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Archive for the ‘CPF’ Category

Julius Caesar was wrong about these anti-PAP activists

In CPF, Humour, Political governance, Public Administration on 24/07/2014 at 4:19 am


When I saw the above photo in TOC, I couldn’t help think that  Juius Caesar was wrong when he said,
Let me have men about me that are fat;
Sleek-headed men, and such as sleep o’ nights.
Yond Cassius has a lean and hungry look;
He thinks too much: such men are dangerous.
(Shakespeare’s Julius Caesar scene ii)
Mr Kenneth Jeyaretnam, Dr James Gomez, Dr Paul Tambyah and Mr Goh Meng Seng don’t have a lean and hungry look.
And they certainly think too much. As to dangerous what do you think?
Only the presenter and a blogger (the two tiny ones in the centre) fit the description of “dangerous”.
GMS used to pretty trim, now his belly is as big as Garbra Gomez’s and KenJ’s. They not doing the rounds like NSP’s P Ravi? He lost a lot of weight by climbing stairs distributing NSP materials to HDB residents, getting a great workout in return. And all the WP MPs and NCMPs are trim. They do the rounds of their areas.
Mr Kenneth Jeyaretnam, Dr James Gomez, Dr Paul Tambyah and Mr Goh Meng Seng  were taking part in “TOC Policy Exchange on CPF – rethinking the system”. Do watch it. https://www.youtube.com/watch?v=SmViCNPF_vc
And donate to TOC:
TOC’s Policy Exchange discussion on the CPF. We thank the various members on the panel who have contributed to the discussion. MOM and CPFB were invited to join us, but have declined.

Regrettably, we had to scale down to size of the event due to lack of funding. If you would like TOC to continue holding such discussions, please do help us with funding. To note, our forums are open to sponsorship.

Finally, do remember that Dr Paul Tambyah is an active SDP member and a professor at NUS. Gone are the days when people liked him accepted invitations to join the PAP without thinking. Or when dabbling in Oppo politics was a no-no for NUS academics. They could be investigated and sacked.

S’pore is changing despite the PAP’s hegemony.

Daft Sinkies? Dishonest insc agents? Or Medisave sucks?

In CPF, Financial competency on 08/07/2014 at 4:29 am

I was shocked to read in BT on Saturday that the MediShield Life Review Committee highlighted something that should never have been allowed to happen by a truly nanny govt or a govt that cares for its people:

 [O]ne issue has stuck out like a sore thumb: the overbuying of Integrated Shield Plans (IPs).

In the clearest indication that something is amiss, the committee’s report released last Friday stated that about three in five Singaporeans covered under MediShield purchased IPs.

But seven in 10 armed with IPs that target Class A wards in public hospitals chose to stay in lower ward classes when hospitalised. Only one in 10 from the same group chose private hospitals.

Echoing a similar trend were those with IPs that target private hospitals – six in 10 chose lower ward classes in public hospitals. The committee noted twice in its report that many Singaporeans want medical treatment beyond that provided in Class B2/C wards but have “over-stretched themselves to buy the most expensive product for higher protection”. (Emphasis mine)

So S’poreans fork out premiums to stay in the best (OK most expensive) wards, but then don’t use them ’cause no money? Presumably the insurers are laughing when they see their bank statements.They pay out less than what they are prepared to pay for.

Shumething is clearly wrong.

BT as part of the constructive, nation-building media tries to avoid blaming S’poreans. insurers and their agents, or Medisave.

Having said that, it qualified that this typically happens during the working years, when premiums can be paid entirely or mostly through Medisave, the national medical savings scheme used to foot hospital bills, among other things.

A quick comparison of the IPs offered by the five insurers – AIA, Prudential, Aviva, NTUC Income and Great Eastern – showed that premiums for the first 40 years of an individual’s life were priced suitably low to gain market share.

