Major CPF policy shift on the way

[NTL]

> 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?

I think why the government want to include the PRs is so that they have a bigger pool of people to share the cost. That is what insurance is all about, isn't it? A large number of people, paying the cost for a smaller group. The bigger the group, the better for them in adjusting the (cost of) risk. Will it work out this way? Guess only time will tell.

Ohh.. Also to add, those PRs and citizens overseas will need to pay for the premiums right? Wonder if this group will have the chance to enjoy the benefits under MediShield Life.

[specuvestor]

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.

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

Hi CY09/ Yeokiwi

SA interest rate was not always at 4%
http://mycpf.cpf.gov.sg/NR/rdonlyres/5C7...stRate.pdf

We have to use nominal interest rate to calculate return if we are going to incorporate FX effect. Could you guys attach the spreadsheet of the calculation as I am keen to see how the returns of CPF SA and EPF for past 20 years are similar? And if we move it back 10 years to 1982 when SGD and MYR were at parity? I suspect there may be some timing bias when we select the FX value

Thanks

[CY09]

Hi Specuvestor,

No excel, I did on calculator. Exchange rate history of the two countries, I used average $ per unit 100 units of Ringgit on Jan 1992
https://secure.mas.gov.sg/msb/ExchangeRates.aspx

Returns of EPF are found on Yeokiwi's post #112 from his EPF link's PDF (page 195)

Returns of CPF, I assumed compound interest of 4%. Understand you have the exact returns for CPF, perhaps you can do one better

[specuvestor]

Ok roger i see where u get your FX data from and will run my own calculation from there when I'm free and see how it goes. I thought i could piggy back on you guys to save time

[specuvestor]

Hi CY09... took me some time to realise this as your argument on the 1.65 "FX swap" was very compelling but to compare returns we need to use UNIT returns ie how much % return per $

You can't use a 10k base and a 16500 base to compare returns as % returns are quantity indifferent, but if you use IRR on the MYR cashflow through the years adjusted by yearly SGD FX I think the EPF IRR should be lower than CPF SA... I'll try do up the excel

[CY09]

Sorry guys,

have a question. All the recent tweaks about the basic retirement sum etc. I noticed there is still one more medisave minimum sum. So does it mean at age 55, we are actually required to set aside $80,500 + $43,500? And if we have insufficient amount in MA to meet $43,500, will it still be drawn down from our MA/SA first before the reminder of MA/SA goes to our retirement account?

[gzbkel]

Yes.
But for people with very little CPF, the $5000 minimum withdrawal sum at 55 has priority I think.
http://mycpf.cpf.gov.sg/NR/rdonlyres/C7A...ooklet.pdf

Sorry guys,

have a question. All the recent tweaks about the basic retirement sum etc. I noticed there is still one more medisave minimum sum. So does it mean at age 55, we are actually required to set aside $80,500 + $43,500? And if we have insufficient amount in MA to meet $43,500, will it still be drawn down from our MA/SA first before the reminder of MA/SA goes to our retirement account?

[investor101]

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.

Not sure how this way of thinking works. There are tens of thousands of foreigners, including PRs [I don't consider PRs as 'locals'] who do not serve NS and explicitly forbid their own sons from serving NS. It helps that their own sons also see NS as nothing more than a burden and a road block to a smooth career.

With regards to the CPF, the CPF returns are basically compounded. But compound interests only works its full magic when the base number is large and allowed to compound over a long period of time. Otherwise, compound interests gives mediocre returns.

For most Singaporeans, due to heavy usage of CPF to pay for overpriced housing, most Singaporeans do not have much CPF money throughout their working lives. Hence, they benefit very little from the theoretical compounding effect of CPF.

I mentioned earlier before along the lines that if from the start, your CPF base sum grows larger and is allowed to compound fast, it really doesn't matter whether you leave your CPF untouched or put in in an SRS account for better returns. You already are in a league way above vast majority of Singaporeans.

Until most Singaporeans are able to grow their CPF egg net throughout most of their working lives, they stand to benefit little from all the fixes our CPF system has recently made. Overpaying for property is probably gonna do many Singaporeans in.

[Temperament]

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.

Not sure how this way of thinking works. There are tens of thousands of foreigners, including PRs [I don't consider PRs as 'locals'] who do not serve NS and explicitly forbid their own sons from serving NS. It helps that their own sons also see NS as nothing more than a burden and a road block to a smooth career.

With regards to the CPF, the CPF returns are basically compounded. But compound interests only works its full magic when the base number is large and allowed to compound over a long period of time. Otherwise, compound interests gives mediocre returns.

For most Singaporeans, due to heavy usage of CPF to pay for overpriced housing, most Singaporeans do not have much CPF money throughout their working lives. Hence, they benefit very little from the theoretical compounding effect of CPF.

I mentioned earlier before along the lines that if from the start, your CPF base sum grows larger and is allowed to compound fast, it really doesn't matter whether you leave your CPF untouched or put in in an SRS account for better returns. You already are in a league way above vast majority of Singaporeans.

Until most Singaporeans are able to grow their CPF egg net throughout most of their working lives, they stand to benefit little from all the fixes our CPF system has recently made. Overpaying for property is probably gonna do many Singaporeans in.

But the G have to find a way to always make sure you work your WL. No time to think is best.
Many, many years ago, i met a Taiwanese on Changi.beach and he asked me, "Do you have time to think and be creative." Imagine so may years ago that's how a Taiwanese look at us. Is it any better now or gating worse?

[investor101]

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.

Not sure how this way of thinking works. There are tens of thousands of foreigners, including PRs [I don't consider PRs as 'locals'] who do not serve NS and explicitly forbid their own sons from serving NS. It helps that their own sons also see NS as nothing more than a burden and a road block to a smooth career.

With regards to the CPF, the CPF returns are basically compounded. But compound interests only works its full magic when the base number is large and allowed to compound over a long period of time. Otherwise, compound interests gives mediocre returns.

For most Singaporeans, due to heavy usage of CPF to pay for overpriced housing, most Singaporeans do not have much CPF money throughout their working lives. Hence, they benefit very little from the theoretical compounding effect of CPF.

I mentioned earlier before along the lines that if from the start, your CPF base sum grows larger and is allowed to compound fast, it really doesn't matter whether you leave your CPF untouched or put in in an SRS account for better returns. You already are in a league way above vast majority of Singaporeans.

Until most Singaporeans are able to grow their CPF egg net throughout most of their working lives, they stand to benefit little from all the fixes our CPF system has recently made. Overpaying for property is probably gonna do many Singaporeans in.

But the G have to find a way to always make sure you work your WL. No time to think is best.
Many, many years ago, i met a Taiwanese on Changi.beach and he asked me, "Do you have time to think and be creative." Imagine so may years ago that's how a Taiwanese look at us. Is it any better now or gating worse?

I was at my most creative when stress levels were much slower. It was a right mix of stress and work. Just a dose of stress to make you want to do better, but not so much stress that it affects your health and work.

When you are overstressed, with too many deadlines to meet, it often means you are overworked or quite incompetent. Usually, it is the former.

I have foreign friends who tell me that a very new Singapore trademark is an old person toiling away at a menial job like dishwasher, toilet cleaner or dish clearer. No matter how hard they work, no matter how good their work attitude is, they are destined to slog for long hours for low pay, and will die miserable and poor. On the other hand, if these same foreigners see old folks doing line dancing in the park, they will guess that these old folks are not Singaporeans, but are most likely PRCs. And they are often right!