Yesterday, parliament sat to discuss the CPF. It’s been nearly two months since Singaporeans stirred and the national call for the government to be honest and transparent about what they are actually doing with our CPF is still ongoing today. Many truths have finally unravelled over the past two months and more is being exposed each day as we go along.
Since the end of May, there have been numerous attempts by the government to explain their version of what they are doing with our CPF. It first started on The Manpower Blog on 25 May, followed by The Straits Times and Singapolitics. Deputy Prime Minister Tharman Shanmugaratnam and Minister without portfolio Lim Swee Say chimed in last month as well. The government’s feedback portal REACH also did a poll with 1,000 Singaporeans. Parliament also debated the issue at the last sitting and at the current sitting yesterday, where Tharman and Manpower Minister Tan Chuan-Jin had replied to parliamentary questions. PAP’s Member of Parliament (MP) Hri Kumar and Minister for Social and Family Development Chan Chun Sing also held forums with their residents. The other political parties, National Solidarity Party (NSP) and the Singapore People’s Party (SPP) also organised their own forums to get feedback from Singaporeans on the CPF.
There has never been so much debate on the CPF in the recent history of Singapore before. The national interest among Singaporeans to demand for truthful answers from the government has continued for two months now, and will continue as long as answers are not properly given.
Thus far, the government has given textbook scripted answers of their version of the story.
The Government Devised The CPF Minimum Sum To Give Singaporeans $1,200 But Singaporeans Are Only Able To Receive $260?
So the government’s story goes that Singaporeans do not understand what the CPF Minimum Sum is about. The government explains that the CPF Minimum Sum of $155,000 is computed to allow Singaporeans to receive a monthly CPF payout of $1,200 every month or what the government has computed as the basic living expenses necessary for Singaporeans (for a lower-middle income household) – how this computation is done has never been revealed. Yet, where the government finally (somewhat) reveals (for the first time) that possibly about 85% of Singaporeans are not able to meet the CPF Minimum Sum fully in cash, doesn’t this mean that 85% of Singaporeans are unable retire even with the basic amount necessary and are not able to retire adequately?
Also, the government claims that to meet the CPF Minimum Sum, Singaporeans are able to pledge our property to meet half of this amount, but if we do not pledge our property and we only have half of the Minimum Sum, then Tan Chuan-Jin explained that, “What it means is that with your smaller amount, your monthly payout will be correspondingly lesser, and that is all.” That is all?
Doesn’t make sense, does it? Then, so what if you have a policy that allows people to pledge their property as half of the Minimum Sum when it wouldn’t allow you to receive a payout of $1,200 and would at most, be able to receive a payout of less than $600?
In fact, if the property pledge doesn’t serve a practical purpose except to let Singaporeans meet the CPF Minimum Sum on paper but not be able to increase their CPF payouts, then why is it even used as a means to meet the Minimum Sum at all?
Tan Chuan-Jin also revealed that the MPs receive “an average of about 500 appeals annually from members 55 years and older who request to use more Retirement Account savings for housing, (where) … two-thirds of the appeals” are approved. Is it not ironic (and completely unnecessary) that Singaporeans have to appeal to the government to allow us to use our CPF to pay for our homes, only to have to pledge our homes to meet the CPF Minimum Sum, and then might have to sell our homes so that we are able to have even little to retire on? Convoluted much, and unnecessarily so?
Finally, when we look at the actual CPF Life payout that Singaporeans receive, Tharman had revealed in 2011 that the median payout is only a miserly $260. Not surprising, is it, when 85% of Singaporeans are not able to meet the $1,200 mark required in the CPF Minimum Sum, and 70% are not even able to meet the $600 mark?
If 85% of Singaporeans are not only not able to receive $1,200 in payouts but vastly lower amounts of less than $300, doesn’t this mean that the CPF is drastically inadequate and in need of immediate reform?
Is it not perplexing that the government continues to hold on strenuously to a system which has become severely broken?
The Singapore Government Pays Singaporeans The Lowest (Un)fair Interest Rates In The World
Second, the government claims that the 2.5% to 4% interest that the government pays is a “secure” interest which is “fair”. What does “fair” mean, anyway? Interest rates are either high or low. Evidently, the 2.5% interest rate that our CPF largely earn is the lowest in the world for retirement funds. Whether it is “fair” or not becomes then an issue of semantics. Low is low.
