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Archive for the ‘CPF’ Category

Using yr CPF OA as a savings account

In CPF, Financial competency, Financial planning on 05/12/2011 at 5:49 am

If you are in a position to withdraw money at age 55 from your CPF accounts, given the pathetic S$ interest rates offered by the banks, you may want to use your CPF Ordinary Account as a savings account that pays higher than S$ bank or finance company fixed deposit rates.

But make sure you know how often a year you can withdraw your money if you want to use your OA as a savings account, or more accurately as a “betterest” way of managing your cash. The laziest way to find out is to call up the CPF help line.

You also have to be aware of the following: http://www.asiaone.com/News/AsiaOne+News/Singapore/Story/A1Story20110715-289391.html.

THE scheme is stated in the Central Provident Fund (CPF) website.

But Mr Jerry Low, 58, was not aware of it.

So the retired bank trader got a surprise when the CPF Board transferred $10,000 into his Medisave Account (MA) without his permission, after he applied to withdraw $37,000 from his Ordinary Account (OA) in June this year.

Mr Low had chosen to not withdraw all his money from his OA when he turned 55.

He opted for a partial withdrawal, leaving some money in his OA as the CPF interest rate of 2.5 per cent was higher than what the banks were offering.

He could do this as his Medisave Account and Retirement Account (RA) had the required amount.

Since 2008, Mr Low had used his Medisave to pay for some medical expenses, whittling away his Medisave Required Amount (MRA), which was $14,000 as of Jan 1, 2008.

However, the required amount was raised to $27,500 as of Jan 1 this year [2011].

Said Mr Low: “I was shocked to find that $10,000 from my OA had been moved to my MA without my approval.

“I did not even know that the money was moved, let alone the amount moved.”

As to the danger of the government not allowing you to withdraw your money by changing the rules yet again, assess the risk of the government taking this action in the light of it only getting 60% of the popular vote in the May 2011 GE, and it’s determination to win back Aljunied. Besides, the government actions, so far, on CPF issues, are never retrospective.

As to the CPF being or going bankrupt, remember that Tan Jee Say (25% of voters voted for him at the 2011 presidential election and he was once a senior civil servant specialising in economic matters) doesn’t worry about the solvency of the CPF system. To him, the S$60bn he proposed spending on his plans was “small change”. So the CPF amount due to members, as of August 2011, S$204 billion, cannot be an issue, despite what the SDP (his ex-party) and his supporters at TR and Singapore Election Watch say. Reminder: they say that the CPF is bankrupt because of the losses at Temasek and GIC. Hence the introduction of the Minimum Sum and CPF Life Plans schemes.

Did you know that until a few years ago, once you reached 55, the staff there hassled people to withdraw their surplus funds? It happened to a friend in 2004. He told them he as a Nantah graduate and retired central bank employee, trusted the S’pore government.

Now, the staff encourage people to keep funds they don’t need in their OAs.

Aftertot 5th December 2011 at 12.55pm

See abc’s comment below. He has a point on Medisave increases. My counterpoint is that Medisave account sure to be used and anyway it attracts 4% interest a yr.

Related post: http://atans1.wordpress.com/2011/12/03/best-cpf-life-plan/

 

CPF system like this meh?

In CPF, Wit on 04/12/2011 at 6:09 am

If SDP members had a sense of humour (which they don’t, Danny the teh tarik Bear excepted)*, the SDP could use this joke to illustrate its view of how the CPF system works.    

A Scotsman goes into a brothel in Amsterdam one night and finds himself a nice-looking prostitute.

He asks her, ‘How much dae ye charrrge forrrr an hourrr?’

‘£100,’ she replies.

So he asks, ‘Okay, dae yee dae it Scottish style?’

She says ‘No!’

He then asks her, ‘I’ll gie you £200 to dae it Scottish style – please?’

She then says, ‘No’, not even knowing what ‘Scottish style’ was!

So he then offers her £300. Again she declines his offer.

So, finally he says, ‘I’ll gie ye £500 to gaun Scottish style wi’ me!’

Finally she agrees, thinking, ‘Well, I’ve been in the game for over 10 years now. I’ve been there and done that, had every kind of request from weirdos from every corner of the world. How bad could Scottish style be?’

So she goes ahead and has sex with him, doing it in every kind of way and in every possible position. Finally, after several intense hours they finish.

Exhausted, the hooker turns to him and says, ‘That was really fantastic. I’ve never enjoyed it so much. But I was expecting something perverted and disgusting. Where does the ‘Scottish style’ come in?’

The Scotsman replies, ‘I’ll pay ye next week…’

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*To be fair, none of the political parties have a sense of humour. They are all too earnest and straight laced for my taste. Oh for Wayang Party.

Best CPF Life Plan?

