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Posts Tagged ‘CPF’

No $ needed: Three fixes to show the PAP really cares

In Political governance on 03/03/2014 at 5:00 am

Prime Minister Lee Hsien Loong said Singapore has to strike a balance between maintaining its competitiveness and caring about the less well-off as it strives to reduce the income gap. (CNA report a few weeks ago: More extracts at end oif article).

And the Budget statement and the spin that the conastructive, nation-building media has been putting on it esp the Pioneer package is along the same lines.

We all know that an election is coming round the corner and we know the PM (remember the 2011 “Sorry”, followed after the GE with massive tpt breakdowns and the population white paper, the latter issued juz before NatCon?)

So PM and the PAP has to walk the walk, not juz talking the talk.

The benefits for the pioneer generation are a gd, if a belatedly and niggardly start. Still got to start sometime and somewhere. It helps the pioneers and their children.and grandchildren who are caring for them**. Here are some things that PM can do to show the govt cares. They cost nothing going by what ministers said when defending these rules.

–Scrap the Medisave limit. It doesn’t cost anything as a minister has admitted but will give S’poreans peace of mind.

Since the inception of Medisave-approved Integrated Shield Plans (IPs) in 2005, no IP policyholder has reached his lifetime claim limit.

Health Minister Gan Kim Yong said this in a written reply to a Parliamentary question from Hougang Single-Member Constituency MP Png Eng Huat about the number of Singaporeans who are no longer insurable under MediShield or Medisave-approved Integrated Shield Plans.

This could be due to exhausted benefits and claim limits upon diagnosis of major illnesses.

Mr Gan said that the MediShield lifetime limit was increased in 2005, and more recently in March last year from S$200,000 to S$300,000. (CNA sometime back)

– Fix the flaw in CPF Life Plans

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/). Even if the rules to access these monies make a mockery of the ownership, at least (so far) the beneficiaries can inherit the monies. (Remember that when Roy Ngerng again asserts (as he regularly does) that CPF contributions should be classified as a social security tax. He would wouldn’t he? He thinks the PAP is oppressing us, even though as a critic and  self-outed gay, ISD is ignoring him.)

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

Finally,  the PM should apologise for VivianB’s sneer at the elderly poor all those yrs ago

Or make him make a fulsome apology.Even ex-Red Guards are apologising for their actions in the Cultural Revolution.

Even if … made amends for selfish or political reasons, their words and gestures are still important, says [a historian]. “It is still better than those who refuse to repent until they die. The conflict and hatred should be solved. The nation must move forward.”

(http://www.economist.com/blogs/analects/2014/02/apologising-cultural-revolution)

Why, I am I not asking him to be sacked? He is actually a gd environment minister. For starters, there are no more 50-yr floods***. Secondly, in my area (Marine Parade, East Coast), there are now regular cutting of shrubs and grass at empty plots of land and along pathways. There is also an attempt to ensure that in spots where ponding regularly occurs after the rain: attempts are made to fill in the spots and re vegetate them. Yaacob and his French cook of a chef never bothered.

And Vivian did get the Indons to do something about the haze by practicising megaphone diplomacy http://atans1.wordpress.com/2013/07/05/haze-pm-silence-is-not-a-solution/. Yaacob was sensitive to Indonesians’ attitude to S’pore and kept quiet: he always liddat. Took PM to rebuke his dad on Malay integration. Yaacob muttered, “Worse case scenario”.

*He made the comment in an interview with China’s New Century — a magazine by Beijing-based media group Caixin — which was published a few Mondays ago.

Mr Lee said there is a need to keep a balance between the yin, which he described as caring for one another, and the yang, which is the “competitive element that drives the society forward”.

“If you go too much towards competitiveness, you lose that cohesion and sense of being Singaporeans together,” Mr Lee said.

“If we go… the other way and say, well, we don’t compete… I think we will all be losers.”

He acknowledged that the competitive environment in Singapore is getting fiercer and conditions are getting more challenging for middle and lower-income groups in many societies.

Alluding to the concept of yin and yang, he said Singapore needs to do more to “tilt the balance towards the yin side” — the element of care and concern for others.

This means greater help for the low-income groups as well as keeping society more open, so that the people who have talent can move up and will not be daunted by the gaps in incomes between the rich and poor, which is what Singapore has been doing, he added.

In reply to a question, Mr Lee acknowledged that while the income gap in Singapore is wider than most other countries, it was not as wide when compared to other cities.

But rather than bringing those in the higher income bracket down, he said it is important to focus on levelling-up the wider population.

He also said Singaporeans have to stay connected to the rest of the world, particularly the Asian region as it offers many opportunities.

Describing Singaporeans as hardworking and talented, he said: “I think the best way to make use of their talents and their abilities is not just to confine (them) within Singapore, but to connect to what’s happening around us.

