Archive for the ‘CPF’ Category
This analysis by Cynical Investor is too simplistic. There are many consideration for buying a medical insurance.
In an emergency, for example if you faint at Tanglin Shopping Centre, the nearest hospital is Gleneagles Hospital which is a private hospital. If you are NOT covered under the highest plan and you go to Gleneagles Hospital, you will need to pay much higher out of pocket. You can of course go to SGH where you can be fully reimburse for the charges but it is further away and you may not have the luxury of time in an emergency.
For non-emergency cases, you can plan which hospital to be admitted but the fact is that the waiting time for admission to B2 or C wards for such cases can be as long as up to 9 months. Can you take the pain for so long and do you want to wait?
Hence most people would opt to buy the most expensive plan when they are young since the full premium can be paid by Medisave. When you are older, you can still downgrade to a lower plan if premium is an issue.
Singaporeans are not as stupid as the report make us up to be. We may be Kiasu but we are definitely not DAFT.
One reason why people buy the most expensive plans is because of the very rapid escalation of hospitalization costs. That and the fact that the insurer has an obligation to renew your plan but is NOT obligated to allow you to upgrade.
When i bought my first shield plan the benefits were enough for a private hospital. When i got hospitalized this year the benefits had not changed as i had naively not upgraded my plan for years. The benefits were only marginally enough for B1 ward. The benefits do not change but the costs keep rising.
And i was told that had my conditon been a chronic one like say cancer or heart disease, it was possible that should i wish to upgrade my plan i would either suffer loading or that very condition would be excluded. BUT i could renew my plan, no problem.
After that you bet i’ll take the highest plan i can afford. In 5 years who knows what this plan will be good for. Just take it as front loading. The real issue is rising medical costs. Dealing with the insurance is treating the symptoms not the disease.
(Or “Numbers don’t lie — the CPF default plan, is awfully bad“)
I doubt it. [Update on 18 August 4.30am: He didn't touch on it. If S'poreans
bitch, bleat, kpkb maybehe'll fix it in next yr's NatDay Rally speech. Remember GE coming.]
Further to my non-quantative rant on CPF Life, two number-crunchers have worked out how nasty and expensive the standard CPF Life plan is. I’m surprised that Roy ngerng has not got round to calling this “criminal misappropriation” yet. Probably, he is waiting for Uncle Leong to explain the numbers to him. Roy may be gd with words, but he is worse than me when it comes to quantative finance, let alone basic maths and stats. At least he wasn’t in finance. (Btw, I would like to point out to Woody Goh that a gd parent would not have devised such a unfair default standard plan, or cPF Life in general. Btw2, since when has govt become our parents? Juz because PAP been in power since 1959, doesn’t mean it has become our parents. Even the CCP doesn’t regard itself as the parents of China. Woody Goh, we are not living in N Korea. You’ve been reading the ST, I assume.)
Nevertheless, the present values gap between CPF Life Standard and CPF Life Basic is too large to ignore. It is difficult to determine what are the ‘fine prints’ for such a large discrepancy between CPF Life Basic and CPF Life Standard as there is no policy contract available unlike a traditional annuity plan available from private insurance company.
In TRE, someone working in finance posted this less technical explanation, coming to the same result:
Here is a comparison between the default CPF Life Standard Plan payout for the writer meeting the minimum sum of $155,000 and the example of Mr. Tan in the CPF Life Handbook, who has $100,000, below the minimum sum, property pledge required. The writer’s payout is derived from the CPF Life Estimator. Mr. Tan’s given in the handbook. The assumed investment rate is 3.75%, the low end of the assumed investment rates for CPF LIFE.
|Chris K||Mr. Tan|
|RA at 55||155,000||100,000|
|Monthly Payout from 65||1,215||822|
|Bequest at 65||187,263||108,505|
|Bequest at 75||41,829||11,909|
|Bequest at 85||0||0|
At 55, CPF deduct half the minimum sum, $77,500 the first premium instalment from both the writer and Mr. Tan. The remainder of both RAs earned 4% with an extra 1% on first $60,000. This will be on combined balance, including the first premium which earned rate of 3.75%. At age 65, the remaining RA pays for the second premium instalment. The writer calculates the accumulated capital at age 65 and then amortised against the CPF Life estimated payout. Here are the numbers (CPF does not reveal its calculation so the writer use the default common sense approach)
|Chris K||Mr. Tan|
|RA at 55||155,000||100,000|
|Monthly Payout from 65||1,215||822|
|Accumulated Capital at 65||225,453||147,171|
|Residual Capital at 65||225,453||147,171|
|Residual Capital at 75||149,529||93,412|
|Residual Capital at 85||39,689||15,638|
|Capital depletion age||88 years old||86.75 years old|
The first thing that jumps out is the disparity between the estimated bequests and the residual capital after drawing the monthly payouts. At age 65, without a single payout, the bequest is $187,263 against accumulated capital of $225,453. As an annuity plan, the difference can be explained as those who expired earlier providing the reserves for those who lived longer on the basis of risk pooling.