For example, existing private IPs for Class B1 in public hospitals range between $78 and $207 annually, according to the comparison provided by the Ministry of Health’s website. The amount payable doubles to about $297 to $410 when the consumer is between the age of 41 and 50. It rises to between $425 and $921 for those aged 51 to 65, and for those who are 66 to 90, the yearly costs go up to between $888 and $4,245.

It calls for more education rather than pointing out that Medisave nudges S’poreans towards over-insuring despite describing the process of nudging (for the daft: the last three preceding paras).

While information is relatively accessible and most people understand that they have to pay more as they get older, only a small number of people truly realise the exponential spike in IP premiums from age 60 onwards, not to mention the accumulated lifetime costs.

All these point towards a poor comprehension of the workings of IPs – a point that the committee also made sure to reiterate throughout its report. This is why there is a pressing need for the government to educate the wider public of its entire healthcare financing system, as well as the things to look out for in choosing an IP if required, so that the individual can make an informed decision.

But it ignores the T Rex in the ward, Medisave: this typically happens during the working years, when premiums can be paid entirely or mostly through Medisave, the national medical savings scheme used to foot hospital bills,

The answer to the title of this rant?

All three with Medisave the catalyst. It worsens the stupidity (or financial incompetency) of many S’poreans and the dishonesty of agents, by nudging via skewed incentives money in Medisave cannot be touched except for illnesses and medical insc premiums, so might as well buy the more expensive coverage)). It’s our money in MediSave, but we can only spend it in the right ways, one of which leads to bigger profits for insurers..

 

 

Linking why staple food agribiz is a gd bet & why the 2.5% CPF rate sucks & a constructive, nation-building suggestion

In CPF, Financial competency on 26/06/2014 at 4:32 am

Change in price

So investing in agribiz that are connected with stapled foods makes gd sense and why recent inflation rates should not have surprised

  • 2010 – 2.8%
  • 2011 – 5.2%
  • 2012 – 4.6%
  • 2013 – 2.4%

It’s largely about the rising cost of staples (and oil at around US$100). Tuesday’s BT reported

Last month’s moderation in core inflation was due to lower contributions from food items and services. Food inflation came in slightly lower at 3 per cent in May compared with 3.1 per cent in the previous month, reflecting a smaller increase in non-cooked food prices.

Services inflation edged down to 2.5 per cent from 2.7 per cent in April, as holiday travel costs and health insurance premiums rose more moderately.

But Barclays and CIMB economists believe the reprieve will be short-lived. Said CIMB economist Song Seng Wun: “Services inflation is going to go up as a result of domestic cost pressures – and firms are likely to pass these on to consumers.”

MAS and MTI reiterated that core inflation is projected to “stay elevated” at 2-3 per cent in 2014, while headline inflation is expected to come in at 1.5-2.5 per cent.

So time for govt to increase the basic CPF rate? After all in the not so distant past, one reason it gave for the rate, was that it was above inflation of around 1%.

As to the excuse of low the yield on govt bonds are, well the govt is already paying more than the yield on govt bonds. It knows that cutting the rate would seriously damage its credibility with the 35% swing voters. So increasing the yield by another 0.5% should be considered.

After all Temasek and GIC, as savvy investors, should have been buying agricultural land in the West. The govt can use the profits from these investments to fund an increase to 3%.

 

CPF: The cock that Swee Say talks

In CPF, Financial competency, Financial planning on 25/06/2014 at 4:43 am

The best way for Singaporeans to prepare for retirement is to use less of their Central Provident Fund (CPF) money when they are young. Mr Lim Swee Say, Minister in the Prime Minister’s Office, said this will ensure the current level of CPF payout can be maintained over time and not be eroded by inflation.

Mr Lim, who is also the labour chief, made that point when speaking to reporters on the sidelines of the closing of the Singapore Model Parliament yesterday. (23 Jan 2014). He later issued a clarification saying “that housing, healthcare and education for the children” were excluded from his spending comments, saying the constructive, nation-building media had misreported him.

