CPF was "100 per cent safe''

[Temperament]

I have my Plan:B NTUC INCOME SHIELD (Integrated with Medishield)'s premium jumps from $600+ to $900+. Can any "experts" tell me should i revert to Medishield since now we have Medishield LIFE? How can layman like us really understand and make a comparison? We may be comparing apple to orange and still none the wiser.

By the way if we closed our Private Shield Plan, is it automatically we will be covered under Medishield Life now?

Thanks any experts like to explain how to compare and then decide what to do?

[NTL]

I have my Plan:B NTUC INCOME SHIELD (Integrated with Medishield)'s premium jumps from $600+ to $900+. Can any "experts" tell me should i revert to Medishield since now we have Medishield LIFE? How can layman like us really understand and make a comparison? We may be comparing apple to orange and still none the wiser.

By the way if we closed our Private Shield Plan, is it automatically we will be covered under Medishield Life now?

Thanks any experts like to explain how to compare and then decide what to do?

Hi Uncle Temperament,

I am not an expert, but from what I read, MediShield Life will be embedded in Integrated Shield Plans after the implementation. The government will be working with the Pte Insurers regarding a Standard Plan for B1 ward.

I guess the premium increase that you had encountered is due to the change in age band, from 65 to 66. Very likely for MediShield Life, you will be paying a much lower premium of around $500+. If B2 or C wards in government hospital is okay for you, guess dropping IncomeShield and move to MediShield Life is not a bad choice. Once implemented in 2015, MediShield Life is mandatory for Singaporeans and PR, and no one can be exempted.

As mentioned in another thread, I will still wait to see what the Pte Insurers have to offer above MediShield Life before making my own decision.

[Fish Head]

Finally found that people in this forum are with good financial knowledge to understand what is the well being of ourselves and our nation in future. Different with people who are shouting outside just to attract attention.

[Freenasi]

I think Mr Gan has tried his best to give assurance that the gov will offset the premium increase for the first 5 yrs. Now the gov task is to explain to the public whether they have done a good job in achieving its objective of medieshild life. The only time they will know the answer thru the election results. Nevertheless its a good try on the gov side to win back some lost hearts.

[greengiraffe]

http://www.todayonline.com/singapore/cpf...epage=true

CPF monies are safe: DPM Tharman
CPF monies are safe: DPM Tharman
TODAY file photo
Risk on GIC investments are wholly borne by the Government, he says
PUBLISHED: JULY 8, 3:23 PM(PAGE 1 OF 1) - PAGINATE
SINGAPORE — Deputy Prime Minister Tharman Shanmugaratnam today (July 8), reiterated that CPF members’ investments are guaranteed, regardless of the returns on investments made by GIC, the Government’s investment arm.

He also clarified that Temasek Holdings does not manage any CPF monies.

“CPF members bear no investment risk at all in their CPF balances. Their monies are safe, and the returns they have been promised are guaranteed,” he said in Parliament in response to questions from Members of Parliament. “Neither does the CPF Board bear any risk, regardless of whether GIC’s investments earn or lose money in any particular year. The risk is wholly borne by the Government, on its own balance sheet.”

HOW CPF MONIES ARE INVESTED

Mr Tharman said that the CPF Board invests CPF members’ monies in Special Singapore Government Securities (SSGS), issued specially by the Government to the Board. The payout from the SSGS is pegged to the interest rates that the the Board is committed to pay its members.

“The Government guarantees these SSGS bonds, so that the CPF Board faces no risk of being unable to meet its obligations to its members. This is a solid guarantee, from a triple-A credit-rated government. The triple-A credit rating reflects Singapore’s very strong financial position, with the Government’s assets comfortably exceeding its liabilities,” said Mr Tharman, who is also Minister of Finance.

SSGS proceeds are then pooled them with the rest of the Government’s funds, such as proceeds from the tradable Singapore Government Securities (SGS), any government surpluses as well as the proceeds from land sales. These comingled funds are first deposited with Monetary Authority of Singapore as Government deposits, which the MAS then converts into foreign assets through the foreign exchange market.

A major portion of these assets - those of a longer term nature - are transferred over to be managed by GIC.

GIC ‘A FUND MANAGER’

“The GIC does not in fact manage SSGS monies on their own, separate from the Government’s other assets,” Mr Tharman said. “GIC is fund manager for the Government, not owner of the assets and liabilities. It seeks to achieve the Government’s mandate of achieving good long-term returns, without regard to the sources of the funds that the Government places with it – for example, whether they are proceeds from SGS, SSGS or government surpluses.”

