NTUC to Force 100,000 Low-wage Workers into CPF Scam
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NTUC to draw 100,000 low-wage workers into CPF scheme
Zakir Hussain
Tue, Jan 29, 2008
The Straits Times
THE labour movement will step up efforts to enlist some 100,000 low-wage casual and contract workers into the CPF scheme this year, labour chief Lim Swee Say said on Tuesday.Being in the Central Provident Fund would allow them to benefit from measures to give Singaporeans a life-long income stream if they live past a certain age, he said.
A committee tasked with designing the national annuity scheme is expected to release its report soon. An annuity is an insurance product in which a person invests a lump sum in return for a monthly payout for life.
Initial plans were for those under 50 to use part of their CPF money to buy the annuity to get payouts from age 85.'These recommendations will only be helpful if the workers are part of the CPF network,' said Mr Lim. The bulk of casual and contract workers, such as cleaners and security guards, are aged 40 or older with at most, secondary education.
'In their working life, will they be earning enough, saving enough, to cater for their retirement needs?' he said.
Mr Lim said the National Trades Union Congress (NTUC) would also help them upgrade their skills and productivity so they can earn more.
Last week, Nominated MP Cham Hui Fong, who heads NTUC's Unit for Contract and Casual Workers, said the unit had convinced about 6,000 workers to become CPF contributors.
But NTUC's efforts alone were not enough, said Mr Lim. The committee is drawing up stronger guidelines for employers of such workers and those who engage them.
'We should take this 100,000 number seriously because for every year these workers do not join the CPF network, they are missing out, not just on the Workfare Income Supplement for that year but more importantly, they are missing out this opportunity to save for retirement and later on to benefit from the recommendation of the national longevity insurance committee.' he said.
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Low wages with no CPF component = affordable to companies, workers have enough for a livelihood, workers have no security when they retire.
Low wages with CPF component = Not affordable to companies and workers may not have enough for a livelihood, workers have some measure of security when they retire.
Result, some workers lose jobs because their salaries are not cost effective, the remaining workers take home less money resulting in hardships for those with jobs, but they gain some measure of security when they retire.
I don't envy MP Cham's responsibility.
I'd suggest he look into tying CPF returns to income levels.
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Seriously, I still dun see the benefit of having CPF. The return is so marginal that it din even manage to offset the inflation rate last year. It is like a slap in ur face saying that u cant be trusted with ur money and that you are most likely to squander it away if we dun lock it up. So it is only right that we use it to make a profit out of it, but since we help prevent u from squandering it away, it is only right that we dont need to share the profit.
Why are they targeting the lower poor class now? Those old folk are not even get paid decently enough to meet days end, just to stay being a competitive cheap lobour work force against even cheaper FT as it is. If CPF is the way to retirement, why would our MP even have to crack his head to come up with compulsory annuity? Coffer running short and in need of new blood?
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Well the government is working hard to fatten the golden goose ..... so its better for the country in the long run.... Im sure your great grandsons will enjoy it then when the goldon goose lays some eggs
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Originally posted by Genie99a:
Well the government is working hard to fatten the golden goose ..... so its better for the country in the long run.... Im sure your great grandsons will enjoy it then when the goldon goose lays some eggs
Only if ur grandson get to eat the egg and not be the straws to cushion the big fat goose arse.
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Originally posted by Genie99a:
Well the government is working hard to fatten the golden goose ..... so its better for the country in the long run.... Im sure your great grandsons will enjoy it then when the goldon goose lays some eggs
... better for the country? I think to be more accurate, better for the people who called themselves the government...... and great grandsons will enjoy it? Are the younger generations enjoying right now??? I think most of them have set their sights abroad...
... please lah, if anything at all, all these BullCrap is to hoard more money for themselves - for all we know, they have squandered all the people's CPF funds, and now coming up with sorts of stunts under the guise of caring for peoples golden years...
... up yours FAP!
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Having CPF is better than not having one. For those that say that CPF provides low returns and therefore not worth it, please be reminded that you may use the funds to invest in risky instruments such as property and shares at your own peril. You may also use it to purchase unit trusts and insurance, endowment or otherwise.
