CPF, a simple effective schemeinto a complicated failed scheme

When the CPF was first introduced it was a simple savings scheme for retirement. You put some money aside and when you retired you take everything out at 55. Simple and neat. Under that system and at one time at 25% + 25%, if I am not wrong, the savings grew rapidly, helped by 6% or 7% interest rate. Everything was fine, really. There were great trust and faith in that system.

When the savings got too big, people started to get clever ideas, just like the foreigners queuing outside our PM and DPM Finance’s offices asking for financial help. The foreigners know that we have a lot of money to give if they know how and what to say. We have been very generous when they rubbed us the right way.

Now where am I? Oh, the people have a lot of money in their CPF accounts. There is no need to sell HDB flats so cheaply right? The people were rich and could afford to pay more for their flats. Along the way some got carried away and HDB flats were priced to suit the savings of the people. Very affordable indeed! The more the people saved, the higher the HDB prices. The people could afford to pay until nothing left in this affordability game.

This should be a good thing if the people had paid all their savings for the flats, no need to pay them interest or return to them. And even better still, if they sell their flats, they have to pay back to CPF with interest some more, lagi shiok. Then some people had smarter ideas. So much money laid idle in the CPF. Should invest them wisely and get higher returns and profit the balance. Who can disagree with this kind of logic and game plan. Hire the best brains money can buy, sure make money one, if not in the short run, sure make in the long run. Historical data showed that over 20 or 30 years, the returned could be 20 or 30%. Bao chiat one. How to lose money, or how can lose money?

The CPF savers should feel very secure. At least they are reporting profits of 7% or more, like 14% or 17%? Then why suddenly a new legislation was passed to reduce the interest rate to 2.5% in Ordinary Account and 4% in Special or Retirement Account, and no guarantee some more? No one smelt a rat. And another legislation was passed to provide for a liquidation of the CPF if it does not have enough money to pay the savers. Correct me if I am wrong, but I remembered it was put up by Gan Kim Yong, I think. No one smelt a rat either. A sure win investment plan, every year registering high profit, then interest rates paid to CPF holders getting lower and lower and even made provision for the CPF to go bust, then no need to pay back. What is going on? No one asked the right question or no one wanted to ask the right questions.

Then more sub accounts were invented within the CPF. Special Account and Retirement Account. Wait a minute, isn’t the whole CPF savings a savings account for retirement? Why now got Retirement Account some more? Then Minimum Sum for Retirement Account or is it Ordinary Account, I am lost on this. Then minimum sum for Medisave. First they created Medisave Account, then Medisave Account also got Minimum Sum? What’s that? And the minimum sum gets bigger and bigger every year, for the good of the savers. Must be lah. Oh, all these accounts are to ensure that the money would always be there till the savers koyak.

When the withdrawal age was pushed back from 55 to 62, no one complained or no one objected. No one smelt any rat. Now it is to 65 or maybe older. Still no one complains. If there were any complaints, it seemed that no one heard or got the message.

The gradual incremental changes of the CPF Scheme were made without much resistance except the very first attempt by then Finance Minister Howe Yoon Choong. The Union objected strongly and it was dropped for a few years. The rest is history. We now have a CPF savings scheme that is unrecognizable from its original form.

With the impending Medishield Life, the money would be stuck in the CPF for good or would be spent without the savers touching it. Oh I forgot. How come when home owners sold their flats, the interests accrued over the years must be returned to the CPF for safe keeping when they should be returned to the owners who had retired or passed 55 years of age?

Today we have a very complicated CPF Scheme that would end up with very little money left after deducting for housing and medical and a few other approved schemes compares to the earlier simple scheme when the savers would have quite a big chunk of money to withdraw at 55. Now at 55, very likely you get $5K.