“So if a company sets up an operation in Singapore, it’s not just for our market, but for the region.

“And if our people have abilities as managers and leaders, they can be managers and leaders not just in Singapore, but they can go out and there are many operations, many companies all over the region which will find a good Asian executive a very considerable asset.”

Prime Minister Lee believes as society changes, so too will Singapore’s political structure, as he cited how it has evolved over the years.

He said: “I think as we go forward, we will probably have to make further adjustments, surely, because our society will change.

“I believe that there will be a greater degree of competition, there will be a greater desire of Singaporeans to participate in the political process. And we ought to accommodate that, because it’s good that Singaporeans care about the affairs of the country and which way Singapore is going.

“But whatever we change, we still want a system where you encourage good people to come forward — you encourage voters to elect people who will represent their interests well, and you encourage the government to act in a way which will take the long-term interests of the country at heart.

“And that’s not easy to do.”

**A constructive suggestion: “Will eldercare be as common as childcare?” (BBC Online)

***OK it hasn’t been raining.

Take advantage of these CPF facilities

In Financial competency, Financial planning on 30/07/2013 at 10:49 am

There are two facilities that S’poreans can take advantage off. The first is for oldies, the other for everyone

Using yr CPF a/c as yr savings, fixed deposit account

(Note that a version of u/m first appeared in 2011)

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 or even as a fixed deposit 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.

BTW, when I first posted this, someone wrote in saying

If you leave money in OA after 55, very high chance you will not get out 100% later.

1. Good chance you will use Medisave for medical expenses after 55, necessitating topping up of MA from OA before you can take out.

2. Medisave Required Amount increases EVERY year on 1st Jan, in line with medical inflation during the previous 12 months. This has resulted about 5%-7% annual increase in MRA for the past few years.

So even if you don’t touch your Medisave after 55, you will need to top up the ever-increasing Medisave Required Amount before you’re allowed to withdraw your OA.

Unless your OA amount is large enough such that the yearly interests are sufficient to cover the yearly increase in MRA. But then, this will effectively reduce the 2.5%. Which defeats the purpose for why you left money in OA in the first place.

He has a gd point. My response is that Medisave account will be used and anyway it attracts 4% interest a yr.

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

Reading BT/ST financial stories for free

Readers may have noticed that I link to ST and BT financial stories (behind paywalls) via CPF.

Check out this link regularly http://www.cpf.gov.sg/imsavvy/infohub.asp if you want read, for free, to ST and BT financial stories.

Oldies use yr CPF acct as savings, fixed deposit account

In Financial competency, Financial planning on 16/10/2012 at 5:28 am

See the low interest rates available in mkt. You get 2.5% minimum with CPF*.

http://www.channelnewsasia.com/stories/singaporebusinessnews/view/1225421/1/.html

*Terms and conditions apply.))))

If Minimum Sum increase was “moderated”, why not electricity prices?

In Political governance on 04/07/2012 at 5:08 am
Last Saturday, it was reported that electricity tariffs will decrease by an average 2.5%  for the next three months, beginning July 1: the price of fuel has gone down. Sounds good to me who doesn’t have a wage increase that compensates for the rise in inflation.
 
But the government’s response to a question on the cost-of-inflation increase in the CPF’s Minimum Sum has me wondering if its formulae for various “automatic’ price adjustments of services etc are not that “automatic”.
 
But shume background first. Uncle Leong (TOC used to carry his articles*, but now they only appear on his website) often asked pointed questions about the way electricity tariffs were calculated. The non-answer response of the authorities was to say “it’s the formulae”, and imply that it was a mechanical process: there were no attempts to tweak or adjust the formulae without first letting us know.
 
But we now know that the increase in the Minimum CPF Sum was “adjusted”: the formula used was tweaked (see letter below to ST’s Forum from the Manpower ministry). And worse: if a member of the public had not grumbled publicly about the inflation rate used to calculate it, the tweaking would not be publicbecause I don’t recall reading about the “moderated’ change when the new Minimum Sum was announced.
 
Now this “moderation’ raises the following issues:
 
– What other formulae have been manipulated without our knowledge?
– Will we never be told unless we ask? And if so why the secrecy?
– Waz the point of using formulae when they can be adjusted in secret? To con us?
– If the Minimum Sum amount was “moderated”, why wasn’t the electricity tariffs “moderated’ given that world gas prices have collapsed, while S’pore continues to pay above market prices because of long-term contractual obligations, among other reasons?
 
—————
 
CPF MINIMUM SUM

Increase doesn’t fully reflect total inflation

MR YOUNG Pak Nang inquired about the use of the headline consumer price index inflation rate to adjust the Central Provident Fund Minimum Sum (‘CPF Minimum Sum should reflect ‘true’ inflation'; last Friday).