Anyway, on the subject of low income workers, the govt must understand that these workers might rather have more now and less later. Every cent might count to these workers. Rather than convince them to save what they probably can't afford to save at this time, why not just make employer's contribution mandatory and employee's contribution voluntary up till a certain wage limit ? Say a limit of $24,000 p.a for example. Anything below $24,000 you get to choose and anything above, you have to contribute.
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do u guys seriously think that the up up up and above million dollars minister will listen to the majority?
in PAP, the minority win. not majority.
they say wad, they implement wad.
law is them, them is law. as long as they arent down, they will set the law. simple.
at least 66.6% agree with their law, arent i right?
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http://singabloodypore.rsfblog.org/archive/2007/08/23/singapore-against-compulsory-annuity.html
I am somewhat intrigued by the government's steadfast refusal to introduce a simple old age pension scheme, for citizens aged 85 onward; the annual cost would be well within the ability of the budget to absorb; by making CPF contributors pay for the cost, you are bound to generate arguments about those not surviving beyond 85 losing out, those dying soon afterwards not getting back enough, etcPosted by: sgsociety.com | 23/08/2007
I don't know where the idea that CPF could actually work in the long run came from. F.A. Hayek is probably not a popular name in a blog such as this, but he made something quite clear: in order to find out what is wrong with a system, the system must first be demonstrated to work correctly.
So far, no one has proven that CPF is a system which will work—in the long term. Sure, in the last 40 years or so the belief is that it does, because people are swayed by the "illusion" that they can actually own property from the scheme—yes, certain results are possible in the short to medium term.
What CPF is is actually a TAX. The fact that they give you a statement of account is total bullshit—but people fall for the ploy because it has the "officialness" of govt backing it.
Current contributors in CPF support those who rely on their savings in the present, so the whole system is actually a LEGALISED GOVERNMENT-RUN PYRAMID SCHEME.
* In any market, people respond to incentives *The PAP didn't cover their flanks. By doing what they did, they have created a disincentive for people to grow old in S'pore, and a serio9us disincentive fro people to make CPF contributions—after they have bought their property.
So what could possibly happen?
Emigration. It becomes more attractive to EMIGRATE—to renounce YOUR Singapore citizenship and take ALL YOUR MONEY, and move to another country.
In fact, by doing just that (ACTION) is much more effective that signing and submitting a poorly-worded emotive petition (WORDS) — which despite my reservations regarding its effectiveness, I will sign anyway.
Taking the idea further: It becomes "better" to renounce one's citizenship, emigrate with family to say, Perth (excuse my personal bias), plonk the ex-CPF loot down on a DECENT house—i.e. a REAL upgrade from the over-priced politicised HDB shoe box, and return to S'pore if necessary as an expat to work—on an expat salary package.
Then, offer a burnt offering, fall on one's knees, thank the PAP for creating the opportunity ;)
Posted by: Matilah_Singapura | 24/08/2007
CPF takes part of your income and puts it into an account; later it gives back the money; this works obviously; but the problems are
(a) people feel they could get better return from their money than CPF gives;
(b) the government hopes that with CPF it is unnecessary to have welfare schemes like old age pension, but clearly many old people do not have enough to live on
in the CPF scheme, you put in money which you get back for your own old age; it is each man for himself; in an annuity scheme, people who live long are subsidized by people who die earlier; it is based on a very different idea, and so far has won little acceptance
Posted by: sgsociety.com | 24/08/2007
> CPF takes part of your income and puts it into an account; later it gives back the money; <
That is incorrect. CPF money is put into a POOL. Any con-man can issue a statement of account—i.e. the "account" in the CPF is an illusion.
Also, CPF NEVER-EVER gives back * ALL * the money it takes (confiscates) unless:
1 You emigrate and renounce S'pore citizenship
2 You die, your benefactors get the dough
However CPF always keeps a "certain amount" whether in the form of "special accounts" or medisave or some other bullshit con-job designed to keep you and (supposedly) your money seperated.
