Is our CPF money a pension fund?

What is a pension fund? A general definition from Investopedia for pension fund is, ‘A pension fund is a common asset pool run by a financial intermediary on behalf of a company and its employees, to generate stable growth over the long term and provide pensions for the employees when they retire.’

Is the CPF savings a pension fund?  The money is contributed by the employers and employees but it stops there. There is no financial intermediary to invest the fund on behalf of the company and employees to generate a stable growth over the long term and to provide pensions for the employees.  There are agencies taking the funds directly or indirectly to invest for their own interests, to make profits for themselves, and the returns to the owners of the fund are incidental or secondary. The primary objectives of agencies utilizing the CPF funds for investment is for their own benefits, without the approval of the owner of the CPF savings, without any agreement that they are investing their savings for their benefits. Only the CPF Board has a small role in this direction, by buying govt bonds and to return the proceeds to the owners of the CPF savings. That is far from managing and investing a pension fund.

Chris Kuan has made some comments on Roy Ngerng’s article on the CPF fund. This is what he said.

The “funnelling of CPF funds” thingy inferred by Roy is no different from any first world country in the way pension funds invests in government bonds and then how the proceeds move around in the government.

Typically public and private pension funds are required to hold a certain percentage of their assets in government bonds either because it is a regulatory requirement or because it is the prevailing asset allocation strategy. On a regular basis, the government will issue government bonds and a variety of investors buy them including pension funds. The debt proceeds from the issuance of the bonds are then for the government to use at its sole discretion. In most cases, the proceeds are used to cover the shortfall of revenues over expenditures, i.e. used for spending.

However nobody in the first world countries will say that the monies spent are “pension” monies in the same way we should not be calling the monies the Singapore government has given to Temasek or for GIC to manage are “CPF monies”.

So this “funnelling” is not exceptional. The exception is the design of the Special Singapore Government Securities (SSGS) issued to Central Provident Fund (CPF) and maybe the coercive nature of the relationship between CPF and the government but even the latter may not be so exceptional if we think CPF as more akin to a first world national social insurance fund than a pension fund.’

What is wrong with Chris Kuan’s analogy that our CPF fund is similar to other pension funds? In the first place, our CPF savings has never been called a pension fund.  The second point is that there is no direct relationship between GIC and Temasek as the fund managers of the CPF savings. For a long time, both funds even denied investing the CPF funds until quite recently when they admitted to have used the funds indirectly to invest. But there is no agreement or commitment by Temasek or GIC that they are the fund managers of CPF funds and whatever commitments to invest and to return the profits to the owners of the CPF funds. How then can these two funds be recognized as the fund managers of CPF funds?

This is definitely very exceptional for anyone to say that GIC and Temasek are the fund managers of the CPF funds and the CPF is a pension fund managed by these fund managers. They are not. They exist for their own agenda and mission, and have no direct relationship or link with the CPF fund.

What do you think of Fund managers managing the CPF fund without an official agreement and commitments, without any terms of reference as to how the funds will be invested, and how the profits should be returned to the owners of the fund?  I really cannot remember reading any such agreements that the GIC and Temasek are the official fund managers of the CPF fund and have a direct fiduciary duty to the owners of the CPF fund.

Please correct me if I am wrong.  Can we assume that the GIC and Temasek are the fund managers of our CPF fund? Where is the agreement? CPF savings is far from an international fund in the West as described by Chris Kuan. There is no active investment strategies by the CPF Board to maximize profits for the CPF savers other than the rudimentary buying of govt bonds.


Anonymous said...

1 pai kar 'nancy em pee' spoken in parliament sometimes ago that our cpf money is not our money Liao. Reason being there is "ah Kong" ( gahmen) money inside there. And don't even think about withdrawing it out 'cos a botak ah NEH wan to let the retirement age go ...meaning in future ur cpf money go "ka boon" ( gone or disappear into thin air if Temasick or GIC investers fail). As to whether our CPF money is manage by these 2 gahmen investments arm? Simple..left arm goes to "middle arm" then to right arm...sort of indirectly involved in investments but protected by some kind of a securities..then the interests paid was also mediocre or pittance. If oppo never win or form gahmen, 4ever cpf money will be like a kangaroo & citizens never even able to touch it..sigh..

Anonymous said...

Worry not! Worry not!

Got Sg got CPF. No Sg no CPF.

To the rich, CPF is very good!

Just put some spare money into the Enhanced Retirement Sum
and let it grows at quite an attractive rate of 4%pa!

Difficult to find! Good interests Good money! Seldom have!

So....to the rich...CPF is very goooooooooood......


Anonymous said...

Yes smile and be happy with the monthly statements, got a lot of zeros, and feel very rich. Can see cannot touch.

Ⓜatilah $ingapura⚠️ said...

CPF, as the name suggests, is a PROVIDENT fund. There are differences between provident funds and pension funds.

It's up to you to find out what those differences are before wasting time on arguments built on incorrect assumptions.

Anonymous said...

Anonymous 9.51am is very correct!

To some......."can see cannot touch"!

But, to the rich....OK lah....spare money to play/throw around......

The Enhanced CPF sum will become a bequest to his/her beneficiaries after death.

Like extra insurance sum........another investment option....no bad leh.......

So.......to the rich....."can see cannot touch" is OK........


Anonymous said...

Mr Redbean, you are very right. There is nobody managing the CPF money for the interest of the CPF members.

But 70% don't care. What can you do?

Anonymous said...

- Isn't this a compulsory savings scheme that enslaves an open-ended (suka suka) amount of Singaporeans' money for an open ended (suka suka) length of time?

Anonymous said...

Singapore Exchange stocks trading temporarily halted


Lucky things like CPF money withdrawal "temporarily halted" will never happen.