Isn’t the CPF meant for retirement? Why when a person retires, he can only get $5K and the rest transferred to another Retirement Account? Why must a person still pledge his home to a Minimum Sum when he has already retired? Or why can’t he use the money transferred to his Retirement Account to pay for his housing when he now needs the money more desperately?
If these terms were made known in the beginning, no one would want to join the scheme. Of course they can make it compulsory, just like the Medishield Life. Now it is looking so beautiful and glowing. Think what they can do to the CPF Scheme and what they can also do to the Medishield Life and the Medishield Minimum Sum in your CPF savings ten or twenty years down the road. You would not recognize them.
The CPF scheme that was once the envy of other countries is turning into another big screw up. Now it has become a scheme when one can only smile at the numbers printed on it. Those who spent their whole life working and savings and thinking that when they retired they could become a king for a moment had their dreams shattered facing a stone wall. Many would get $5k if they are lucky.


Virgp49 said...

Amount in the Medisave Account is for the Doctors/Hospitals to write the amount they want when you seeked them for their service.

It's a BLANK Cheque for them. When they keyed in your CPF's Acount, they knew how much you have balance in your Medisave Account.

You have no choice - either you quit and request not to be treated or have to look for the tallest building for a free fall.

Cannot even asked to be put to sleep just like dogs- cheaper and also kinder.

Can afford to die but cannot afford to fall sick.

Ⓜatilah $ingapura⚠️ said...
This comment has been removed by the author.
agongkia said...

Dun land yourself in imh counting newspaper as dollar notes.How many times must i say to treat it as a tax or a contribution to the nation and one will feel better.
My poor cousin thought bo hee hae ma hor cos they say he can be given 5k when he reached 55 lately.Walao before he could get a confirmation that the money is approve the tax dept call him to say that few thousand that he owe the tax dept will be deducted from this 5k before he can receive the balance.
Go buy 4D can get full 5k faster.

Ⓜatilah $ingapura⚠️ said...

The CPF might have started with good intentions. However, is it managed by GOVERNMENT, which under the aegis and authority of The State, can do anything it likes for any reason at any time to anyone individual or group.

CPF is BIG MONEY. Big Government + Big Money = Big Fucking Disaster, always, no exceptions.

So for the last few decades, CPF has morphed into a TAX. Now it is THEY who tell YOU what you can have and when, and how much interest you will get for your "contribution", which is FORDCED out of you. The fallacy is that the employer is forced too. No, that is not the case. The employer's "contribution is money you have earned by working, so it is the worker who bears the WHOLE BURDEN of the tax.

E.g. Taking the "old days". Say you are paid $100. Your contribution is $25, and employer contribution is $25. But since you DID THE WORK, you actually earned $125 (but you are paid $100) -- dun be silly enough to think the employer is going to "sacrifice" his profits for the government.
Total CPF as %: $50 out of $125 = 40%

Tax rate: 40%. Then they paid 6-7% interest, your account grew until one day you decide to buy an HDB flat -- from the government. Money exits the CPF (a government agency) and into the account of HDB (another government agency). Government pays government, you get a LEASEHOLD flat. Wah, a legal scam!

...asnd over time, things change. The CPF is used to fund Government Corporations in the post Regan-Thatcher world giddy with "privatisation". Privatisastion gets a boost when governments decide to create NEW enterprises and ventures and start dabbling in global property and equity markets -- telecoms, airlines, media, derivatives. What the fuck?

So now CPF is a HUGE AD-VENTURE CAPITAL FUND for the government, to play like a big time corporate entity, with people earning corporate-style incomes and living the concomitant lifestyles...all playing with Other People's Money -- the best part -- without their consent, and the even better part -- without the proper SHARE OF PROFITS, dividends, earnings and capital gains..

CPF? World's best financial scam. Genius, pure genius.

Anonymous said...

CPF is the financial F35, to do so many things and nothing good or adequate.

Anonymous said...

The CPF structures are as complex as taxi fares. Bloody hell, I am at lost over all the conditions and terms. Why must make simple thing so complex? CPF is for retirement and one should be given the money he saved when he retires. Period. Unless of course CPF finds it hard to cough out the money owed.

patriot said...