> the government hopes that with CPF it is unnecessary to have welfare schemes like old age pension, <
Welfare systems are great—as long as they are run privately, and kept WELL AWAY from the meddling hands of government.
The trouble with S'pore is that most people believe "the government will SAVE ME from... myself", and so an ENTITLEMENT mentality is fostered and ingrained.
S'pore is well and truly a welfare state: once yo have the ballot tied to public housing, there's your welfare state. Once a welfare state is in place—with a one-party system—you have a govt which has ULTIMATE POWER over each individual citizen.
> in an annuity scheme, people who live long are subsidized by people who die earlier; <
Much like a tontine or a pyramid game—which is what CPF really is.
The question to ask is:
"To WHOM does the money belong?"
Clearly the name of the CPF account holder doesn't own the money in his alleged CPF account, for if he did in fact OWN the money, he could do with it as he pleased.
Oh well, some people believe in angels and returning messiahs, others believe the govt is there to solve their problems for them, and some govt department is going to look after you when you get old.
If you pay attention, you will notice this has NEVER HAPPENED. i.e. no old person I know of in this society is actually being "looked after" by the government.
(and it is unlikely that any one elderly person will be)
Posted by: Matilah_Singapura | 25/08/2007
>CPF money is put into a POOL.
of course it does; when you put money into a bank, or buy insurance policy, it goes into a pool, but you have an account telling you how much you can get back if you take it out now, some time in the future, etc; you sound muddled about basic finance, man!
>CPF NEVER-EVER gives back * ALL * the money
I think it does, with interest, but the interest is not very high; I believe you are muddled about "when" you get "all" the money, since they keep the minimum sum until age 82, and now they want to delay it to 85 or even longer
>if you pay attention, you will notice this has NEVER HAPPENED. i.e. no old person I know of in this society is actually being "looked after" by the government.
maybe you should pay attention too; I said they want the annuity scheme to avoid the need for old age pension; in the former, people who die earlier subsidize people who live longer, while in an pension scheme the government does
chill, man; the Perth weather getting to you?
Posted by: sgsociety.com | 25/08/2007
Banks, insurance companies et al are PRIVATE firms, i.e. governed by CONTRACTUAL AGREEMENT between service provider and customer. You have choice to go somewhere else if you've been mistreated, or sue if you've been cheated.
CPF is COMPULSION—you have no choice, you have no recourse—i.e. the govt can change the rules at ANYTIME.
What's that you were saying about my knowledge (or lack of) of * BASIC * finance? ;)
Anyway, it seems we'll have to agree to disagree here.
I find the cold weather in Perth brisk — keeps the senses honed. :p
Posted by: Matilah_Singapura | 25/08/2007
not really an issue of different opinions and disagreement; you were simply wrong about CPF not giving all your money back and about not having individual accounts
I am not as excited about CPF not being free enterprise; I believe people above 85 should simply get an old age pension and the annuity idea would produce little benefit but a lot of trouble; I am OK with a bit more socialism in singapore, especially in the government; it is far too much of a business enterpise already
Posted by: society.com | 26/08/2007
I think Matliah_Singapura is right on this one.
Firstly, the low-risk yield on the free market is 3-10%. The CPF, with its 2.5% yield (now going to be increased to 3.5%), falls way short of this. Keep in mind that 3-10% is very low-risk, almost guaranteed. So the government is using force to get money from you that would be earning a higher guaranteed sum anywhere else
Secondly, the government is spending all the funds in the CPF pool for its billion-dollar projects. Yet it seems to be giving some back to the citizen for investment. It seems a paradox. The answer is credit expansion by the authorities. This problem will only get worse the more people claim their money from CPF as MAS injects their paper money into the financial market. So inflation (debasement of money) is a huge wipe-out on any yields CPF funds have, making them almost negligible. It's only going to get worse in the long run.
I've done a short article on this one on my blog
http://freedom-for-man.blogspot.com/search/label/Central%20Provident%20Fund
It explains basically why CPF is a tax.
