I had mentioned in this blog a few times that our CPF is better than almost any other system out there but unfortunately the best has also turned out to be not good enough.
I am fairly sure the writer didn't understand Lawrence Wong in layman speak what it actually meant that an equivalent US TIPS product would be too costly for us. Besides in many countries they also mug around with their inflation numbers so that the returns from such products are actually less than meaningful inflation.
People also and I don't blame them missed that the present way our CPF is managed is helping us avoid a worse outcome. They don't realize that their CPF money is not stolen but together with the gains from government surpluses invested with half of these gains used to fund the budget. Now if the government were to up the returns for each CPF account holder then there would be less money available for social and other spending. But this is not the big point. What would hit harder is that the rich will benefit more from higher returns than the poor simply because they have more money in CPF.
The CPF is about the best system we could come up with and is much admired internationally. It is just terribly unfortunate that the global financial environment has for now and the foreseeable future made it impossible to be good enough for our needs. In other words, people should seriously think of working for as long as possible. And who should be blamed for this? He is none other than Uncle Sam and his cronies. Now if we do not have Uncle Sam, do we want China to take its place? We would all be worse off.
America understood that a prosperous and strong China is good for America but I wonder if China also appreciate that she will always be better off with a strong and prosperous America. If the Chinese do not grasp this fact, all bets are off and our CPF would hardly matter. How do we tell people not to sweat the small stuff? LKY knew how to persuade his generation on such matters but we have no interlocutor like him for this generation.
I fully agree that the new normal which is a dreadful world was much to do with the yanks. As to whether we should let China, or for that matter, any other power, to replace the crooks from US, we wouldn't know until we try. For sure, Uncle Sam is getting more evil in its surveillance over every and any body including their own and can hardly be called democratic (with the donkey and elephant punch-and-judy distraction), while China may well be heading towards democracy.
ReplyDeleteUnfortunately the public has the perception that their money is being held back to provide jobs for fat cats. The angst is heightened when inspite of scrimping all their lives, their retirement is in jeopardy.
ReplyDeleteHmmm .. this is one post I don't quite agree with you on. "Our CPF is better than almost any other system out there but unfortunately the best has also turned out to be not good enough ...Now if the government were to up the returns for each CPF account holder then there would be less money available for social and other spending. But this is not the big point. What would hit harder is that the rich will benefit more from higher returns than the poor simply because they have more money in CPF."
ReplyDeleteOnly a small portion of the invested returns is spent. The taxes collected regularly generate embarrasing levels of surpluses. The middle class is the one that will benefit most from CPF rate change, not the rich. CPF contribution is maxed out at $5k monthly salary. In other words, its like GST -- a highly regressive tax. And the Fed's printing of money is almost peripheral -- we have raised CPF min sum (and now, add to it, Medisave min too) at a rate of 6% pa, far exceeding inflation and avg salary growth. People have less to withdraw and its deferred further and further.
I think most people are not looking for GUARANTEED returns >2.5%. I think people are saying, if its our funds that you're using to get 9% GIC and 15% Temasek returns, then pls return a fair proportion of such non-guaranteed returns to us. Just like how other countries do it. Especially, when you KNOW that most of us do not have enough savings for retirement & medical. Instead of flogging a dead horse (ie. keep raising it and exhorting us to work longer), don't make our problems worse by sogging away our returns elsewhere.
QE changes everything. If you can get to speak to a GIC fund manager he or she will tell you how difficult it has become to look for yields. QE is also a way for America to get all of us to pay for their mistakes. It is definitely not peripheral.
DeleteAnyway regarding the CPF the main issue is it is not good enough for our needs. How can any pension system be good enough if you spend a quarter to a third of your life in retirement? QE is key and perversely CPF is peripheral. Better give the money back to the people as Dr. Toh said at 55 years old. Some will discover in real life they can't do better than CPF and ask to get back in but almost everyone will realize they have to keep working ....
The critical part isnt the return but
ReplyDeleteThe obvious intention to keep the money from the owner forever
Braking the rule of the game they made
This itself deserve a bank run
Even our malaysian counterparts offer higher rate at 6%.
ReplyDeleteHK has offered an inflation-proof-index funds that takes into account the ever increasing cost of living.
So why can't GIC/Temasek do better than that, instead of delaying payout and imposing the higher lock in rate for its citizens?
Besides those issues, we understand that in the past, when PRs/Foreigners left Singapore, they could withdraw the lumpsum but the condition is to never allowed work again on red dot. Now we have TCJ saying they never keep track of those who have withdrawn. So if you don't keep track, surely you also mean you wont know who are these people who could have gotten their money back and yet, still return to work again?! The fundamental reason why PRs/Foreigners are treated better and more promptly once again over is citizen is just pure class discrimination, period!
The first test of any pension fund is not its returns but whether it is properly funded. Most funds fail this test. In more transparent jurisdictions the public know. There are many funds which also get cash from resource transfers, e.g., Norway and they can do this transparently or opaquely like in Malaysia. The EPF can promise any returns they want but can they keep their promise? Only with luck. They will need to have bomohs along with conventional fund managers. The lucky ones are those who have taken their money out
DeleteFor us, I think every dollar in the CPF is backed by at least three dollars or more in reserves. We are quite uniquely 'over funded' and of course there is a cost.....this public scrutiny of the CPF is good and if done in an open minded and constructive way without alluding to suspicious intent, society will realize how uniquely vulnerable Singapore is. You gotta to protect the home first before you can protect its people. Unfortunately it will also show that the government is just a top boy in a class of failures. In other words, we need them to be better. Nevertheless at the end of the day we have to live with what we have got.
The government has lost the plot and discussion on this issue. They are terrible communicators and many PAP MPs are clueless and populist. A complex subject like the CPF, like any difficult subject, leaders must identify the nub of the problem and guide discussion along ONE SIMPLE IDEA or the whole conversation will go all over the place and descend into chaos. Sadly this generation of leaders no longer have that ability. A more secure society like America can leave it naturally messy and through natural selection with many casualties along the way produce a best solution but if we try that, our society becomes the casualty.
It is very sad that the pap(ists) have lost the heart to care for its own citizens especially those who had stood by the ruling party and survived the tough years of the sixties and seventies. Is this the way the pap(ists) repay their loyal supporters? They even treat foreigners better no wonder people are so uptight about foreign talent though we generally get along very well with anybody under the sun, What a great disappointment!!!
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