So, the government hedges the whole “trustworthiness” of their governance to claim that this 2.5% to 4% interest rate is thus “secure” and Singaporeans should thus feel assured. But what does how much our interest earns have anything to do with the government, and whether we can trust them (or not)? Does that mean that as long as we blindly trust the government, we will be able to blindly believe that the interest rates are good enough? The government has also claimed that, “Both Standard and Poor’s and Moody’s recently reaffirmed our credit (triple-A) rating” but the truth is that it was reported yesterday that, “Moody’s Investors Service says its the outlook on Singapore’s banks remains “negative” over the next 12 to 18 months.“
The government also claims that the 2.5% to 4% interest is a “floor” rate, or the lowest that the government is willing to give. But isn’t this 2.5% to 4% similarly a “ceiling” as the interest rates on the CPF have never gone above this rate since 1999 or for 15 years now? Doesn’t this mean this is also the highest the government is willing to give? Calling this low interest a “floor” rate becomes then, obviously another game of semantics. To Singaporeans, the low interest is quite clearly a ceiling rate, where we can never earn higher interest rates.
If we put aside the play of words and look at the 2.5% to 4% by itself and compare it to all other retirement funds among the advanced countries which earn an average of 6%, then this interest rate is low. It is low (in fact, it is very low). Period. The government can throw in words, such as “fair”, “secure” “a floor rate” to beautify their presentation and try to sway our perception but take that all away, then low is low. Bad is bad.
Even so, the government still hasn’t explained why our CPF Ordinary Account is earning only a low interest of 2.5%. The CPF OA’s interest is pegged to the banks’ interest rates, but why is this so, when our CPF is invested in government bonds? Then, shouldn’t the CPF OA’s interest be pegged to the government bonds, which are earning a higher interest than the banks?
Why Has The Government Set Such A High Minimum Sum But Give Singaporeans Such Low Interest Rates On Our CPF That We Will Never Be Able To Meet The Minimum Sum?
The government might thus claim that the CPF Minimum Sum is set at a level to accord basic living but at no point in time did they explain how they are going to help Singaporeans reach this basic minimum. The government continues to reiterate that the 2.5% to 4% is a “fair” return but where the interest rates have remained at this low level for the last 15 years and where Singaporeans are still not able to meet the CPF Minimum Sum, isn’t it sufficiently clear to the government that at this low interest rate that Singaporeans are earning on our CPF, there is no way that we would be able to ever meet the basic minimum amount required?
Isn’t there a clear disjoint then? Why would the government propagate the CPF Minimum Sum, knowing clear well that at the “(un)fair” and low interest rates that they are giving to Singaporeans on our CPF that we will never be able to meet the Minimum Sum, never be able to earn a basic minimum amount and never be able to retire?
Does it not appear then that the policy making of the government thus seem somewhat hypocritical?
Singaporeans Are Made To Take On The Risks For The GIC’s Investments By Paying With Our CPF
Finally, for the first time ever (again), the government finally admits that Singaporeans’ CPF is indeed invested in the GIC, and finally told Singaporeans the truth after hiding this information for so many decades. Singaporeans have speculated about this for years, however the government has refused to admit to this. However, by June this year, when the floodgates can no longer be held back, the government finally bowed down to public pressure and admitted that they have been taking our CPF to invest in the GIC (and in the past, in the Temasek Holdings).
However, even then, the government continues to claim that by transferring our CPF to be invested in the GIC, the government is letting the GIC take on the “risk” of investment. They claim to give us a low 2.5% to 4% interest because this is a “secure” rate. GIC then takes our CPF to supposedly invest in higher risk investments, and because they apparently take on the “risk”, they get to keep the interest earned.
The government also claimed that, “The CPF has also avoided imposing risk on tax-payers”, but where the interest that the GIC (and the Temasek Holdings used to) earns on our CPF is not returned, this has been described by the Asian Development Bank Institute as an “implicit tax” that the government is making Singaporeans pay. Then, isn’t this a risk that Singaporean tax-payers are taking on, for the government? The government might paint the picture that the GIC is taking on the risk for Singaporeans, but the truth is that Singaporeans are the ones taking on the risk for the GIC, by paying this implicit tax to the government (or is it the GIC?), to help the GIC to stay afloat. Meanwhile, who sinks?