Also, with a little reasoning, it is easy to see why the annuities scheme is a fraud. Firstly, life expectancy is lower than the payout age (79.21 males 84.59 females). Secondly, it takes more than a year to begin recouping the amount (I expected it to be $400, but turns out its even lower at $250-300). Thirdly, inflation. They're paying you back in cheap dollars for expensive ones.
Nice to see a fellow Austrian around these parts!
Posted by: Kenneth Tiong | 26/08/2007
let us get back to the topic on hand guys? I think its pretty much settled CPF was always a losing hand in the first place. Even when I was 11 and stupid, no one could answer me the entire purpose of CPF and how it wouldn't lead to self-bankruptcy over time with an aging population.
Yet privatization is not the way too. The age of libertarianism is long since past. I mean Bush tried to pull the same crap over the eyes of the american public a couple years back (and to my knowledge is still trying to do the same). In order for privatization to work in any way, private companies and individuals must have similar (or complementary) goals, and just to point out any form of compulsory "financing" industry that turns private, is essentially going to be a win-lose contract between the exploiter and the exploited. (much like transport and energy since its a monopoly and essential)
This means that the complete removal of CPF has to be(not a conversion into a private fund). However how can they do this? if they stop CPF for those about to enter work today, how will they pay off those that are to withdraw and retire tomorrow? CPF has already gone into a phase of robbing peter to pay paul. An entire generation of people will be left without a safety net because they assumed Singapore would pay up the money owed to them.
Will a protest march or silent protest help solve the problem? How will black tee-shirts solve it? We need solutions not some weak-willed 50 people protest that do not do anything more than show how much we hate the PAP.
Posted by: fastspawn | 26/08/2007
Hi fastspawn,
So what would you suggest?
From the earlier messgaes, for those who can emigrate and become citizens of another country and therefore able to empty their CPF account, well, good for them.
What about those who cannot emigrate or who have no chance of emigrating to one of those sought after western countries like Canada and Australia. They have to stay back and fight the injustice.
Well, how you might ask. Certainly not by the voting as the current GRC system favours the PAP party. So the only alternative is to have peaceful protests. If enough Singaporeans do it, then the government HAS to listen. Otherwise it may end up like the Marcos regime where people power toppled the evil regime. Even nuns came out and block the tanks in the streets. What we need is Singaporeans who dare to come out and be counted.
Posted by: People Power | 26/08/2007
ranting about CPF being a tax does no good,
emigration is not an option for most people;
try suggesting some concrete alternatives;
I believe the simplest is old age pension,
i.e., subsidizing people after 85 directly
from tax income, rather than from
contributions of people who die earlier
and collect no/little annuityPosted by: sgsociety.com | 26/08/2007
It is a given that most people get old and sick before they die.
It is also understood that after a certain age people are no longer capable of being productive (i.e. able to work effectively)
Therefore it would be RATIONAL to make plans for have adequate finances for this time of life. True? Well, not for everyone.
Some people would prefer to "live for the day", and not care about the future. Others might subscribe to the mantra "Life fast, party hard, die pretty" . And of course there'll be those who choose behaviours which they think would adequately prepare themselves and their families financially for the inevitable, and perhaps leave a portion of their wealth behind for the benefit of the next generation(s).
Thus, in a FREE SOCIETY (which IMO should be the goal—with emphasis on my OPINION) people have the ability to CHOOSE how they are to live out their lives.
The only alternative to CPF I would agree to is to not have CPF or any other government welfare scam, and * allow the market * to find solutions. Some people will privatization (insurance, funds, etc), others self-planned action like real estate development/investment or equities or business ownership, business firms will self-organise to introduce pension schemes again, community groups/private organisations and clubs might start their own pension/welfare funds, some will gamble on the stock market or the race track, and still some others will be partying heartily. Many of these folk will die, so saving for the future in their cases makes no sense whatsoever.
* Bear in mind this is a FREE society I'm talking about. In our current situation, if you chose to party your life away, some interfering moral-crusading CUNT will stop you, by force of law and police action if necessary and attempt to "change your attitude" by force if necessary. In a FREE society, no one would be allowed—BY LAW—to impose their moral standards on you. ;-)
The point is, WHO KNOWS what solutions will evolve out of a market? I've only offered a few possibilities.
