Manpower Minister Tan Chuan-Jin shared an article from Business Insider and talked about “how compounding helps us build up our savings”. He added that this is #NotMagicJustMaths.
I decided to leave a comment on his posting. You can read the text below.
(Unfortunately, my comment was deleted within an hour. 😦 I posted the comment on 14 March 2015 10.00pm but by 10.55pm, it was deleted by Tan Chuan-Jin and I have also been also blocked from commenting on his “public” profile. I am not sure why my comment was seen as being so threatening that it had to be deleted. 😛 I thought that I was only asking questions of public interest. You mean this is not allowed in Singapore?)
Maybe you should really read my comment and the links in the comment to see why the PAP finds it so frightening. Will answering the questions I posed affect good governance?
Hello Mr Tan Chuan-Jin,
Thank you for sharing this article.
(1) You said that the “Special Account … has interest rates ranging from 4-5% and up to 6% from 55 onwards”. For completeness, actually, the CPF interest rates for the Ordinary, Special and Medisave Account is 2.5% to 4%. Singaporeans only earn an additional 1% on the first $60,000 inside their CPF. The rest of their CPF earns only 2.5% to 4%. Also, only Singaporeans 55 and above are able to earn 6% and this is only on the first $30,000 and will only start in 2016.
(2) On the same note, what is the median CPF balance for ALL Singaporeans – do the majority of Singaporeans actually have more than $60,000 inside their CPF? My estimates show that about half of Singaporeans might actually have lesser than that amount inside our CPF. I recall that you said last year that you would be letting Singaporeans know this figure.
(3) You used the Business Insider’s article to highlight how “compounding helps us build up our savings” but the illustration of the article “assumes a 7% annual return”, for the WHOLE PERIOD of investment which gives very good returns. For Singaporeans, we only get 2.5% to 4% and the additional interest is only for specific amounts and age groups. And only Singaporeans aged 55 and above after 2016 will be able to see the “compounding” effect on only the first $30,000 of their CPF and ironically, based on the article that you shared, would mean that because of the short 10 years that Singaporeans will be able to earn 6% before 65, this means that the “compounding” effect will not be as significant. Would the government and/or the CPF Board consider also illustrating a chart that shows how much the low-income earner (of a cleaner earning a mandated minimum basic wage of $1,000), median-income earner and high-income earner would earn at retirement at 65, with the 2.5% to 4% interest, and the additional complications?
(4) Similarly, would the government and/or the CPF Board also consider illustrating a chart to show how the payouts are calculated and disbursed after 65?
(5) Also, the article that you shared assumes that a person invests the money without using it for other purposes. But this is not practical for the purposes of Singapore, where Singaporeans have to also use our CPF retirement funds for housing, healthcare and education. For example, last year, you talked about how Singaporeans have to spend an average of 55% of our CPF Ordinary Account to pay off the housing loans. This complicates the issue. Would the government and/or CPF Board consider illustrating how much Singaporeans would be able to save at 65 for the different income groups, after factoring in how much Singaporeans have to subtract from the CPF to pay for housing, healthcare and education? Also, is it possible to know how much Singaporeans are then losing from their CPF because of the the subtraction?
(6) In addition, Singaporeans also have to pay an accrued interest when we take out the CPF to pay for housing and education. This would mean an additional amount that we would have to pay into the CPF, which again complicates the issue. Is it possible to include the accrued interest into the illustration, if the government and/or CPF Board would be so kind as to do
(7) Additionally, Singapore’s system is also complicated because our CPF is actually invested in government bonds, which are then invested in the reserves which are managed by the GIC (and where some of it was channelled into the Temasek Holdings). Today, the CPF earns a declared 2.5% to 4% while the GIC and Temasek Holdings earn an estimated 6% to 16%. Singaporeans are losing as much as half of our CPF to the government because of this. If the government and/or CPF Board were to illustrate how much Singaporeans would earn at 65, would the government and/or CPF Board also illustrate how much Singaporeans are also losing to the GIC and Temasek Holdings, and therefore the government?
(8) Also, the government has previously not admitted to how our CPF is actually invested in the GIC and Temasek Holdings but I was managed to trace how the CPF is invested in these two agencies. The government thereafter deleted the information from the websites where I had traced the information. Also, the government claims that it “does not interfere” in the GIC and the GIC also up until last year claimed that it does not know if it uses our CPF to invest because this is “not made explicit” to them by the government. However, the prime minister, two deputy prime ministers, several ministers and ex-ministers also sit on the GIC’s board of directors, so clearly there is a conflict of interest. Finally, the government denied that the CPF is invested in 2001, 2006 and 2007 and made an about turn last year and admitted to this. Would you like to comment on this as well?
(9) Finally, the CPF interest rates of 2.5% have been found to be the lowest among all retirement funds in the world. This means that Singaporeans are earning the lowest returns, which also explains why many of our elderly Singaporeans are unable to retire today, and so many foreigners who come to Singapore constantly ask Singaporeans why our elderly Singaporeans have to work in menial labour and and are unable to retire. It is quite embarrassing that as a developed country with one of the highest GDP per capita in the world, we cannot afford to take care of our elderly. Do Singaporeans have to tell foreigners that our elderly Singaporeans cannot retire because the government does not take care of them? Would the government consider increasing the CPF interest rates to 6% for all age groups and for all amounts, so that all Singaporeans will be able to save enough to retire, and the “compounding” that you highlighted here will actually come true? #NotMagicJustMaths Or would the government consider allowing the management of the CPF to be transparent, similar to the Hong Kong’s system where their citizens are able to choose where their retirement funds are invested in, how much they can earn and really take responsibility for their own funds?
(10) Last but not least, the GIC and Temasek Holdings are today ranked the top 10 sovereign wealth funds in the world but the CPF has been ranked by the OECD as the least adequate among OECD and Asia-Pacific countries. May I know why there is this discrepancy, where the GIC and Temasek Holdings, which take the CPF retirement funds of Singaporeans to use, are able to earn so much, but where Singaporeans have to actually earn so little in our retirement funds? If the GIC and Temasek Holdings are able to earn so much, surely our CPF should also rank as one of the most adequate? May I know what happened along the line when the CPF was taken away to be given to the GIC and Temasek Holdings to use? Perhaps instead of investing the CPF in government bonds, then into the reserves and then into the GIC and Temasek Holdings, it would be more transparent and direct if the CPF of Singaporeans are directly invested in funds which Singaporeans have a direct say over and where Singaporeans are able to manage for ourselves. This way, even as the government wants to be secretive about the GIC, the government can do that for all they want and the CPF retirement funds of Singaporeans are still protected and where the management of the funds will then be transparent and accountable.
In Deputy Teo Chee Hean’s words, “what do you think?” I look forward to receiving a response from you.
Just to add, I think young people in Singapore understand how “compounding” can help us to “have a lot of money”. I think on the contrary, Singaporeans believe that the PAP government does not understand this.
Roy Ngerng Yi Ling
So, what do you think? Do you think the questions should have been answered?
Since Tan Chuan-Jin does not want to answer my question, he might answer yours.
You can share my blog post or better still, copy and paste the questions onto your blog, Facebook and/or Twitter and put the hashtag #NotMagicJustMaths right at the front. This is the hashtag that Tan Chuan-Jin used in his post so he is likely to also take note of your post.
If you think the questions asked are reasonable and fair, and that the government should answer to them, share the questions and get the government to answer to them.
(My comment was deleted but you can see the full screenshot that I took of my reply, before it was deleted. 😦 )