Debunking Ten reasons why Singaporeans are pissed off with the CPF contribution system

The following article is written by Gilbert Goh and first appeared in Let’s debunk the points put forward in this article.

Ten reasons why Singaporeans are pissed off with the CPF contribution system

1. The goalpost keeps shifting especially for the minimum sum scheme which will be adjusted to $155,000 from July this year onwards. Every year, the minimum sum increases by an average of 7% in which the authorities justify by saying that the adjustment is for inflation. How can inflation be 7 percent?

TSB: It is not only inflation. There are other costs as well. The costs of medical tests, medicines and hospitalisation for example. And remember that someone will have to manage the funds. Therefore operation costs such as wages will have to be considered. And also the fact that we live longer.

2. The CPF system is initially set up for Singaporeans to use for their retirement purposes in which the employers will contribute 25% and the workers another 25% from their salary. However, nowadays, it can be used for investment-linked insurance products, tertiary educational fees for their children, home mortgage repayment among others and become diluted in its usage as a result. Our low wages here also do not allow our account holders to effectively use their CPF for more than two main purposes.

TSB: So are you saying that Singaporeans are not happy because they have been given choices on how to use their CPF monies? Where do you get your data from? You do realise that the choices are voluntary right? If Singaporeans are truly unhappy, they can always not use their CPF for the different schemes. Or are you saying that Singaporeans are happy to only use their CPF for retirement plan? Make up your mind please.

3. The government tends to adjust the employer part of the CPF contribution during any recession but leaving the employee part untouched, sending the signal that the CPF system is elastic and pro-employer. During any of such downward adjustment, mortgage payors have to fork out cash to pay for the difference.

TSB: It is called good business sense. During a recession it makes sense to reduce the companies’ wage cost so that the companies can continue to thrive and provide jobs for Singaporeans. It is better for your company to pay a reduced sum than not to pay at all because that will mean you are out of job! should have known better.

4. Though the authorities allow parents to pay for the tertiary fees of their children, they have to return the money with interest, angering many Singaporeans in the process. It’s their own money – many argued but the CPF board still insists that the money be returned to the CPF account holders with adjusted interest when they finish their tertiary education.

TSB: Are you saying that the parents are angry because their hard-earned savings are returned to them with interest? Seriously. Who will be angry with that? Or are you saying that the children are angry because they can use their parents’ CPF to pursue their studies? Again seriously. Most of them will be grateful that they do not have to take a more expensive study loan.

5. During the stock bull run of the 1990s, the government allowed Singaporeans to use their CPF money to invest in stocks and other risky financial instruments. Less than 20% of them made money and the scheme was subsequently amended so that less of the risky instruments can be invested. Right now, only investment-linked insurance products and some gold/stocks can be invested using CPF money. Hundreds of millions of dollars of hard-earned CPF were lost during that treacherous period.

TSB: That’s the reason why the Government is reluctant to release all the CPF monies at once. Not all Singaporeans are financially savvy. Your point above is a proof of this.

6. Half of the CPF money in the ordinary account can be withdrawn in cash, after deducting the minimum sum amount, at age 55 but as the minimum sum keeps shifting upwards, it is believed that not many Singaporeans will have enough in their minimum sum scheme let alone excess money to withdraw. Less than half of the current CPF holders can meet the current minimum sum scheme right now.

TSB: See your point (2) above. You yourself admitted that the CPF is a retirement plan. So having excess money to withdraw is just a bonus. Any way you can pledge your HDB flat to form 50% of the minimum sum. Since most Singaporeans own HDB flats, this will not be an issue. Furthermore, the government will be providing assistance, safety nets, to those who do not have ample minimum sum to see through their old age. The Pioneer Generation Package is just one of them.

7. Almost a decade ago during the then-PM Goh Chok Tong era, when the people asked for their money to be released in one lump sum when they retired instead of being given annuity-based installments, they were insulted with stories of withdrawn CPF money lost to women in Batam, used as propaganda to substantiate the government’s stand that it was safer for Singaporeans to withdraw their minimum sum in annuity installments than in one lump sum.

TSB: Are there no truths to the stories? And there are many other stories of life-long savings being lost to bad decisions. Gambling and bad business ventures are some of them.

8. Prior to that, then-PM Lee Kuan Yew had also revealed that our CPF money was used for investments in Temasek Holdings and GIC, angering many Singaporeans in the process. When the giant sovereign funds lost almost $40 billion during the financial crisis in 2008/9 period, people were afraid that their CPF money would not be able to be withdrawn as the money was all gone. Moreover, many people are unhappy that the Prime Minister’s wife Ho Ching is the overall in-charge of Temasek Holdings, which can lead to suspicions of a conflict of interest.

TSB: Are you sure that Singaporeans are angry that their CPF monies are being invested in Temasek Holdings and GIC? Where did your assumption come from? And what has Ho Ching being in-charged of Temasek Holdings got to do with Singaporeans being unhappy about their CPF contributions? You are barking up the wrong tree and really, scrapping the barrel to find the ten points needed for your list.

9. There is also a drastic lack of transparency on how our CPF money is used for investment – how much of this money is actually used for the two sovereign funds, how much was lost during the financial crisis and why nobody wants to talk about it in Parliament. Singaporeans by and large have already accepted the fact that our CPF money is used for investment but the lack of transparency is annoying and frustrating to many.

TSB: There is also a lack of transparency on how your bank savings are being invested and where your insurance money goes to. But you don’t make a big hoo-hah out of it do you? The point is; financial investments are too complex for most people to understand. But you are correct to say that Singaporeans by and large have already accepted the fact that our CPF money is used for investment. But no. They do not want to know the details.

10.The ordinary account still carries 2.5% in interest and the special account 4% and many Singaporeans are unhappy that despite risking it in the sovereign investment funds which historically earn close to 8-9% per annum, our interest rate remains unchanged for the past few decades.

TSB: This is a dead horse. Interest rates are basically pegged to the risks. Your CPF monies are practically risk free. So to be paid 2.5% – 4% is actually above premium. To get 2.5% – 4% in interest for savings that are 100% backed by a government of a country with ‘AAA’ credit rating is not too shabby. As for Temasek and GIC getting higher interest, it is really beside the point. Do you question your bank as to why you receive so little in interest when they earn billions of dollars in profit? I guess not.

Gilbert Goh – A website that helps jobless Singaporeans find new hope in life.

TSB: Your list is not helpful for the jobless Singaporeans.


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