Questions to ponder:
Who's life is it, and who knows what is "BEST"?
Who owns the money?
Am I (in the words of Milton Friedman) FREE TO CHOOSE?
Posted by: matilah_singapura | 27/08/2007
Picking up on Kenneth Tiong:
I generally had a healthy respect for MAS, as they're pretty good (in the past) about limiting the growth of the money supply. (Economic Freedom Of The World Report, by Fraser Institute, CATO and The Heritage Foundation)
However it is clear that there is money inflation in S'pore—just look at the price rises on the free market—at the stores, for example. Sure, the high price of fuel and a higher GST are contributing factors (there's massive govt interference in the global oil market...but that's another story), but prices have risen beyond the effects these factors.
Where did the money come from to drive the stock market sky-high (until recently), or property prices? Borrowed money mostly. Fractional reserve banking's child: CREDIT.
Question is: WHAT mechanism is there to STOP the government using money-pumping to pay off the state's CPF liabilities (i.e. payouts to members)? It doesn't matter if it is lump-sum or periodically like annuities.
Singapore has massive reserves—a lot of the money which formed the capital to generate these reserves come from CPF. Do the OWNERS of that capital (forcibly taken) receive a "fair and just" benefit—i.e. return on capital—NO.
Once a govt gets its hands on money—a constant supply, and a lot of it—it expands in power and influence. Fact: the govt can tinker (and it does) with the CPF anytime it chooses, and YOU LOSE most of the time.
Posted by: Matilah_Singapura | 27/08/2007
since you are so crazy about free enterprise, could I get you to agree that you would never accept government handouts? Australia has pretty good welfare programmes, but because of your beliefs, you would refuse to benefit from them?
Posted by: sgsociety.com | 27/08/2007
I don't know what my personal behavioural choices have to do with the argument... but if you'd like to steer this on a personal level—in the hope that you think you might "snook me"... oh very well, just out of pure curiosity, I'll humour you. ;-)
I don't know how you've evaluated Australia's welfare programs as "good", I think they are fucking lousy.
In any society there'll be people who one some occasion in their lives, will not be able to help themselves. Smaller in number still will be those who can't help themselves at all, no matter what—FUBAR—Fucked Up Beyond Belief. A tough * private * charity market will be able to help these people, no worries. Given such a WEALTHY country like Australia, there are more than enough resources for anyone to achieve practically any goal in life. It is not a country short on individual achievement. And it is not a society short on generousity. I have seen private charity do wonders here, and I've lived here a LONG time.
I am of the belief that Aust can run its welfare privately. But as long as people are being taxed to the gills, this can't happen. Free markets allocate resources in the best way, and "welfare" is a good, just like any other good—coming into existence because of DEMAND.
Unfortunately the "good" (according to you) welfare programs (run by the state and by state compulsion) you mention undermine the big charitable spirit (thankfully not by much), and to the recipients, over time has created an ENTITLEMENT MENTALITY. It goes something like this: "My life is fucked up. I am not responsible— is to blame. Therefore it is the DUTY of SOCIETY to HELP me". * - insert agent of blame e.g. my parents, god, the govt, my ex, my family, my boss, my co-worker...santa claus, the Tooth Fairy.
This is total nonsense. Since when has having a need—whether it be big or small—give an AUTOMATIC CLAIM on the property of OTHERS?
Yes, the mentality of Entitlement is well and truly embedded in Aust democracy, so one can rest assured that any govt voted into power will tax like hell (Labour/Liberal it makes no difference). Even though Howard and Costello lowered taxes, Peter Costello still holds the RECORD of being Australia's HIGHEST taxing Treasurer.
BUT STILL, Aust is a land filled with opportunity—though very few can see it. It has been my position to take advantage of as many viable opportunities as possible in Aust. No, you don't have to go on the dole to have a "good life", you will find that it is far better to AVOID THE NOSEY AND INTRUSIVE STATE as much as possible—which means steering clear of the welfare system, which is what I do.