However, the next thing that jumps out is the capital depletion age which is when the accumulated capital is completely drawn down: 88 years for the writer and 86.75 years for Mr Tan, both well in excess of the 82-83 years life expectancy. The government in effect made triple provisions for those who lived beyond the life expectancy:
1) the excess over the bequests of those who expired earlier
2) stretch the monthly payout well beyond life expectancy and
3) to a smaller extent having those who met the minimum sum compensate those who did not, which then begs the question why should anyone want to meet the minimum sum.
If that is not enough, legislation has been provided to wind up CPF LIFE in case the Plans are insolvent.
The Basic Plan
To avoid a long article, the writer provides a brief summary of the Basic Plan which is predicated on drawing most of the monthly payout from the RA while the annuity only kicks in at age 90. As such, the Basic Plan provides a larger bequest from the RA and over a longer time frame but with lower monthly payout compared to the Standard Plan.
At age 55, the first CPF Life premium instalment equal to 10% of the respective RA is deducted. At age 65, the second instalment equal of 10% of the accumulated RA balance is deducted. The writer draws $1,098 per month from his RA as the payout under the Basic Plan while Mr. Tan draws $737. At the age of 90, the remaining balances in the RAs will be completely depleted. Then, the CPF Life annuities start providing their respective payouts. If both expire before age 90, here is the unused accumulated capital in their respective CPF LIFE annuities and if they live, the capital depletion age.
|Chris K||Mr. Tan|
|Annuity accumulated capital at 90||86,384||61,896|
|Annuity capital depletion age||96.75 years old||95.5 years old|
When the government said a third of Singaporeans who are 65 today will live beyond 90, then two thirds of them will not see a single cent paid from the CPF LIFE annuity. Again the government has built in triple provisions 1) the payout from the RA is stretched well over life expectancy 2) annuities kicking in well beyond life expectancy, guaranteeing massive reserves to pay for those who live beyond 95 3) to a smaller extend, those who meet the minimum sum mitigating those who do not.
The writer does not accuse the government of deliberately profiting from the financial risks of longevity. However, the triple provision, triple redundancy or in the strictly local parlance “kiasu, kiasi, kiabo” of absolutely ensuring not a single cent is spent on retirement funding, can only mean that there will be excess money left from CPF LIFE which reverts back to the government.
Some may call this conservative financial management but there is a very thin line between such conservative financial management and indolent financial management which arises from coercion and monopoly over retirement savings. Undoubtedly, the usual price of not getting more from their retirement funds is paid by you and me.
* Chris K holds a senior position in a global financial centre bigger than Singapore. He writes mostly on economic and financial matters to highlight misconceptions of economic policy in Singapore.
Fyi, I was lucky enough to be under the old system and I didn’t opt for any of these plans. If I live too long, I’d die financially if the CPF was all I had. The good concept but as usual messed up by the PAP govt in its meanness: The Standard plan offers an annuity scheme similar to what retirees in Britain opt for. The Basic plan is commonly adopted by US retirees.
Reminder, the Basic plan is closer to the Minimum Sum scheme that is no longer available.
Someone claiming to be a civil servant (and ex-reporter) replied to an article of mine on the above, As he has some good points, I tot I’d share it. My comments follow.
I’ll answer briefly the two questions you posed.
Firstly, why we need a larger population if each individual saves for his own retirement. Strictly speaking, we don’t. What we need is a larger *working* population because only those who have active incomes pay taxes. The taxes collected is used to run the country. It is simply not tenable nor sustainable to run a country with *both* a shrinking pool of tax revenue and a growing proportion of retirees.