And as if it’s not already bad enough, it does not help that the government itself is on the Board of Directors of the GIC. Then, where Singaporeans are made to take on the risk for the GIC, isn’t the government making us shoulder this unnecessary burden? But wait a minute, isn’t the government supposed to protect Singaporeans? Isn’t there a major conflict of interest here?
The government has also still not chosen to admit this, but if not for our CPF, will the GIC even have this money to use for investment? If so, isn’t it only logical that the interest earned by the GIC be returned to Singaporeans, unless Singaporeans give specific permission for the government and the GIC to take our money away (but have we?). Why is the government giving us the lowest interest rates on pension funds in the world?
Even as the Worker’s Party Low Thia Kiang questioned how it is that the government has to give this convoluted reasoning, when with about $300 billion in the CPF, there are adequate funds in the CPF for it to be managed on its own, to be able to take on the risks and give higher returns to Singaporeans, the government continues to take the stance that it is better for GIC to take on the “risks”.
Mr Low has obviously exposed the flawed in the government’s reasoning but in a bid to hold its ground, the government continues to defend its stance, which has been much weakened by their circular reasoning.
The CPF System Is So Thoroughly Broken Yet The Government Tries To Fix A Leaking Tap By Stuffing A Cloth
By now, it is clear that the CPF has been very badly managed, to put it the most simply. The government has created layers and layers of problems – the CPF Minimum Sum, the Medi-schemes and liberalisation policies as Tan Chuan-Jin had himself admitted that “Many (Singaporeans) have low CPF balances because of … more liberal withdrawal rules which … (have) depleted their CPF savings”.
It is perhaps also contradictory when the government claims that the CPF offers flexibility for Singaporeans for housing and healthcare, when Lim Swee Say at the same time counters that Singaporeans should “defer cash withdrawals”, which thus directly contradicts the idea of this flexibility, doesn’t it?
Yet, instead of admitting that these patchwork solutions do not work and admit that an overhaul is desperately needed for the CPF to function again, the government chose to go through a series of logical leaps and fanciful words, just so to mask the inherent flaws that is running Singaporeans’ CPF into the ground.
It is perhaps pitiful that where the government has such a perfect opportunity now to finally be transparent about how they are managing the CPF and to be honest but the government chose to go back into their tortoise shell, while continuing to dress up the already cluttered and broken CPF in new clothes.
The government needs to acknowledge that what Singaporeans want at this point is a clear admission by the government on the lack of transparency and clarity of the system and to reform the system by going back to the basics of what a pension fund is supposed to do for Singaporeans – which is to allow us to earn enough to retire. And to do so, the government needs to increase the wages of Singaporeans and the CPF interest rates – two of the only and most direct solutions which would immediately resolve the issue facing us today, and to give Singaporeans choice on how to invest and when to withdraw their monies.
Yet, even as the solutions present themselves the most clearly, the government refuses to take them as the government continues to mire themselves in a convoluted pool of mess. It is perhaps most perplexing what the government is thinking when they rather withdraw than engage honestly.
#ReturnOurCPF Event To Ask The Government To Be Transparent To Singaporeans On What They Are Doing With Our CPF And To Reform The CPF System
As a citizen of our country, we cannot sit back and witness the change, or lack thereof, that is happening in our country and allow that to run our country into the ground. It is not a joke when our elderly Singaporeans are unable to retire and when the CPF system is no longer able to meet the needs of Singaporeans, and yet the government is unable to respond adequately. It is not funny.
At some point, we have to decide whether to take a stand or not, and whether to speak up for our rights, for the longer we stay silent on this issue, the longer we do not see the necessary reforms required for our CPF not done, and the longer our lives are put in an uncomfortable scenario that can be dire for our nation in the longer term.
This Saturday, an event will be held to advocate to the government to be transparent on how they are managing Singaporeans’ CPF and to implement real solutions to reform the CPF. Do come down to the event to make your voice heard. We are at a turning point in our country’s history where the activism of ordinary Singaporeans have a big part to play in shaping our country, and to bring it back on the right track. Do come down and join us. Your participation and your voice means each and every thing for our nation.
You can join the Facebook event page here.