CPF: Wages Increased (by 0.1%), But We Still Want to Raise Your CPF Contributions – For Investments

Yet again, the government has released news that the wages of Singaporeans have increased and that we should be grateful, please.

The Straits Times reported today that, “Last year’s average wage growth beat inflation”. Wages, excluding employers’ CPF contributions, increased by 5.3%, beating inflation’s 5.2% growth by the grand proportion of 0.1%.

The Straits Times had also reported that, “But most people might have thought… that their salaries were not growing as quickly as the size of their bills.” So, Singaporeans, your wages have increased, so stop complaining. So stop asking us to increase your wages!

In fact, “Deputy Prime Minister Tharman Shanmugaratnam said that as most Singaporeans are not buying new cars or renting, they would not feel the full impact of inflation, (which would be)… closer to 3%.” According to the report, wage increases in all sectors were above this figure. So, be thankful, Singaporeans. All of you had a wage increase!

Is this part of an elaborate scheme by the government to release news of the wage increments, so that we will learn to be contended? First, PM Lee Hsien Loong had proposed that wages would be increased by 30% in 10 years, but pegged to productivity growth. This proposal has been debunked. Next, Mr Lim Swee Say had proposed to raise the wages of at least 10,000 low wage earners to $1,000 by 2015 – but 10,000 would only account for 3% of the almost 300,000 CPF members who earn less than $1,000 per month. And now, the government has released news that our wages have increased, on average, by 0.1%, after accounting for inflation – it’s good! This is in spite of how the wages of the lower wage earners have actually decreased by 1.5%. These news have all been framed to remind Singaporeans of what the government is doing for us – “we are increasing your wages”, even if the proposals are near impossibilities or the effect is too insignificant to be of use. These are token gestures. They aren’t interested to increase our wages. 

Minimum Sum for CPF to Increase from 1 July

On 30 May, the CPF Board had also released news that from 1 July, the Minimum Sum for CPF has been raised from $131,000 in 2011 to $139,000 in 2012, which is a 6% increase. The CPF Board would also like us to know that according to the initial proposal, the Minimum Sum was expected to increase by 9% but the CPF Board had magnanimously “spread out” the increases over four years. We only need to pay an additional 6%.

The CPF Board had said that the Minimum Sum had needed to be increased because of “inflation, longer life expectancies and Singaporeans’ rising expectations of their quality of life post-retirement.”

However, the CPF Board had only explained how the factor of inflation had contributed to necessity for the increase in the Minimum Sum. It does not explain how “longer life expectancies and Singaporeans’ rising expectations of their quality of life post-retirement” also accounts for the increase. In the first place, how Singaporeans’ rising expectations calculated, how does this calculation, if any, gets factored in into the increase?

According to The Straits Times, inflation had grown by 5.2% in 2011. If the CPF Board had wanted to increase the Minimum Sum in tandem with inflation rate, the Minimum Sum need only be increased by 5.2%, and not 6%. Does this mean that the 0.8% increment was to account for the “longer life expectancies and Singaporeans’ rising expectations”?

However, what this 0.8% means in additional monies collected by the Singapore government is of a greater significance. According to the CPF Board’s Annual Report, “In 2011, the total members’ balances grew by 11.7% from $185,888.0 million to $207,545.5 million.” Just a 0.8% increment alone would mean an additional $1.66 billion. Thus in total, the 6% increase in Minimum Sum would net the government another $12.68 billion collected in monies. This is significant because our CPF monies are used for investment by the Singapore government’s investment arms, GIC and Temasek. Read further to understand how this is so. 

CPF Members to Continue to ‘Enjoy’ 4% Interest Rates on Special and Medisave Accounts

In another news release by the CPF Board on 15 June, “the average yield of the 10-Year Singapore Government Securities (SGS) “plus 1%, from 1 June 2011 to 31 May 2012, works out to be 2.72%.” (The CPF is invested in SGS. We will understand this in greater detail later.) The government had said that, “Savings in the Special and Medisave Accounts (SMA) currently earn either 4% or the 12-month average yield of the 10-Year SGS plus 1%, whichever is higher.” Thus, accordingly, the SMA interest rate payable to CPF members will be maintained at the current floor of 4%.” Thus it seems like the government is continuing to be magnanimous – the government continues to give Singaporeans a higher interest rate of 4% on our CPF SMA, even though the investment of our CPF in SGS rakes in only 1.72%. Is this true? Is our government really being kind? 

According to the Ministry of Finance (MOF), “Special Singapore Government Securities (SSGS)… are Government bonds issued to the CPF Board. CPF monies are invested in these special securities which are fully guaranteed by the Government.”

In addition, MOF lists the CPF monies as a liability. It is also said that the reserves “refer to the total assets minus liabilities of the Government (and other entities specified in the Fifth Schedule under the Constitution)… Our reserves are managed by three agencies – the Government of Singapore Investment Corporation (GIC), Temasek Holdings (Temasek) and the Monetary Authority of Singapore (MAS).” Thus MOF states here that the CPF monies are not used by GIC or Temasek for investments, as the CPF monies are not part of the reserves. 