For instance, even with steady population numbers, we expect the size of our law enforcement to maintain its strength (if already adequate). Our law enforcement staff is mainly supported by tax payers. Retirees generally enjoy their services but do not pay for the police. With waning tax revenues, it would be reasonable to cut funding and strength of our law enforcement agencies. And it stands to reason that crime rates would go up.
The same reasoning can be applied to health care, defense, or education expenses. Retirees don’t pay for these (other than a token co-payment).
Secondly, why the need for minimum sum and CPF Life. In my opinion, the Government is trying to be tactful in stating their reasons. I’d be more blunt here. Simply stated, the minimum sum is a proxy for your financial acuity throughout your working life. Financially savvy individuals would, by the time they retire, have a nest egg many times the minimum sum. Folks like you would be in that category. The Government does not have to worry for these folks.
Conversely, if you hadn’t even been able to save the minimum sum, what basis does the Government have to believe that you will be able to manage your own money to sustain you till death and not burden the rest of the population? If someone hadn’t been financially successful during their most productive years, would you believe that he is more likely to multiply his retirement account, or if given a chance, misspend or “mis-invest” his money. What then? What if they have no children or their children couldn’t support them or are themselves retired. Are you willing to support these folks for the rest of their life?
You yourself mentioned that life expectancy is much greater than before. That means whatever savings a retiree has would have to last for a longer time. If someone hadn’t sufficiently planned for his own retirement, what makes you think he could plan for his sustenance till death?
The views expressed here are mine and mine alone.
Whatever it is, it ain’t brief. So there goes his/her “briefly”.
Absolutely correct on first point though. My question was aimed at hopefully drawing out this answer.
This answer shows the BS (OK “incompleteness”, “economy with the truth”) that is the govt’s explanation here:
Moves on: nor all thy Piety nor Wit
Shall lure it back to cancel half a Line,
Nor all thy Tears wash out a Word of it.”
Mr Ariely therefore recommends a degree of compulsion. People should have to buy some insurance against longevity risks just as they are required to buy a basic level of car insurance, he says.
The problem is the govt’s solution, CPF Life. We juz don’t know if it’s any gd: black box calculations and no protection against default (yr CPF Life, it dies, you die). Sometime soon I’ll give blog further on these points.
As to Kee Chui’s *Population figures – nobody knows” comments last week: This is what the moderator at the event where he spoke (and a respected economist) posted on Facebook Chan Chun Sing, this is what
As an economist all I can say is that it’s not a very helpful answer.
A final population of below 4 million implies a drastic collapse of the economy not seen even in the Great Depression
10 million implies an impossibly crowded, highly unequal, socially divided society.
That we want to look after our citizens, or provide good jobs for our young is an independent truism.
No comment on an issue that is a key determinant of long term well being for future generations?
Freedom is slavery.
Ignorance is strength.” .
This is how our constructive, nation-building BT reported how GIC is adding insult to injury:
AMID a gloomier outlook for fund managers globally, GIC has racked up annualised real returns of 4.1 per cent over the past 20 years to end-March this year, up from 4 per cent as at end-March last year. This return – above global inflation – was underpinned by a strong recovery in global financial markets, said the Singapore sovereign wealth fund.
Waz the point of this inflation-beating return when the 2.5% CPF rate is below S’pore’s inflation rate? Remember that until recently, we were told the 2.5% rate was justified given that inflation was oneish?
In late July after the June inflation numbers were released which showed core inflation slowed for a second straight month to 2.1 per cent after May’s 2.2%, but a drop to below 2% will be unlikely this year, OCBC economist Selena Ling told MediaCorp..
Especially as our CPF monies do find their way into the pool of funds managed by GIC. Not that this s any secret exposed by Roy Ngerng. I blogged about this in 2009. And I think TRE reproduced it then.
But with domestic cost pressures remaining the primary source of inflation, the government reiterated that core inflation (which strips out accommodation and private road transport costs) will stay elevated at 2-3 per cent in 2014.
The impact of rising consumer prices on households varied across different income groups in the first half of this year. Worst hit were the bottom 20 per cent of households: their larger expenditure shares on food and healthcare costs meant they experienced a higher inflation rate (excluding imputed rentals on owner-occupied accommodation) at 2 per cent, compared to the middle 60 per cent income group and the richest fifth of households (both at 1.7 per cent).
CIMB and DBS economists agreed that much of the increase in food and healthcare costs was the result of ongoing restructuring efforts, where a tight labour market has pushed costs (and therefore prices) up.