Even with the clarification, he was talking rubbish, showing how clueless the nTUC minister was with the life of his ordinary members.

For starters, as TRE pointed out

Using less CPF money means leaving the money with CPF board, which in the case of OA, will earn only 2.5%. Inflation rate for the last few years already exceeded 2.5% (except last year, which barely covered the 2.4% inflation rate) [Link]:

  • 2010 – 2.8%
  • 2011 – 5.2%
  • 2012 – 4.6%
  • 2013 – 2.4%

Next after his clarification that he was talking of CPF spending other than for “housing, healthcare and education for the children”, one is left wondering if he doesn’t realise that other than for these things, CPF cannot be used for other than retirement. Is he so out of touch? Or another example of his special status, like once a month CPF statement?

The more impt issue, if no use CPF, how to afford “affordable” public housing? Public housing is only “affordable” because of 20-yr mortgages that use CPF monies to finance the loans.

At the moment 36% of a S’porean’s wages are locked up in the CPF because of this Hard Truth

[Without the CPF], Singaporeans would buy enormous quantities of clothes, shoes, furniture, television sets, radio, tape recorders, hi-fis, washing machines, motor cars. They would have no substantial or permanent asset to show for it.

  • Asian Wall Street Journal, Oct 21 1985 quoting one LKY.

Our money, but can only be spent on the “right” things: uniquely S’porean.

But it was an ang moh’s idea in the first place: In February 1940, one Keynes published How to Pay for the War. He advocated that interest rates should be kept low and that compulsory saving (thereby deferring pay) should be used as a mechanism to prevent the inflation that occurred during World War One. A portion of everyone’s income would be automatically invested in government bonds. Then, when the war was over, and the economy was in dire need of savings, the money would be released. The plan was too revolutionary for the British government.

In the S’pore version, the payout got deferred and deferred.

“The rule is, jam to-morrow and jam yesterday – but never jam to-day.”
“It must come sometimes to ‘jam to-day’,” Alice objected.
“No, it can’t,” said the Queen. “It’s jam every other day: to-day isn’t any other day, you know.”
“I don’t understand you,” said Alice. “It’s dreadfully confusing!”

(Through the Looking Glass and What Alice Found There)

CPF Life: Shumething for “Free my CPF” protestors, anti-PAP cyber warriors to reflect on

In CPF, Financial competency, Financial planning on 24/06/2014 at 4:50 am

The OECD has criticised the UK government’s recently announced plans to end the obligation to buy an annuity at retirement.
Anyone aged 55 or over will be able to take their entire pensions savings pot as cash from next April instead of buying an annuity that would guarantee an income for life.

Pablo Antolin, chief economist and head of the OECD’s private pensions unit, said he was concerned the UK government’s proposals would lead to pensioners running out of money in old age.
“An annuity is the only instrument that provides complete protection in retirement and which safeguards individuals against the danger that they exhaust their savings before death,” he said.

Mr Antolin said the proposed UK reforms were driven by the high costs of buying an annuity, but he argued that savers were unlikely to achieve better incomes in retirement simply as a result of scrapping mandatory annuitisation.
Mr Antolin is expected to say at the Investment Innovation & the Global Future of Retirement conference in New York on Monday that partial annuitisation should be encouraged as an integral part of direct contribution retirement plans offered to savers across the OECD.

 With investors likely to be faced with an environment of low yields and low investment returns for some time, the only way to ensure adequate income in retirement is for workers to save more for longer, said Mr Antolin.

He also criticised private pension providers for marketing annuities as investments, rather than insurance products.

“Buying fire insurance is not an investment. That is how an annuity needs to be looked at, as insurance against outliving one’s resources,” he said.

The above was reported by FT on Monday. Apologies to FT for such a long extract. But it’s for a noble cause, educating S’poreans and showing that the PAP govt has conventional wisdom on its side, on this issue as on the immigration and growth issues.

But as one totful reader pointed out, the ministers expect million-dollar salaries to follow conventional wisdom?