MOF Says CPF Is Not Invested in GIC and Temasek but Invested in SGS. Not True? 

According to The Economist, Singapore’s public debt stands at US$214,902 million, which is roughly S$269,615 million. However, according to MOF, “There is no net Government debt. Singapore is in fact a net creditor country, not a debtor country.” MOF has also added that, “No Government borrowings are for spending. Under the Reserves protection framework in the Constitution, the Singapore Government cannot spend the monies raised from Singapore Government Securities (SGS) and Special Singapore Government Securities (SSGS). SGS are issued to develop the domestic debt market and SSGS are bonds issued to the Central Provident Fund (CPF) Board with full Government guarantee. All borrowing proceeds are therefore invested (and this would include the CPF).” The MOF had also said that, the “total outstanding Government borrowing was S$354b as at December 2011. This comprised S$59b of T-Bills, S$79b of SGS bonds, S$216b of SSGS.” Thus the MOF has also stated that the government had borrowed S$216 billion from the Special Singapore Government Securities, which is also our CPF. The overall CPF monies collected in 2011, according to CPF’s Annual Report, is S$208 billion. 

According to MOF, “As of 31 March 2012, the size of Temasek’s portfolio was S$198 billion.” GIC’s funds are not published but it “has been revealed is that GIC manages well over US$100 billion.” 

Thus this suggests that even though our CPF monies are not directly used for investment by GIC and Temasek, the CPF monies is, however invested in the Special Singapore Government Securities, which are then borrowed for investment by GIC and Temasek. I had discussed about this in a previous article. Professor Balding had also discussed this in his article

Why has the MOF chosen to state that the CPF monies are not part of our reserves, and thus suggesting that they are not managed by GIC and Temasek, when in actual fact, the MOF has undergone a complicated process of firstly investing our CPF in Special Singapore Government Securities, which are then borrowed by MOF to be used for investment by GIC and Temasek? One can only question – why does the government choose to go through such a complicated process of shifting our money around? What are they trying to hide?

This brings to my mind the recent arrest of Pastor Kong, who was accused of fraud, by channelling the church funds in a similar way. 

According to the MOF, “Temasek’s Total Shareholder Return since inception (1974) was 17% p.a. in SGD terms,” and the rate of return on the GIC-managed portfolio over 20 years is 7.2%. This is significantly higher than the 1.72% that the  Singapore Government Securities (SGS) had earned. The government had positioned themselves as having ‘kindly’ allow a 4% interest rate on our CPF Special and Medisave Accounts, higher than the investment of CPF in SGS which had earned only 1.72%. However, the truth is that our CPF is invested in SGS, which is borrowed for investment by GIC and Temasek, which means that on top of the 1.72% interest in SGS, the investment returns from the borrowing from SGS (and our CPF) has also netted another 7.2% through GIC’s investments and 17% through Temasek’s investment – the real interest rate that the investment from our CPF monies is netting. In short, the government has chosen to position themselves in being magnanimous by giving us a 4% interest rate on our CPF SMA, apparently higher than the interest gained at 1.72% when what we should really be comparing this 4% interest rate is against GIC’s 7.2% and Temasek 17% interest rate. The government has short-changed us! Where did our 3.2% and 13% respectively go?

In Summary:

  1. The MOF states that our CPF is part of liabilities, which they state is not part of the reserves. It adds that only the reserves are used by GIC and Temasek for investment and thus the CPF are not used for investment by GIC and Temasek.
  2. The MOF states that our CPF is, however, invested in Special Singapore Government Securities (SSGS).
  3. The Economist had stated that Singapore’s public debt is $270 million. However, the MOF states that there is “no government debt”. This money is actually borrowed from the Singapore people.
  4. The MOF had stated that the government borrows S$216 billion of from the Special Singapore Government Securities (SSGS), which is where our CPF monies are invested. (The CPF monies collected in 2011 is $208 billion.) (There is some discrepancy between the three figures ($270 billion, $216 billion and $208 billion) but they are essentially the same – the government borrows our our CPF/SGS for investment in GIC and Temasek, which is also counted as debt.)
  5. The MOF states that “no government borrowing are for spending” and that, “all borrowing proceeds are therefore invested.”
  6. This investment is made through GIC and Temasek. Our reserves is thus made up of money borrowed from the S$216 billion of from the SSGS, which comes from our CPF. The reserves are managed by GIC, Temasek and the Monetary Authority of Singapore (MAS). Singapore’s reserves is S$304 billion. Temasek’s portfolio was S$198 billion. GIC manages well over US$100 billion.
  7. Clearly, our CPF monies are thus invested in GIC and Temasek.
  8. The CPF Board had stated that the interest rate for the CPF Special and Medisave Accounts will remain at 4%, even though “the  average yield of the 10-Year Singapore Government Securities (SGS) “plus 1%, from 1 June 2011 to 31 May 2012, works out to be 2.72%.”
  9. However, “Temasek’s Total Shareholder Return since inception (1974) was 17% p.a. in SGD terms,” and the rate of return on the GIC-managed portfolio over 20 years is 7.2%.”
  10. If our CPF monies is indirectly used for investment in GIC and Temasek, shouldn’t we obtain a higher interest rate for our CPF, based on a 7.2% or 17% interest rate? Where did our 3.2% and 13% investment returns go to?
  11. If the government is earning an interest of 3.2% and 13% which is not returned to us, why are we expected to make a higher payment for the CPF Minimum Sum, when they would have more than enough money to fund our retirement funds? 