Only Chua Chin Leng aka Redbean has been talking about CPF and it's related Issues.
Got to remind Redbean that Sinkies do not mind whatever happens to their CPF la.


Anonymous said...

While there are many ways to make money, one of the cash cow it through the Singapore Congress?

The shocked and disbelieved in the face of those USA celebrities when they saw how expensive Singapore cars?

Controlling the medias is one way of making money too? Why people spent so much money for advertisements?

The threat to making money is too many opp came into the parliament?

Nobody in the right mind would think the GRC is use to only for solving the racial harmony?

If it can be used around the world, many countries will adopted these ridiculously system, how come up to now, no countries ever adopt these GRC system to solve their racial problems?

Other races could be sent into the parliament,like the NMP and NCMP? It more like child playground passing of toys?

One person said there is no group think, if no group think they would not want to adopt the GRC system?

They adopt the GRC system because they want obedient people and group think in the parliament, even if they don't obey they still have the whip, which 77 MP voted for the white paper to increase the population from 5.3 to 6.9 millions people?

Which saw Singapore biggest protest around 6K? Many know how serious you bring in extra 1.6millions people, Singapore don't have any resources at all?

Maybe the real reason of this joke system of the world, so that they can get the highest pay into world?

To get the highest pay in the world you need lots of taxes possibly they highest overall taxes in the world?

Most Singaporean were taxed so dry they got to look for new foreigners to tax or to vote them back into the parliament so that the can enjoy the world highest taxes again?

Can you imagine any other parliament in the world give some excuses, so they can adopt such system to benefits their leaders?

Maybe solution is they volunteering reduce their pay competitive to the Nordic minister pay, still a very decent pay by any standard?

The Nordic can solve many of the problem Singapore can't solve, what for get the highest pay in the world where you can't solve these important problems?

Nordic had the highest birthrate in developed countries, low income disparity, high standard of living? They got many successful multi national companies, olympic champions and nobel prize winners?

Singapore leaders can't collect the world highest wages and continue to give all kind of excuses, at the end of the day the result that matters?

If the opp become govt, which was the same as the main party used to be opposition party?

Opp likely to reduce their income to tally to those of the Nordic or the Swiss minister pay, they are likely to empower the local and adopt various initiative and incentives of the culture of the Nordic?

To bring Singapore to the next level like Israel or South korea became an advanced countries?

Singapore old model of depend on cheaper foreign labour simply obsolete, with the massive improvement in internet, the opp likely to return people most imp asset the CPF at 55?

Anonymous said...

If GRC could be use to solve the racial harmony many countries will adopted it, right now no other countries in the world with the right flame of mind believe this ridiculous jokes, vote top up system is used to solve racial harmony?

Wonder why they are called crowns, they thought the world is as stupid as they think?

Anonymous said...

Hi rb,

Sharing my perspective.

The CPF scheme is a success for some contributors. These include high earners (lower contribution, tax shelter), PRs and those who are able to withdraw the whole lot when they leave Singapore permanently. Only sacrifice is the lower return vs market return.

As for most contributors, it is a failure. This is painful. Insufficient for retirement, lost market returns, insufficient for healthcare, insufficient for housing, all these created through the changes made over the years.

When the scheme was first started and in its early stage, CPF was meant for retirement and the contribution rates were then at its highest (for low and high income earners). It was a great success for those early birds who "retired" at the age of 55 then and took out all their CPF monies - no minimum sum then.

Since this early success, the Government has been putting their hands into the jar on many occasions (and still dipping into it). Resulting in failures for the vast majority of contributors.

The flipside of failures are the successes for the government.

Success 1 - Reduce public housing funding through the HDB scheme and building up hidden reserves. MBT confirmed this.

Success 2 - Slashing healthcare funding through the 3Ms. Singapore has one of the lowest % of GDP healthcare expenditure, contributing to budget surpluses.

Success 3 - Building up more hidden reserves through creaming off the excess of market returns vs S$ bond returns (paid to contributors).