Said DBS’s Irvin Seah: “Restructuring is inflationary in nature, and it will affect everything. Even if we are unable to bring healthcare costs lower, we should try to moderate the pace of increase.”
According to a report released by the Department of Statistics (DOS) yesterday, Singapore households experienced a 1.7 per cent inflation rate in the first half of this year compared to the same period in 2013. This was lower than the 1.9 per cent rise seen in the preceding six months.
Excluding imputed rentals on owner-occupied accommodation, the consumer price index (CPI) went up by 1.7 per cent in H1 2014 – slightly higher than the increase of 1.5 per cent in the second half of 2013.
As for the second half of this year, the government expects headline inflation to ease, due to lower car prices and accommodation costs.
If you go to link below, and click around, you will find that S’pore’s ranking on happiness (70) is very close to that Laos (69) and Burma (67) despite being way ahead in development rankings. M’sia is also at 70. The Thais and Indons are happiest in Asean (80).
So in Asean, S’poreans are about the norm happiness wise. And on par with HK which is at around our lrvel of development.
So juz as there is something wrong with netizens’ perceptions about material prosperity, they got happiness wrong too? TRE posters and other netizens must the exception to reasonably happy S’poreans? Born losers in happiness as in prosperity?
Any wonder then why govt commissioning a new study to find out what the people want, for retirement, and for health needs? Can’t rely on the noise from cyberspace for accurate feedback? Born losers here (self-included). S’pore Notes bitching on new govt study.
But then I’ve been called a PAP mole and worse by TRE ranters.
I refer to this “Discontent among WP’s old guard” in the New Paper. Typical of “constructive, nation-building” media. When the PAP changes members of the management team, the media praise it for” self renewal”, “New blood”. when an Oppo party does the same thing the emphasis is on “discontent”, splits of the losers, malcontents.
I was going to deconstruct the article, given that I’m not too well-informed on the WP’s internal workings (My Morocco Mole has his agenda when telling me stuff. And he had a howler ). But my FB avatar came across a detailed analysis (deconstruction and factual) on FB by a WP member. As we didn’t ask permission, I will not name the person. But if she wants to be named, I will amend this piece to give credit where credit is due.
The New Paper published a report masquerading as a factual analysis of the dynamics at this year’s Organising Members Conference held at the Workers’ Party HQ on 27 July 2014. The article was mischievous and misleading. But more importantly, errors were aplenty. The following are my brief comments.
1. A binary between veterans and younger members who hold degrees was constructed. Supposed “facts” were thrown into this binary framework to create a seamless understanding of what has transpired and to provide analysis of and/ or an account of the situation.
In the article, John Yam and Somasundaram are conveniently labelled as part of the “old guard”. In that case, it appears that both of them were labelled as such due to their physical age in relative to the previous council members who were voted out, such as Ng Swee Bee and Koh Choong Yong who are in their 30s and early 40s respectively, rather than their experience in the Party. If the journalist had done his research, he would have realised that John Yam and Somasundaram joined the Party in 2009 and 2006 respectively. They are in no way “veterans” alluded to by the journalist as being “around for more than 15 years.” In fact, Swee Bee has been in the Party for the last 10 years, longer than John Yam and Somasundaram.
In listing down the reasons for the unhappiness of the “veterans”, he cited that “newer and younger members who hold degrees are preferred over veterans. In that case, the two “older members” who were elected does not in any way fit this caricature. Dr. John Yam holds a PhD and Mr. Somasundaram holds a Masters degree. Swee Bee on the other hand, for the longest time since she joined the Party in 2004 did not have a university degree, but she has been holding the position of Organising Secretary for many years.
The journalist also pointed out that former members, “Mr. Mohamed Fazli Talip and Sajeev Kamalasanan” were veterans of the Party. They were not. Fazli joined the Party in and around 2009/ 2010 and Sajeev joined the Party in 2006. To put it into perspective, Swee Bee and Choong Yong joined the Party in 2004 and 2006 respectively. This binary of “veterans”/ “old guard” vis-a-vis the younger and educated members is clearly misleading and in his attempts to construct a “Other” in the Party, does more harm than good in helping readers of The New Paper understand what had transpired at 216G, Syed Alwi Road on 27 July 2014 and more importantly, the implications/ significance of the new Council in the lead up to the next General Election.
The fundamental point is this. The journalist contradicted himself with the use of the terms “old guard” and “veterans” to mean the same group of people or to construct a faction within the Party from thin air. As he writes on, even he became confused.