Related article: http://atans1.wordpress.com/2014/06/03/cpf-life-what-sucks-which-is-closest-to-minimum-sum-scheme/

I’ll end with a constructive suggestion to those TRE posters who keep posting there that I’m a PAP, WP, ISD mole whenever TRE republishes something of mine (got three pieces there now). Rather than getting frus and abusive, why don’t they start a petition asking TRE not republish me. I have no issues about not appearing there. Let the readers decide.

Take on TRE’s readers vitriol on a sneer on Roy & his supporters

In CPF on 08/06/2014 at 4:31 am

But first Han claimed at the close of the protest at about 6:30pm that the crowd size had grown to 6,000 — a figure that pits attendance at this protest as higher than the 4,000 turnout at last year’s Population White Paper protest. Observers who spoke to Yahoo Singapore, however, peg the attendance at closer to 3,000 people.

(https://sg.news.yahoo.com/over-1-000-people-at–returnourcpf-protest-at-hong-lim-park-093133980.html)

Han is Han Hui Hu, new citizen, blogger and activist.

[Update at 9.30am: WSJ reported attendence at 2,000. It, too like Yahoo, has no reason to misrepresnt the numbers attending, unlike TOC, TRE (3-4,000), our constructive nation-building MSM, and Ms Han. Oh and a TRE article said yesterday: The next possible scenario is a turnout of 500 to 5,000 people. Given the extent that this CPF issue affects the people universally, it is highly unusual if it happens that people would not even bother to turn up and show face. http://www.tremeritus.com/2014/06/07/cpf-protest-4-pm-today-4-possible-turnout-scenarios/)

Well not very many people are worked up with Roy’s allegations of the theft of our CPF monies by the govt, are they?

This nicely leads to the title of this post. The u/m attracted a lot of vitriolic comments

Dear TRE,

I really laugh when I read how your readers are so excited when Roy raised the $72K.

Hello, it’s only about 1000 Singaporeans donating, not 1,000,000 ok?

There is nothing so fantastic to shout about.

Most Singaporeans are wise enough not to donate any money to Roy.

Roy is wrong. So, why the need to encourage him?

If I anyhow accuse you of stealing money, would you be happy?

PM has every right to sue him for such a malicious accusation.

I read that some of your readers is calling the incident – “Singapore Spring”?

With a pathetic 1,000 people giving money and you call this a “Singapore Spring”?

Don’t joke lah.

I urge the rational Singaporeans to ignore these bunch of losers.

Yes, I call the 1,000 people who gave money to Roy, losers. They think that by supporting Roy, they can get their CPF money back.

Keep on dreaming, losers!

I see the guy who is laughing to the bank is Roy’s lawyer Ravi, stupid Singaporeans.

Can’t stand stupid Singaporeans

* Submitted by TRE reader.

http://www.tremeritus.com/2014/06/04/nothing-fantastic-about-1000-sgs-donating-to-roy/

Whatever or wherever the truth lies, bear in mind that even if 2,000 people have by now contributed, 2,000 amounts to only 0.3% of the 600,000 voters who voted for TJS and TKL in PE 2011: the “any anti-PAP buffoon baboon, so long as he’s not not a PAP ape”. (BTW, on the PAP apes, one is a King Kong, the other is like one of  apes that adopted Tarzan.)

The latest on TRE is that $86,000 has been raised. This amount, while looking impressive, amounts to 14 cents for each 600,000 anti-PAP voters.

At this rate, don’t be surprised if PAP retains its hegemony indefinitely and our CPF keeps getting doled out at the PAP govt’s pleasure and whim. The anti-PAP voters don’t care when it comes to walking the walk (and contributing money), they juz love to talk the talk and BS all the way. They only act once every few yrs. And that ’cause they are forced to.

And how many of the vitriolic TRE writers contributed and how much? Based on the amount raised, “peanuts”.is the answer to both questions.

And remember 2m S’poreans voted for one or other of the PAP’s Great Apes at PE 2011.