Unfortunately total avoidance of govt welfare is impossible: there's MediCare, and everyone is issued a card, as well as being taxed.
There's a better game to play in Australia which will over time, earn an individual MORE than what he can get on the dole. It is called "Pay As Little Tax As Possible".
Singaporeans domiciled in Australia, I am told, play this game rather well. ;-)Are tax breaks govt handouts? You betcha.
__Free Kick To Anyone Interested in Emigrating__
(i.e. cash out grab the CPF, flip LKY the bird, and tell him where he can stick the citizenship, get the flock out of S'pore and duck off Down Under)
Australia is short of skilled workers. There is a new visa program called the "457 Visa". You get one, you come and work, and in a few years get PR, then citizenship.
Posted by: Matilah_Singapura | 27/08/2007
repeat: since you are so crazy about free enterprise, could I get you to agree that you would never accept government handouts?
Posted by: sgsociety.com | 27/08/2007
Government Handouts ??? Just look at the BABY BONUS Handout, analysed it and you will see similiar concerns and problems in our existing system in Singapore.
I think we don't need the Government to restrict us from withdrawing all our CPF at 55 and then introduce "buy annuity for those below 50" at all. A word from my mother who is now 80.... She survived all these years spending as little as $300 a month. Until now, she has not experienced any financial difficulties but proudly raised her 8 children. I am number 6 and is already reaching 50. Her savings alone is sufficient for her; not to mention those monies given to her by her siblings all these years.
We should follow the Government call for pro-family and more children. Then you need not worry about old age.
I quote her: "When you have no money, the Government won't feed you, your father could not get any money from the social welfare scheme when we need it most. So we learned how to take care of our own money. Just get it back. It is ours!!"
For years we strongly believe and we all agree that we should take back our CPF in one lump sum, not by instalments. We know what to do with our money, we all have earned Masters Degree and PhD. We don't believe anybody really cares about our welfare anyway.
Statistics shows that there is over 1,000,000 people in Singapore above age 45 (55% Female, 45% Male), so the CPF withdrawal problem is a big problem actually. However,it should not be solved at our expense since ministers are highly paid in Singapore.
Many of these so called old people are entreprenuers waiting to be their own bosses. But I guess their dreams are all shattered anyway now. (Only a handful of silly old men spent their money in Geylang but I think they pay too much to enjoy the best part of their lives - showing off & womanising)
Though we won't take drastic steps like discrediting our Government, dumping our citizenship and withdraw my CPF of SGD400,000 (RMB 2M)and go to China - buy a bungalow to live like a KING, we sincerely HOPE and HOPE that Singapore can do well and return us our hard-earned savings as early as when we are 55.
However, between HOPE and CERTAINTY, I choose certainty. It is preferred that a law is passed to pay us ALL our CPF by age of 62; clear cut.
My plead "Give me back my money, don't borrow from me and I will be most grateful... Thank You."
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Originally posted by kramnave:
Having CPF is better than not having one. For those that say that CPF provides low returns and therefore not worth it, please be reminded that you may use the funds to invest in risky instruments such as property and shares at your own peril. You may also use it to purchase unit trusts and insurance, endowment or otherwise.
Anyway, on the subject of low income workers, the govt must understand that these workers might rather have more now and less later. Every cent might count to these workers. Rather than convince them to save what they probably can't afford to save at this time, why not just make employer's contribution mandatory and employee's contribution voluntary up till a certain wage limit ? Say a limit of $24,000 p.a for example. Anything below $24,000 you get to choose and anything above, you have to contribute.
If u wish for a safer investment with low return, there is a lot out there that will not lock up ur MONEY till 62yrs (or 72yrs) OLD. Bottom line is, that is ur money and u are suppose to be able to use it as u wish regardless of wat. Which isn’t the case.