(Side note:- we do not know how real are the hidden reserves)

Success 4 - Time and time again, gaining political mileage from various changes through the years. And largely successful.

The recent proposed Medishield Life is just another tweak to deal with the healthcare part of the system. PGP is on top of this, but part of it through the shifting of financial burdens amongst the contributors. Could this be their next success?

Looming issue is the retirement part of the system. About 50% of contributors would not have enough in their CPF to meet the minimum sums. CPF Life is of no use if there is not enough money left. Perhaps another PGP for CPF Life?


Anonymous said...

Armchair Anarchist:
February 13, 2014 at 12:02 pm (Quote)

Jess, I would call it in a faux democratic totalitarian government. I meant it as a government that is like the nasty old Soviet regime but pretend it is democratic.

I shared your experience when you were granted US citizenship. In 1990, I left Singapore to take up a job with a German company in Japan. I learned of my rights even as a foreigner in Japan (yes, I do have much more rights as a foreigner in Japan than as a citizen in Singapore). From my German colleagues (not without a sense a superiority over a naive Singaporean), I learned of my rights as an employee: no unfair dismissal, grievances are heard, no dismissal without compensation, no work related expenses incurred outside office without compensation. From them, I learned to speak without fear. Later I was transferred to the UK where I learned that the government there almost never intrude into my life. That if my job is redundant, the first priority is to redeploy me before even discussing redundancy. That when I fell ill or became unemployed I can lean on the state for support even if I am a foreigner. I learned what it is meant by civil society and social justice. All this I learned through the past 24 years as an expat nomad toggling between Europe and Asia.

I am afraid those PAP apologists know nothing of what it is a true democracy because they swallow everything hook, line and sinker. Maybe they rather want to believe this because the alternative narrative that they have been abused and hoodwinked by a totalitarian government is a reality too scary to contemplate.

Anonymous said...

CPF failed scheme?


Failed for who?

60% 40% or MIW?

Anonymous said...

...PAP apologists know nothing of what it is a true democracy because they swallow everything hook, line and sinker.
Anon 12:30 pm

Apologists or not, do they have a choice not to swallow?

Which opposition party is ready to be govt, you tell me lah?

Anonymous said...

Nobody in the right flame of mind believe that the GRC system or votes top up system is to solve racial harmony issues?

If it can be used to solve racial problems, very fast many countries with different races will adopted it, it is more likely use to earn money?

If you own the medias you can use it to sell anything, why people spent so much money on advertisements, one of the world richest company Google earn its money from others who advertise with them?

The GRC vote passing system should be dismantle, using the back the old one to one contest system, which so effective in bring Singapore to success in the 80s?

Singapore can’t continue to delay, as internet grow faster Singapore is facing more challenges?

Hope that Singapore leaders is prudent, not like the ostrich type of mentality, which China experience possibly the most humiliated defeat in the Boxer Rebellions, which they refused to heed changing circumstances?

The is many ways to bring the other races to the parliament, you can see many of the other races they are still a group of underclass? Many live in poverty need regular handouts? Because of the cheaper foreign workers?

Chua Chin Leng aka redbean said...

Hi faber, you hit it on the nail. In a zero sum game, when one loses, someone gains. When one loses everything, someone gains everything.

What is left in the reserves against liabilities is scary.

Anonymous said...

Failed scheme nor not, PAP will still win in 2016.

Don't believe, just ask WP Teochew Ah Hia.

Anonymous said...

What is left in the reserves against liabilities is scary.
RB 1:34 pm

If u are not a minister like Lim Swee Say, you won't feel rich looking at your CPF account. So nothing scary one also.

But it may be scary looking at your bank account. Maybe a lot of Sinkies (40%?) have scary bank accounts.

Anonymous said...

RB, me and my wife have basically retired but below 65 with no basic income but we have between us about 400,000 in the lock up cpf that we can withdraw bits by bits when we are 65 if we live that long.

Chua Chin Leng aka redbean said...