Anti-PAP paper warrors, ponder on this as you take public tpt to and fro work. Or when you sit unemployed at home.

Strong words and emotions don’t butter parsnips. Only deeds matter.

Oh and think about the attendance at Roy’s and Han’s do: Maybe most S’poreans trust the govt when it comes to their CPF monies? But I’m sure these cyber warriors will agree with u/m (courtesy of Yahoo S’pore). Actually the comment could have been one said by one LKY: so nannyish.

 

 

CPF Life: What sucks/ Which is closest to Minimum Sum scheme

In CPF, Financial competency, Financial planning on 03/06/2014 at 5:25 am

The CPF system is in the news what with the President’s Address, which had hinted at further tweaks to the CPF system to enhance the retirement adequacy of Singaporeans, and Roy Ngegng’s claims* that the CPF system amounts to theft, something I’ve pointed out even before the PM threatened to sue him for defamation. Now we have an expert on Orchard Rd being sovereign territory where Pinoys cannot trespass, writing on the topic.

Well I never tot all this would happen when a  long time ago, I’ve blogged on the flaws in CPF Life.

Black box/ No benefits illustration

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 Minum sum S 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.

(http://atans1.wordpress.com/2011/12/03/best-cpf-life-plan/)

Our money but CPF Life solvency is our problem

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 [Minimum Sum] scheme, where account holders are legally entitled to the monies in their CPF accounts …

(http://atans1.wordpress.com/2011/12/03/best-cpf-life-plan/)

The government has said the provision on solvency is only a precaution unlikely ever  to be used. If so, why have it? This is a peace of mind issue. It was Gan who made this assurance when he was MoM.

BTW, the above link analyses which CPF Life Plan is closest to the Minimum Sum scheme in terms of payouts. It’s the basic plan which is a deferred annuity plan.

And here’s a constructive, nation-building way of using yr CPF (if you disagree with Roy Ngerng that CPF is theft by govt). Using yr CPF account as a savings account http://atans1.wordpress.com/2011/12/05/using-yr-cpf-oa-as-a-savings-account/. I’m sure Roy can get for his parents better rates than the 4% and 2.5% available from CPF , but I can’t. So i leave my surplus cash with the CPF Board.

——-

*Here’s what an ex senior EDB man with progressive tendencies posted on Facebook: My impression is that quite a number of us have learned to avoid sharing stuff by sites such as STOMP, Heart Truths, and TRS after having been embarrassed by their ridiculous accusations afterwards (myself included). I think that these fringe views have actually caused serious readers to become more discerning.
To take legal action, as this post points out, is double edged. Ironically, it confers a certain ‘legitimacy’. I used to take bus 36 to work, and an obviously mentally ill man would get on around Esplanade. He would complain loudly about many of our politicians and mutter to himself his plan to deal with them. Most people avoided eye contact. I always just tried to get off the bus without provoking him further. Nobody ever tried to debate him.

Roy’s thesis that the govt steals our CPF is an example of para-facts, nuggets of pseudo-truth, edited, wrenched from context, or simply invented from whole cloth. People like Uncle Leong (and self) have described how the CPF system works long before Roy did.

I once even wrote wrote, One noted local economist has said that the government is effectively pocketing the difference between the returns it gets from investing abroad and the returns it pays on our CPF accounts: a carry trade arbitrage. Borrow low and invest for higher returns. http://atans1.wordpress.com/2010/11/02/how-we-fund-our-swfs/ He never got sued even though it was said publicly.

 

 

 

 

 

 

 

 

CPF: Answering TRE poster & supporters/ NMP on inconvenient CPF truths

In CPF, Economy, Political governance on 28/05/2014 at 4:09 am
Toast Bread:

Will LHL answer just one question please?
Did any Singaporean authorize or consent to CPF locking up our CPF retirement money at 55 ?