Over the past 20 years, there were eight years in which GIC’s investment returns were below what the Government pays on SSGS. However, the Government has a “substantial buffer of net assets” which ensures it can meet its obligations, said Mr Tharman. As a result, “no extraordinary measures” have been necessary to enable the Government to meet its SSGS obligations in the years when GIC’s returns fall short.

“The Government has been absorbing that volatility, and protecting CPF members,” he added. “Our CPF system is hence sustainable, so long as the Government continues to run prudent budgets, and invest the reserves wisely.” CHANNEL NEWSASIA

[corydorus]

Hopefully this truly clarifies. which we can understand why there is no direct linkage between CPF interests and GIC returns.
And is really "100%" safe.

Ofcourse there will always be a group of people who refuses to believe or disagreed.

[CityFarmer]

One common doubt, and has been asked by Mr. Low, and official minister answer was given by Mr. Tharman.

GIC ‘needs to invest over long term’, cannot directly manage CPF

Noting that some grassroots leaders and others have questioned why the Government does not get the GIC to directly manage Central Provident Fund (CPF) monies, Deputy Prime Minister Tharman Shanmugaratnam explained yesterday that should the GIC do so, it will need a very conservative portfolio without the ability to invest over the long term and ride out market cycles.

This is because the GIC would have to focus on ensuring that it is able to meet the Government’s full obligations on the CPF every year, said Mr Tharman, who is also Finance Minister.

The conservative portfolio the GIC would have to manage would not invest much in equities and certainly not in real estate, he added.

“It will aim to just minimise the chance of failure to meet obligations, not maximise long-term returns. That’s what would happen,” said Mr Tharman, who was responding to Workers’ Party chief Low Thia Khiang’s question on why he thought having CPF monies managed and invested as an independent pool would not result in the same returns as that the GIC is able to achieve.
...
http://www.todayonline.com/singapore/gic...manage-cpf

[HitandRun]

Cityfarmer

One other thing that I like to highlight is I believe that the total yield of Govt funds is NOT the weighted average of GIC and Temasek's returns. The Govt also keeps idle cash in its balance sheet that actually drags down overall yield. So far Govt has been too shy to disclose this number or nobody ever asks.... I suspect this figure, i.e. net return on Govt funds, is probably within 3-5%.....

[CityFarmer]

Cityfarmer

One other thing that I like to highlight is I believe that the total yield of Govt funds is NOT the weighted average of GIC and Temasek's returns. The Govt also keeps idle cash in its balance sheet that actually drags down overall yield. So far Govt has been too shy to disclose this number or nobody ever asks.... I suspect this figure, i.e. net return on Govt funds, is probably within 3-5%.....

IMO, in term of performance, we should not include the idle cash not managed by both GIC and Temasek.

In GIC, 10-year long term return in US$ was 8.8%, and Temasek 10-year return was 13%, so it is a valid question to ask why not CPF? The answer was provided, because the mismatch of mandate between CPF board with GIC/Temasek...

Sources

http://www.temasek.com.sg/mediacentre/ne...ilid=19158

http://www.gic.com.sg/en/report/report-o...7yivfndnD0

[specuvestor]

Tharman's response is nothing new from what we discussed here.

Except that MAS could monetise any SSGS bonds that the govt issue to fund CPF in case of any shortfalls. For obvious reasons why this was not stated: to prevent another Pandora's Box.

Cityfarmer

One other thing that I like to highlight is I believe that the total yield of Govt funds is NOT the weighted average of GIC and Temasek's returns. The Govt also keeps idle cash in its balance sheet that actually drags down overall yield. So far Govt has been too shy to disclose this number or nobody ever asks.... I suspect this figure, i.e. net return on Govt funds, is probably within 3-5%.....

Any surplus over the term of the government is locked into the reserves. The flexibility is from the investment returns from GIC and Temasek to fund shortfalls. The payouts from them are subjective like dividend payments, so it's hard to say specifically what is return on govt funds. It's like trying to calculate a holding company's return on funds.

In a certain sense there is no balance sheet per se for the current admin to fall back on but more on a cash basis aggregated every ~5 years.

Of course when push comes to shove, then the current admin can apply to the President to unlock the reserves and debate why. Theoretically that's our system