You and your wife are so lucky. They will make sure you have enough money when you live till 200 years : )

Anonymous said...

When you live till 200 years, really tan tio (you win big while PAP lose big) with CPF life.

But of course you will for sure not live till 200 years so PAP for sure won't lose big one, or not even lose at all.

Anonymous said...

Kpkb 4 fuck sake?

do something constructive lah

Knnccb.... hsien loong, u fucking asshole, stop your all these mother shit of yours. The people are suffering, dun have millions dollars salaries.

Anonymous said...

RB, before reaching 65 we are drinking water lor. If they let us take out the fund, it more then m$ 1 million, we can retire in jb quite comfortably instead of drink water and look at the statement feeling paper rich only. In the meantime I can see our medisave kena whack left right and centre with the medishield insurance premium which basically double last year.

b said...

On top of that, the foreigners can come here earn big money, take out their cpf whenever they like and retire back to their hometown like a kind. what does this sound like? who allow that to happen?

I think the current ruling party is so addicted to manipulating and exploiting sinkies that if any policy does not achieve that purpose, they feel no kick; and if they managed to screw the sinkies to a huge extent, they feel alive. They have turn into political psychopaths especially the Gan guy.

The Truth Hurts said...

Mr Chua, you seem to think that things and rules must remain static. The sad thing is that choose to mention only the negative things about CPF. You sound bitter?

Chua Chin Leng aka redbean said...

Anon 5:37, if all Sinkies demand for the return of their savings, the govt must return the money. The alternative is to vote them out.

The Truth Hurts. This is not a matter of changing or static rules. This is a matter of the people's money and life savings. No one can take away the people's money without their permission. If it is a govt handout, the govt can change all the rules it wants.

The govt is acting outside its moral authority by changing the rules to keep the people's money and dictating how the money should be used, when to return and what to pay for.

This is fundamentally not right. Unfortunately daft Sinkies think that the govt has this right to mess around with their money. The people forfeit their right to their money by being daft in this matter.

Anonymous said...

The Lies Hurt More said ...

Mr Lee, you seem to think that things and rules can chop and change as you please. The sad thing is that you choose to mention only the positive things about CPF. You sound shady and sneaky ?

February 13, 2014 7:28 pm

Anonymous said...

Omfg.... forgotten to take the shrink's medicine

Hsien loong, u bloody fucking bastard, asshole licker, cock sucking twit

Stop screwing the life of poor fucker like me.
Dun u believe in karma? Look at those around u, u fucking bastard.

Me, helpless, hopeless old man, can only cursed @ u daily. Hoping the divine will pass the ultimate judgement on u n your running dog n bitches

Of course, u dogs can knock on my front door in the wee hours.. it okay

Knnccb.... cum on fucking bastard

Anonymous said...

Try asking those who want their CPF savings returned in full when they reach 55 to meet at HLP lah. You'll get a turnout of less than 100 !

Anonymous said...

Ya lor. They already choped our CPF for so many things.

Anonymous said...

From 2012 to 2013, the min sum in Retirement a/c increased by 9,000. For medisave a/c, the min. sum increased by 2,000. In total, we need 11,000 more per year to meet the min. sum requirement. Even salary increase for most folks- does it amount to 11,000 per year ? CPF is sucking money like dracula till we all die.

Anonymous said...

The road ahead for sinkies - a CPF blackhole! The younger ones just be prepared to feed the ponzi scheme.

Ever wonder why, despite years of arguing against giving workers more pay, they suddenly are releasing the dam and playing Santa Claus and forcing the private sector to follow. All this adds up to more being siphoned into CPF, to be conficated, of course, by increases in medical, housing and education.

Sometimes it is difficult to recognise the devil from the angel. Just give this a thought, will ya!

b said...

HLP is an insult to the citizens rights. The citizens have a right to held peaceful protest where ever and whenever they want. The gov has no right to impose such things on the people. It is an abuse of the right to freedom of assembly, the right to freedom of association, and the right to freedom of speech that exist in any democracy state.