2. The journalist displays his lack of understanding of the operations and functions of the Workers’ Party. He did not bother to do his research and check his facts.
The Workers’ Party do not and would not parachute in their candidates. In the article, it was pointed out “candidates are parachuted in, despite not having walked the ground.” Anyone with a basic understanding of the Workers’ Party knows that this is not true at all. The journalist would also be interested to note that the Workers’ Party fielded an ITE graduate at the 2006 elections.
The reasons for Dr. Poh Lee Guan’s sacking, Mr. Eric Tan’s resignation (why Mr. Gerald Giam was made NCMP ahead of Mr. Eric Tan) and the earlier resignations of Mr. Fazli Talip and Mr. Sajeev were made clear to members, cadres and non-cadres at the annual members seminar of the Party. In particular, Mr. Low had explained to the entire membership the reasons as to why candidates were not guaranteed a cadreship. This point was consistently explained to the membership whenever it was brought at internal meetings. For the case of Dr. Poh Lee Guan, Mr. Low had made the reasons clear in his interview with the press after the nomination of Mr. Png Eng Huat during the 2012 Hougang by-elections.
Thus, the journalist was simply mischievous in attempting to illustrate a lineage of discontent and dissatisfaction in the Party. He accepted the comments of these former members at face-value, without trying to better understand the respective motivations/ intentions of these former members. Not too sure whether this is journalism or gossip.
3. “How bad was it?” / “Is there a split?”
In situating his piece in the context of an election drama and an internal party split, the journalist tried his utmost to fit his analysis with the gossip and rumours he picked up with members at the coffeeshop under the party’s headquarters. He had no intention to put up a accurate report.
4. The journalist do not understand the historical context behind Sylvia Lim’s statement.
Sylvia Lim told the cadres that the “WP could not afford to have internal problems or disunity.” Any responsible political party with an understanding of the period in Singapore’s political history (1991 – 1997, Singapore Democratic Party) would make a similar appeal to its members. A quick search would also find Lee Hsien Loong emphasising party unity to his members.
If a political party was nothing but a monolith, with the entire membership parroting the leadership, then I guess something is really wrong. It probably would be inherently broken. As a member of the Party, I am glad to say that this is not the case. The Workers’ Party is growing, its membership is growing and with that will come more competitive internal party elections. Different individuals with different views, ideological inclinations and backgrounds and experiences join the Party at different junctures in their lives. This can only be good for the long term development of a Party. As the case of Mr. Yaw Shin Leong and Dr. Poh Lee Guan had clearly shown, no one is above the institutions and standing orders laid down in the Workers’ Party. WP is a professional organisation and a well-oiled political machinery.
By the way, I attended the conference last Sunday. There were more cadres than the physical space at HQ would allow. It was packed, very packed. No wonder WP needs a new HQ for its continued growth and development. I like to think that this is not very newsworthy for The New Paper.
BTW, I’m sure that TRE ranters who call me a PAP mole, ISD person will say this post confirms what they have been saying, ’cause it sides with the WP. For the record, I think the SDP has the best policies for S’pore, 10-15 yrs into the future. It’s the only party that talks about
De-couple housing and healthcare from CPF.
The major reason why Singaporeans are left with insufficient retirement funds is because the PAP gives Singaporeans no choice but to use what is their retirement money to pay for their HDB flats and hospital expenses.
The SDP plan ensures that HDB flats are sold without the inclusion of land cost (see here) and that the Government stops profiting from healthcare (see here) In this way, our CPF savings are left unmolested for retirement.
Solving the problems around retirement, public housing and healthcare require solving all three issues together.
Yes, yed, I know that in the long term, the SDP’s retirement and healthcare policies will be very expensive for S’poreans but
The long run is a misleading guide to current affairs. In the long run we are all dead. Economists set themselves too easy, too useless a task if in tempestuous seasons they can only tell us that when the storm is past the ocean is flat again.
Here’s an explanation of what Keynes meant:by Simon Taylor
Keynes wrote this in one of his earlier works, The Tract on Monetary Reform, in 1923. It should be clear that he is not arguing that we should recklessly enjoy the present and let the future go hang. He is exasperated with the view of mainstream economists that the economy is an equilibrium system which will eventually return to a point of balance, so long as the government doesn’t interfere and if we are only willing to wait. He later challenged that view in his most important work The General Theory of Employment, Interest and Money (1935). arguing that the economy can slip into a long term underemployment equilibrium from which only government policy can rescue it.