Rating: +34 (from 34 votes)

 (On TRE)
Person seems to have forgotten that ever since the PAP introduced the Minimum Sum, PAP keeps getting re-elected. Ever heard of implicit consent? Last election the PAP got 60% of the votes. Still some way to go.
Seriously, elected govts round the world run on their record and the promises they make. By re-electing a govt, the majority of voters accept the entire package.
 …..
Never tot much of this NMP who uses a lot of mascara, was a PAP member (expectations were that she would be a PaPpy MP. But she surprised with her frank remarks on inflation (domestic pressures) and CPF rates( lower than inflation will erode our CPF savings):

Nominated MP Tan Su Shan said that it was probable that Singaporeans had to factor in a higher rate of inflation when calculating their retirement adequacy.

This, given the fact that CPF members enjoy a risk-free interest rate of 2.5 per cent per annum on their Ordinary Account savings, but bearing in mind that inflation in Singapore has averaged 4.1 per cent over the last three years since the economic restructuring journey began.

“This is double the historic average inflation rate of about 2 per cent and will erode our CPF savings,” she said, adding that it would be “useful” for the government to provide a medium-term projection of the country’s inflation rate.

Ms Tan … noted that since the Monetary Authority of Singapore had chosen to maintain a strong and stable Singapore dollar, it was likely that most inflation costs could come from domestic pressures.

“Being able to project the growth rate of our cost of living expenses will help us make the right choices, outside of parking our surplus funds in cash deposits,” she said. (Yesterday’s BT)

Ms Tan is the head of private banking at DBS Bank and is considered to be a possible future CEO, by no less than the chairman. She is a S’porean birther, not a new citizen.

Even rich face non-transparency when buying bonds

In CPF, Financial competency on 22/05/2014 at 4:18 am

(Yes, I’m taking a break from posting on FT-related topics. Normal FT ranting will resume tomorrow.)

ST recently pontificated on the need to make it easier for the “little people” to buy bonds (where in theory only $250,000 is needed for a minimum trade, though the usual dealing size is millions of $). Shortly thereafter, this letter appeared in Forum (BTW, I worked with him when we were both in the central bank. Glad to see that that he is still filthy rich. He went into stockbroking and ran into a rough patch here during the mid 1980s, but recouped his fortune in Perth, I was told).

But before I reproduce the letter, those anti-PAP paper activists who hate the CPF scheme (I’m thinking of you Half Heart Truths) should tell the truth on  CPF returns vis–a-vis govt bonds.  My Facebook Avatar posted this on Siow Kum Hong’s Facebook page (He had praised the 4% but not the 2.5% interest rate)

Don’t be greedy. 10 yr govt paper is less than 2.4%, while 15 yr is 2.7%. Of course investing in Reits a lot higher 5%+. But gd chance of having to retyrn it all via rights issue when there is a recession.

There was once a time when CPF acct holders were screwed (about the time Half Truths was saying rates were 7%). But now it’s a different story. GE coming )))

Now back to the problems very rich face when trying to buy S$ bonds:

Opaque fee structure for secondary bond market
Published on May 13, 2014

I recently bought a sizeable amount of Olam bonds and perpetual notes.

I discovered that bonds in Singapore and abroad are traded over the counter and was shocked by what I learnt about pricing in the secondary market.

While the direction of Olam bond prices was in line with my expectations, the quotations of bid and offer prices were extremely wide. Different banks and stockbroking houses also quoted different bid-offer spreads ranging from 0.75 per cent to 1.25 per cent over a 10-minute period.

Also, these institutions had opaque fee structures. Some banks incorporate their fees in the bid and offer prices, while others charge an additional fee of 0.25 per cent to 3 per cent over and above the spread.

Dealers told me of wealth management and advisory firms charging unsuspecting retail clients up to 3 per cent transaction fees on bonds.

Over one morning, I was given differing quotes from the various departments of a principal bank.

Comparing quotes between major investment banks is another nightmare.

If the Singapore Exchange and investment service practitioners wish to further develop the bond markets here and in Asia, they must come up with a more transparent system of secondary market pricing for retail investors.

