atans1

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

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

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

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

Black box/ No benefits illustration

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

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

Our money but CPF Life solvency is our problem

There is a provision in the law governing the CPF Life Plans which states that payouts are contingent on the Plans being solvent. This is because premiums that are paid in to get the annuities are pooled and collectively invested. If the plan you chose doesn’t have enough money to pay out, you die. This is unlike the [Minimum Sum] scheme, where account holders are legally entitled to the monies in their CPF accounts …

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

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

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

And here’s a constructive, nation-building way of using yr CPF (if you disagree with Roy Ngerng that CPF is theft by govt). Using yr CPF account as a savings account https://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. https://atans1.wordpress.com/2010/11/02/how-we-fund-our-swfs/ He never got sued even though it was said publicly.

 

 

 

 

 

 

 

 

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  1. […] – The Independent, SG: CPF: Old policy, new fire – The Heart Truths: Growing Our CPF: Time To Go Back To The Basics – Singapore 2B: On CPF – Thoughts of a Cynical Investor: CPF Life: What sucks/ Which is closest to Minimum Sum scheme […]

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