Deputy Prime Minister Tharman Shanmugaratnam said earlier this week that the government would explore the option of private pension plans for the CPF for those who are able to take higher risk. But he also warned that private pensions “will not be a walk in the park”, as higher risk did not always translate into higher returns. (BT 24 July)
Here we go again. Time for civil servants and fund manager marketers to reopen their files from the early noughties.
As BT reported, Industry anticipation of the prospect of private pension plans for the CPF was intense in 2004. Such plans were mooted as a means to enhance returns and lower costs for CPF members.
Private pension plans were envisioned as balanced or mixed-asset portfolios which would be farmed out to the private sector to be managed on an institutional basis. The ideal scenario was that there would be no sales charge, and annual fees would be reduced to a fraction of the prevailing fees … In 2004, estimates of the fund size needed for an expense ratio of 50-75 basis points ranged from S$200-300 million to as much as S$1 billion*.
In 2007, the government said the CPF’s “risk-free” structure would be retained because the majority of members did not have large balances and because private pension funds would be “too risky for older members”.
That was the decision then.
Now in 2014, Tharman is raising the issue again? Now the rich can have private pensions, he says? Hello, why didn’t that happen in 2007? It was dismissed out of hand apparently on the ground that the rules had to be the same for everyone in the scheme.
Is the govt trying to distract us from the real issues of the day that can cause it problems as it spends our money on ourselves in trying to buy our votes: Minimum Sum calculations, how CPF Life funds are invested and is it that safe, and Medisave, Medishield flaws that show up the govt’s incompetency or meanness. One of these days, I’ll blog on what actuaries say about Medishield’s proposed buffer reserves: they agree with WP’s GG rather Gan and Puthu. Remember the higher the reserves, the larger the premiums paid.
Roy Ngerng’s “revelations”** and PM’s law suit distract S’poreans from these impt issues. Sadly, new media ais ana abets unwittingly the govt’s wayang. And now there is more smoke from Tharman.
Whatever leh, govt’s attitude on private pensions, and “tweaking” the CPF system reminds me of Charles Dicken’s description of the Circumlocution Office in Little Dorrit.
It describes the govt procrastinating over everything. It also can be seen as a reproach to the government that whatever it does the results are just empty words. And our govt dares call cyberspace “noise” given its track record on private pension plans?
The Circumlocution Office was (as everybody knows without being told) the most important Department under Government. No public business of any kind could possibly be done at any time without the acquiescence of the Circumlocution Office. Its finger was in the largest public pie, and in the smallest public tart. It was equally impossible to do the plainest right and to undo the plainest wrong without the express authority of the Circumlocution Office. If another Gunpowder Plot had been discovered half an hour before the lighting of the match, nobody would have been justified in saving the parliament until there had been half a score of boards, half a bushel of minutes, several sacks of official memoranda, and a family-vault full of ungrammatical correspondence, on the part of the Circumlocution Office.
This glorious establishment had been early in the field, when the one sublime principle involving the difficult art of governing a country, was first distinctly revealed to statesmen. It had been foremost to study that bright revelation and to carry its shining influence through the whole of the official proceedings. Whatever was required to be done, the Circumlocution Office was beforehand with all the public departments in the art of perceiving — HOW NOT TO DO IT.
Through this delicate perception, through the tact with which it invariably seized it, and through the genius with which it always acted on it, the Circumlocution Office had risen to overtop all the public departments; and the public condition had risen to be — what it was.
It is true that How not to do it was the great study and object of all public departments and professional politicians all round the Circumlocution Office. It is true that every new premier and every new government, coming in because they had upheld a certain thing as necessary to be done, were no sooner come in than they applied their utmost faculties to discovering How not to do it. It is true that from the moment when a general election was over, every returned man who had been raving on hustings because it hadn’t been done, and who had been asking the friends of the honourable gentleman in the opposite interest on pain of impeachment to tell him why it hadn’t been done, and who had been asserting that it must be done, and who had been pledging himself that it should be done, began to devise, How it was not to be done. It is true that the debates of both Houses of Parliament the whole session through, uniformly tended to the protracted deliberation, How not to do it. It is true that the royal speech at the opening of such session virtually said, My lords and gentlemen, you have a considerable stroke of work to do, and you will please to retire to your respective chambers, and discuss, How not to do it. It is true that the royal speech, at the close of such session, virtually said, My lords and gentlemen, you have through several laborious months been considering with great loyalty and patriotism, How not to do it, and you have found out; and with the blessing of Providence upon the harvest (natural, not political), I now dismiss you. All this is true, but the Circumlocution Office went beyond it.