In CPF, Financial competency, Financial planning on 03/12/2011 at 6:36 am

 CPF Life Plans

CPF LIFE Plans (With Refund) Monthly Payout Bequest
LIFE Basic Low High
LIFE Balanced Medium Medium
LIFE Plus High Low
CPF LIFE Plans (Without Refund) Monthly Payout Bequest
LIFE Income Highest No bequest

Source: CPF Board

From 1 January 2013, those turning 55 will have to opt for one of the CPF Life Plans. They will no longer have the choice between the Minimum Sum scheme (payouts for about 20 years from age 65) or the CPF Life Plans. “With rising life expectancy, 1 in 5 Singaporeans is expected to be aged 65 and above by 2030. Out of which half can expect to live beyond 85. Therefore, an income for life to help you meet your basic retirement needsis very important,” is what the CPF Board says.

Various people (self included, a retired senior bank executive, and a scholar working in a GLC ) who have the choice of choosing between the CPF Life Plans and the MS scheme, have opted for the latter because the CPF Life Plans’ calculations are in a black-box. As a financial planner pointed out, “The CPF Life Plans come without a benefits illustration, something the law requires insurance agents and financial planners to show life insurance buyers”. The plans could be better, but we just don’t know.

The CPF Life Plans are also more risky.  There is a provision in the law governing the CPF Life Plans which states that payouts are contingent on the Plans being solvent. This is because premiums that are paid in to get the annuities are pooled and collectively invested. If the plan you chose doesn’t have enough money to pay out, you die. This is unlike the MS scheme, where account holders are legally entitled to the monies in their CPF accounts. Though accessing the monies in one lump sum after 55 is an issue.

The government has said the provision on solvency is only a precaution unlikely ever  to be used. If so, why have it?

Of course those who opt for the MS assume that in the event they are still alive in their late 80s and even 90s, they can support themselves financially, or have children and grandchildren that will support them

If

– longevity* runs in your family and you think you can live well past 80; and

– ‘you think you will run out of money in your 80s,

you are probably better off with a CPF Life Plan.

If you choose a plan, or have no choice to choose a plan, you may want to opt for the “Basic” plan. This is the closest to the MS scheme. In fact, Doctor Money, Larry Haverkamp (whose views I respect) thinks it is superior to the MS scheme.

 Remember, if you don’t opt, the default is the “Balanced” plan. In this, the annuity element starts from age 80, while in the “Basic” plan the annuity starts from age 90. Hence one of the reasons why your beneficiaries should get more under the latter plan. Another is that the latter attracts a smaller premium, 10% versus the former’s 30%.

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*Some useful statistics (from a 2008 Department of Statistics paper based on 2006 preliminary data) on how long you have live:

– If male aged 65 – can expect to live another 17.2 years – 82.2

– If female aged 65 – can expect to live another 20.6 years. — 85.6

– Proportion of Singaporeans aged 65 expected to be alive at age 85 is

      — Male 39%

      — Female 55%

CPF and Alice’s Adventures in Wonderland

In CPF, Wit on 02/12/2011 at 5:48 am

I’ve been reading shumething by Lewis Carroll and came across Sylvie and Bruno. Am surprised that the Young PAP and that unemployed chap running the Facebook page on “Fabrications about the PAP” are not defending the CPF system in the terms below what with the compulsory minimum sum scheme and the CPF Life Plans were introduced, and promises of better rates of interest in exchange for monies being locked up beyond 55.

But then maybe they don’t read and appreciate the works of Lewis Carroll of Alice’s Adventures in Wonderland fame? They can only read and understand our nation-building, constructive local media and Petir?

From his Sylvie and Bruno:

How much is it, this year, my man?”… “Well, it’s been a doubling so many years, you see,” the tailor replied, a little gruffly, “and I think I’d like the money now. It’s two thousand pound, it is!”

“Oh, that’s nothing!” the Professor carelessly remarked … “But wouldn’t you like to wait just another year, and make it four thousand? Just think how rich you’d be!”  …  “But it; dew sound a powerful sight o’ money! Well, I think I’ll wait–”

“Of course you will!” said the Professor. “There’s good sense in you” …“Will you ever have to pay him that four thousand pounds?” Sylvie asked as the door closed on the departing creditor.

“Never, my child!” the Professor replied emphatically. “He’ll go on doubling it, till he dies. You see it’s always worth while waiting another year, to get twice as much money!

The novel was published in 1889 and in 1987 or 1988, Ralph Wanger (a then leading investment fund manager, now retired) told author John Train that the sum would have grown to £1 followed by 33 zeros. The magic of compounding on funds not drawn on. No wonder Lim Swee Say has a special monthly CPF statement so that he can see every month how much his millions are compounding. 

Coming soon http://feed.theweek.com/article/index/221651/retirement-is-80-the-new-65?

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