGD, probably will go to Temasek more than GIC.

[sgd]

This is quite old

but it supports my view why I think cpf money is invested overseas.

[freedom]

a lot of CPF money stays in Singapore as well. e.g. PSA, Singapore Power, Changi Airport, etc, if I am not wrong, all wholly owned subsidiary of Temasek, which is mostly fund by CPF money.