Because the Circumlocution Office went on mechanically, every day, keeping this wonderful, all-sufficient wheel of statesmanship, How not to do it, in motion. Because the Circumlocution Office was down upon any ill-advised public servant who was going to do it, or who appeared to be by any surprising accident in remote danger of doing it, with a minute, and a memorandum, and a letter of instructions that extinguished him. It was this spirit of national efficiency in the Circumlocution Office that had gradually led to its having something to do with everything. Mechanicians, natural philosophers, soldiers, sailors, petitioners, memorialists, people with grievances, people who wanted to prevent grievances, people who wanted to redress grievances, jobbing people, jobbed people, people who couldn’t get rewarded for merit, and people who couldn’t get punished for demerit, were all indiscriminately tucked up under the foolscap paper of the Circumlocution Office.
Numbers of people were lost in the Circumlocution Office. Unfortunates with wrongs, or with projects for the general welfare (and they had better have had wrongs at first, than have taken that bitter English recipe for certainly getting them), who in slow lapse of time and agony had passed safely through other public departments; who, according to rule, had been bullied in this, over-reached by that, and evaded by the other; got referred at last to the Circumlocution Office, and never reappeared in the light of day. Boards sat upon them, secretaries minuted upon them, commissioners gabbled about them, clerks registered, entered, checked, and ticked them off, and they melted away. In short, all the business of the country went through the Circumlocution Office, except the business that never came out of it; and its name was Legion.
Sometimes, angry spirits attacked the Circumlocution Office. Sometimes, parliamentary questions were asked about it, and even parliamentary motions made or threatened about it by demagogues so low and ignorant as to hold that the real recipe of government was, How to do it. Then would the noble lord, or right honourable gentleman, in whose department it was to defend the Circumlocution Office, put an orange in his pocket, and make a regular field-day of the occasion. Then would he come down to that house with a slap upon the table, and meet the honourable gentleman foot to foot. Then would he be there to tell that honourable gentleman that the Circumlocution Office not only was blameless in this matter, but was commendable in this matter, was extollable to the skies in this matter. Then would he be there to tell that honourable gentleman that, although the Circumlocution Office was invariably right and wholly right, it never was so right as in this matter. Then would he be there to tell that honourable gentleman that it would have been more to his honour, more to his credit, more to his good taste, more to his good sense, more to half the dictionary of commonplaces, if he had left the Circumlocution Office alone, and never approached this matter. Then would he keep one eye upon a coach or crammer from the Circumlocution Office sitting below the bar, and smash the honourable gentleman with the Circumlocution Office account of this matter. And although one of two things always happened; namely, either that the Circumlocution Office had nothing to say and said it, or that it had something to say of which the noble lord, or right honourable gentleman, blundered one half and forgot the other; the Circumlocution Office was always voted immaculate by an accommodating majority.
Such a nursery of statesmen had the Department become in virtue of a long career of this nature, that several solemn lords had attained the reputation of being quite unearthly prodigies of business, solely from having practised, How not to do it, as the head of the Circumlocution Office. As to the minor priests and acolytes of that temple, the result of all this was that they stood divided into two classes, and, down to the junior messenger, either believed in the Circumlocution Office as a heaven-born institution that had an absolute right to do whatever it liked; or took refuge in total infidelity, and considered it a flagrant nuisance.
*Background facts about CPF
Data compiled by Morningstar shows that there are funds which handily beat the CPF rates. Aberdeen’s Pacific Equity Fund, for example, generated annualised returns of 4.6 per cent over three years; 13.8 per cent over five years; and 13.5 per cent over 10 years. The maximum loss and volatility over the periods were in double digits, however.
As at March 2014, there was S$259.5 billion in total members’ balances in the CPF. The Ordinary Account (OA) accounted for S$100.7 billion and another S$62.8 billion sat in the Special Account (SA).
In terms of participation in the CPF Investment Scheme, S$20.7 billion of OA funds were invested, and S$5.7 billion of SA funds.