The current structure lacks transparent guidelines and uniform fee structures.

Chua Wee Meng (Dr)

- See more at: http://www.straitstimes.com/archive/tuesday/premium/forum-letters/story/opaque-fee-structure-secondary-bond-market-20140513#sthash.ihCRqFWc.dpuf

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%.

—————————-

*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?

How we fund our SWFs

In CPF, GIC, S'pore Inc, Temasek on 02/11/2010 at 5:42 am

This piece is an attempt* to answer,”If Singaporeans are not “hard-driving and hard-striving”, where did GIC and Temasek get so much money to lose?”: a posting on a Temasek Review article in late 2009.

The answer parroted mindlessly by the government is that government budget surpluses mean that GIC and Temasek get money to invest with.

A more detailed explanation has to start with how the surpluses arise.

As about 43% of the working population  don’t pay income tax, and VAT and other taxes are relatively low: one way the surpluses are generated is by a government being thrifty (government’s view) or mean (view of many netizens).

Economists in the private sector, and the Reform Party (the sec-gen was once an economist and he has a first-class degree from Cambridge) have argued that rather than accumulate large surpluses that are then invested abroad, the government should spend more building up Singapore’s human capital. By spending more on things like education, healthcare and consumer protection, the returns generated will be better than the returns on overseas investments.

This is an argument that has excellent academic credentials. China is often asked by eminent economists ,”Why do you export so much when you, in return, use the surplus lend to the Americans so that they can buy more from you?” The economists advise that China should invest more locally.

The government’s view is that Singapore needs the reserves as an emergency fund should things go badly wrong. The late Dr Goh Keng Swee talked of spending the reserves in a recession (as has happened recently). Dr Goh and others could also have quoted the example of Kuwait. When Kuwait was invaded by Iraq, the reserves were used to help pay for the war. And afterwards for the reconstruction of the country. They could also have cited Iceland and Dubai as countries that got into trouble because they ran out of $, when they could not borrow any more.

The second reason why surpluses occur is that our CPF monies are invested in special government bonds. The $ from the bonds flow into the government’s Consolidated Fund together with revenues from taxes etc. All government expenses are paid out from this fund. If there is a surplus (as there usually  because the government is thrifty or mean depending on who is doing the talking) part of that surplus can go to GIC and Temasek. The government argues that because all the monies in the fund  is fungible (cannot be separated), one is wrong to argue that CPF monies are invested abroad.

Technically and legally the government is correct, but so what is the retort? The financial effect (though not the legal consequences) is the same as if our CPF monies are directly invested abroad.

And these special bonds are the reason why S’pore is up there on a  list that the local media does not ever publicise. S’pore has the 8th highest public debt to GDP ration (113.10%) in the world. Greece is 7th with 113.40. Other countries on the list above us are Zimbabwe  (champion), Japan (second), Lebanon and Italy. Iceland is 9th (106.7) while Ireland is at 36 (57.7).

(Aside, could this high debt to GDP ratio be the reason why the govmin wants to force-feed GDP growth through immigration? I may explore this issue in future and I hope RP will explore the issue as something the electorate should be educated upon.)

Singapore is unique among the countries with the largest sovereign wealth funds. The other SWFs are effectively funded from oil revenues. In the case of Singapore, it could be reasonably argued, by government critics, that the funding results from the “hard-driving and hard-striving” Singaporeans who are forced to save and lend the money to the government; and from less than optimal government spending.

So the quote at the beginning of this piece has elements of the truth. And worse: one could reasonably argue that the government makes something for itself from “hard-driving and hard-striving” S’poreans.  One noted local economist has said that the government is effectively pocketing the difference between the returns it gets from investing abroad and the returns it pays on our CPF accounts: a carry trade arbitrage. Borrow low and invest for higher returns.

*What with an election coming, I tot I should revise (and repost) a piece I did in December last year. The revision has been pretty extensive.

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