As he noted, increases in imputed housing rentals on owner-occupied homes and certificate of entitlement prices for private cars contributed to higher-than-normal headline consumer price index inflation last year.

For the majority of retirees, these are not items that would lead to increased cash expenditures.

The Minimum Sum is aimed at providing for CPF members’ basic retirement needs.

The original target, adopted in 2003, was for the Minimum Sum to increase in real terms to $120,000 (in 2003 dollars) by 2013.

Further, besides this real increase, the Minimum Sum has to keep pace with long-term inflation trends.

The Minimum Sum has therefore been increased each year to meet the required real increase and to take into account inflation.

However, this year’s Minimum Sum increase was moderated, and hence did not fully reflect the consumer price index inflation that occurred over the last year.

This year’s increase in Minimum Sum, by $8,000, was one-third less than it would have been if we had followed the usual formula for Minimum Sum adjustments. With the moderated increase, we have stretched out the 2013 target to 2015.

Some of the factors that have led to higher consumer price index inflation in the last year are cyclical, and likely to even out over the long term.

For example, imputed housing rentals on owner-occupied homes have significant short-term impact on the consumer price index, but tend to even out over time.

Over the 15-year period from 1996 to last year, which like most such periods saw the property market fluctuating in both directions, headline consumer price index inflation averaged 1.6 per cent.

This is comparable to the average inflation of 1.5 per cent over the same period if imputed rentals on owner-occupied homes were excluded.

We thank Mr Young for his useful query.

Farah Abdul Rahim (Ms)

Director, Corporate Communications

Ministry of Manpower

*Update after posting: Juz found out via S’pore Surf that TOC carried an article from Uncle Leong dated 2 July. Funny not among the Main Stories.

Government right on need to raise retirement age

In Political economy, Political governance on 13/06/2012 at 5:35 am

The issue of changing the rules on the access to our CPF funds is one that upsets many S’poreans, even those who support the PAP. The imposition of Minimum Sum and CPF Life are lazy solutions to a problem that needs to be addressed: longevity.

But while we should, disagree and row with him on the access to our money, we should not be in denial that we (me excluded) have to retire only in the 60s. The issue is longevity, not the amounts we have in our CPF accounts and how the cost of housing erodes the amounts left over for retirement, or access to our money.

According to a new report from the OECD, increases in the official retirement age are planned or underway in 28 out of its 34 member countries. As can be seen from the chart in the link, pensionable ages have failed to keep pace with longevity http://www.economist.com/blogs/graphicdetail/2012/06/daily-chart-5

Not quite correct, Tharman

In Financial competency, Financial planning, Political economy, Political governance on 06/03/2012 at 6:32 am

(Or “Wrong, Minister”) (Updated at 9.20 am to explain the “premium”)

“The bequest goes to your loved ones, not to other CPF members and not to the Government. You get all of your capital back either through your monthly payouts or in a bequest that you leave to your family and loved ones.”

Err you don’t. What about the “premium”* that one pays to ensure that one is covered for life? This is “lost” if one dies too early to benefit fully from the annuity. The “premium” amounts to 10% of the amount in the Retirement Account (at age 55) for the Basic Plan and 30% for the old Balanced Plan. Both are not “peanuts”.

BTW1, I was not one of those who criticised or raised an eyebrow at Tharman’s remark that one could earn only $1,000 a month and still buy a HDB flat.

BTW2, I know that Tin Pei Ling is not helping to create sound-bites for Tharman, juz as she isn’t helping Vikram Nair with his jokes, Hri Kumar Nair with his research and MoE with gathering data on FT government scholars. She is focusing on helping the uncles and aunties in her self-styled SMC. By all accounts, she is doing a good job.

——-

*”Premium” is the amount that a CPF holder has to pay from his minimum sum in order to get life-long “assurance” of an annuity till death.I put the word “assurance” within quotation marks because technically if the CPF Plan that one is in goes bust, one’s annuity payments ceases. Taz the law.

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…’

————————-

*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?

Where GIC and Temasek gets their $

In Economy, GIC, Temasek on 26/12/2009 at 1:08 pm

“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.

Not quite correct because the money that GIC and Temasek invest comes from government surpluses. As about 43% of Singaporeans don’t pay income tax, this means that the surpluses are generated by 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.

Now MM Lee’s view is that Singapore needs the reserves should anything go badly wrong. He could have quoted the example of Kuwait, which surprising he has not. When Kuwait was invaded by Iraq, the reserves were used to help pay for the war. And afterwards for the reconstruction of the country. He could have cited Iceland and Dubai (which again he hasn’t) as countries that got into trouble because they ran out of $.

BTW, 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.

For the technically minded, 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 is)  part of that 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 the government is correct, but so what is the retort? The financial effect is the same as if our CPF monies are invested abroad.

Finally, 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 from less than optimal government spending.

So the quote at the beginning of this piece has elements of the truth.

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