**Uncle Leong (Roy’s sifu) has been telling S’poreans for years what Roy has discovered. The only thing that Roy did different was to accuse the govt of “stealing” our CPF, something that he has repented of:
I recognise that the Article means and is understood to mean that Mr Lee Hsien Loong, the Prime Minister of Singapore and Chairman of GIC, is guilty of criminal misappropriation of the monies paid by Singaporeans to the Central Provident Fund.
3.I admit and acknowledge that this allegation is false and completely without foundation.
4.I unreservedly apologise to Mr Lee Hsien Loong for the distress and embarrassment caused to him by this allegation.
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.
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.
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 suggestionIn CPF, Financial competency on 26/06/2014 at 4:32 am
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%.
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!”
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?
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.
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.
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
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.
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.
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.
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 …
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.
In response to questions by the media of the possibility of sounding xenophobic due to the use of the words in the party’s name, “Singaporeans First”, Mr Tan Jee Say said that the words were not meant to disservice foreigners or put locals at the forefront. Rather, it was meant to signify the intention to treat all Singaporeans as equal and to bring back their dignity and self-esteem.
So SPH and MediaCorp journalists think that “S’poreans First” carries tones of “xenophobia”.? So do they think that the “P” in the SPF, PAP and PM stands for “Pinoy”, something the Pinoy Pride organisers seemed to have assumed wrongly. The hacks should like MoM Tan, Amy Khor and other PAPpies realise that people who raise concerns about immigration are not always prejudiced, let alone “xenophobia.
But then to be fair they are not alone in looking down on ordinary S’poreans. So too do middle class and elite kay pohs like Kirsten Han and Constance Singham http://www.theonlinecitizen.com/2014/05/civil-society-statement-on-racism-and-xenophobia/, who likewise equate concern about immigration with “xenophobia. And then go on to blame the PAP govt. But then they are in the main anti-PAP paper warriors (with some anti-PAP real-world warriors). And being upper crusts are used to having their cake and eating it.
Calling S’poreans concerned about immigration names just shows that the govt, media and these upper crust kay pohs fail to understand S’poreans’ (self included even though the pro FT policies are gd for me, by keeping inflation in check) concerns on the issue.
Let me be clear, there are some extremists and real loonies on the issue of FTs, but most of those concerned about immigration are juz normal S’poreans who happen not to agree with AWARE (who diss NS and NSmen), Kirsten Han, Mom Tan, Constance Singham, Amy Khor etc.
(BTW great riposte to these FT loving upper crust kay pohs http://www.theonlinecitizen.com/2014/05/racism-xenophobia-statement-by-civil-society-groups-disappointing/ from a professor no less)
Money in your CPF account is your money
This is what MoM Tan, a paper general, blogged, inter alia, recently.
Best riposte I’ve come across.
Come on Baey, surely you can help him come up with better lines? http://atans1.wordpress.com/2011/05/28/pap-needs-a-public-communications-swat-team/. Or maybe you can’t? You no longer the CEO of an int’l PR firm’s S’pore office.
The use of “xenophobia”and “your money” reminds me of, “When I use a word,” Humpty Dumpty said, in rather a scornful tone, “it means just what I choose it to mean—neither more nor less.”
“The question is,” said Alice, “whether you can make words mean so many different things.”
“The question is,” said Humpty Dumpty, “which is to be master—that’s all.” *
Have a gd weekend.
*“I don’t know what you mean by ‘glory,’ ” Alice said.
Humpty Dumpty smiled contemptuously. “Of course you don’t—till I tell you. I meant ‘there’s a nice knock-down argument for you!’ ”
“But ‘glory’ doesn’t mean ‘a nice knock-down argument’,” Alice objected.
“When I use a word,” Humpty Dumpty said, in rather a scornful tone, “it means just what I choose it to mean—neither more nor less.”
“The question is,” said Alice, “whether you can make words mean so many different things.”
“The question is,” said Humpty Dumpty, “which is to be master—that’s all.” Alice was too much puzzled to say anything, so after a minute Humpty Dumpty began again. “They’ve a temper, some of them—particularly verbs, they’re the proudest—adjectives you can do anything with, but not verbs—however, I can manage the whole lot! Impenetrability! That’s what I say!”(Thru the Looking-Glass)
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)
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.
(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
Opaque fee structure for secondary bond market
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)
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 .
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.
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…’
*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.
CPF Life Plans
|CPF LIFE Plans (With Refund)||Monthly Payout||Bequest|
|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
– 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%
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.
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.