Tell Us The Truth!

If this is the real story, then the questions we need to ask is this:

  1. Why did MOF not tell the story of how our CPF monies is used, and actually invested in GIC and Temasek, directly? I had to click through several different webpages before I could find a straight answer, or rather, find a straight answer by myself through a convoluted process.
  2. Why is CPF Board increasing the Minimum Sum by 6% when firstly, 6% is higher than 2011’s inflation rate of 5.2% and secondly, the indirect manner in which the CPF is invested has already net 7.2% interest with GIC and 17% with Temasek? The investment earnings can more than cover any increases that the government needs. Shouldn’t the government takes from its coffers first, when there is more than enough, instead of taking from the people’s wallets?
  3. Why are we not getting a higher interest rate on our CPF when the CPF monies that is indirectly invested in GIC and Temasek net a 7.2% and 17% interest rate respectively?
  4. What considerations did the CPF Board and the government use in deciding to increase the CPF Minimum Sum contribution by 6%? Is it really because of “inflation, longer life expectancies and Singaporeans’ rising expectations of their quality of life post-retirement,” or or is it because the government wants more monies for investment via GIC and Temasek Holdings?

According to an article on The Online Citizen, only “1 in 8 (CPF Members)… were able to meet the minimum sum balance”.

  1. Why is the government increasing the CPF Minimum Sum when already, so many Singaporeans are not able to meet the requirement?
  2. Why is the government increasing the CPF Minimum Sum when it can more than afford not to?

If the aim of CPF is to be a “comprehensive social security savings plan that has provided many working Singaporeans with a sense of security and confidence in their old age,” can we really feel secure and confident that we can honestly know how the government makes use of our CPF, our savings?

The CPF is our money, our savings. The government has a responsibility and needs to be honest with us about how they are using OUR money for THEIR wealth. The MOF has, I would argue, purposely provided a complicated and convoluted picture of how our CPF is invested so that we would not be able to draw the link that our CPF is actually netting interest rates of 7.2% or 17% – so that we will remain satisfied that the 4% is actually higher than what we would have otherwise gotten, and we should really be grateful for our government. Really? We should be grateful because they have not been honest to us about how our money is being used and prevented us from knowing the truth? Really? 

Lest I remind you that our CPF monies is actually 4 times higher than our tax revenue. The government keeps harping on how our tax is only between 4% to 20%, much lower than that of the other developed countries. They also explain that because of the lower tax, the Singapore government doesn’t have enough money to redistribute to Singaporeans and thus public expenditure (on healthcare and education etc) by the government has to remain low, by their excuse. What has been done is easy trickery where the tax rate is made low, so that Singaporeans are made to think that there won’t be enough for public expenditure. The government can then use our CPF, which is 4 times higher than the tax returns, for investment, instead of redistribution. By keeping the money in their coffers for a longer time and dispensing at little amounts only when we grow old, the government need not start distributing the monies back to us immediately. This gives them a larger pool of monies for investment purposes right at the start. 

The government needs to be honest to us. What are they doing with this money – saving it for a rainy day? What rainy day? Is it because they are really worried that there will be a rainy day, or is it because they have already found purposes for the money, which does not involves giving back to Singaporeans? 

(Note: This article was intended to discuss the impact of the wage growth or lack thereof on the low-wage workers, but as I conducted further research, a more pressing issue came about and thus I had focused on that in this article. However, if you look at the report, “salaries rose least in the administrative and support services, at 3.7%. The industry includes employment agency staff, security guards, cleaners, gardeners and office administrative staff. Factor in inflation, and the real wages for these workers actually fell – by 1.5%.” Thus far, the only proposal aimed at increasing the lot of these workers were when Mr Lim Swee Say had announced that the “National Trades Union Congress (NTUC) is targeting to raise the wages of 10,000 cleaners to at least $1,000 a month by 2015.” 10,000 is a small number when there are still about 294,264 CPF members earning less than 1,000 every month. Mr Lim’s proposal would only improve the lives of 3% of the low wage earners. Just 3%.)


  1. Pingback: Our CPF Monies: Truth Denied From Us « The Heart Truths

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