What is the trade off for lossing this freedom? Nothing!!!! If all i want is a sure sure 2% return, i might as well invest it in bonds!! Even life insurance give a return of 6~7% principle return after 10yrs. What abt CPF? u start at age of say 22yrs till u are 62yrs. A total lock down of 40yrs and it does nothing. How do bank earn money? U must be naive to think that with all the money that is in the CPF, it cant be used to generate a considerate amount of income. If not, where do u think GIC or temasek holding got it loan to earn big buck???
Back to the subject of those low earner. Let assume cpf does help those ppl during their old age, but are they able to contribute the cpf? The main reason they cant is that they simply dun earn enough. Do u think any employer will rather pay them more so that they can have enough for their CPF? If they do, why do we find so many FT snatching up those low incomer job. On top of that, with last year inflation rate of over 4%, do u actually think that they pay have increase at all? If not, where do u think they are going to fork out this extra if it isnt going to bare by the employer?
So we are back to square one. If those lower income dun get any better, CPF or not, nothing is ever going to work. Worse that can happen is force them onto the worthless CPF bandwagon down toward more misery. Tell me now, does min wages seem like a responsible implementation to do for those less fortunate one?
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Originally posted by kramnave:
Having CPF is better than not having one. For those that say that CPF provides low returns and therefore not worth it, please be reminded that you may use the funds to invest in risky instruments such as property and shares at your own peril. You may also use it to purchase unit trusts and insurance, endowment or otherwise.
Anyway, on the subject of low income workers, the govt must understand that these workers might rather have more now and less later. Every cent might count to these workers. Rather than convince them to save what they probably can't afford to save at this time, why not just make employer's contribution mandatory and employee's contribution voluntary up till a certain wage limit ? Say a limit of $24,000 p.a for example. Anything below $24,000 you get to choose and anything above, you have to contribute.
That option still does not address the retirement fund. The retirement fund is calculated based on a few things. How much you contribute to it and how much you'll need at the point you retire. Other effects are that the rate of return has to at least cover inflation.For example, if the worker opts not to contribute to CPF and relies on employer's contribution alone, the monthly addition to his retirement fund would not be sufficient. On retirement he'll find his CPF insufficient to survive on.
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Ultimately people are bad at handling their money. I'm not saying all. Of course I think I'm quite good at handling my money. Nothing however is stopping me from using that money to invest in a risky business venture, paying my relative's horse racing debts, servicing my credit card debts, paying transaction fees for lotteries i "win" once a week at least over the internet etc.
Like it or not, pension plans so to speak locks down your money. You can't withdraw your CPF now but you still can choose to invest a portion of it on shares, gold, unit trusts, insurance etc to get a better return for yourself if you think that you are good at handling your investment returns. Suppose we do away with CPF and adopt a pension plan that adopts a pay-as-you-go system. Tax may have to be increased to say in excess of 40% or above. This is "your money"(actually it's not) too. You are not going to receive any pension till your retirement too and its "locked away" and your "freedom is lost" as well. I'm not going compare both systems but just to show you that whatever plan will result in you paying now and getting something in return much later and autonomy on some part of your income is lost.
I don't know why you are so adamant that our CPF is in Temasek / GIC. I also don't know what is the problem with Temasek/GIC "making big bucks".
Whether or not Singaporeans will lose their jobs to cheaper labour because of mandatory CPF contributions is up to government policy. If they are encouraging low income (part-time, contract or otherwise) workers to sign up for CPF scheme, why not let them have a choice as i previously mentioned. Like it or not, in this case, the employers have to make contributions if they sign up. What i'm proposing is for them to tweak the system to make it voluntary for these workers.
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http://theonlinecitizen.com/2007/08/24/unanswered-questions-about-cpf-changes/
Unanswered questions about CPF changes
Posted by theonlinecitizen on August 24, 2007
By Leong Sze HianThis is in reference to media reports that the CPF Special, Retirement and Medisave accounts’ rates will be modified next year.
The question that may be in every Singaporean’s mind is whether the peg to “an appropriate long term bond rate” may result in a higher or lower average rate, compared to the 4 per cent fixed rate now?
Channelnewsasia reported Manpower Minister Ng Eng Hen as saying:
“… the new rates will be lower initially than the current rate of 4 percent but it should do better than 4 percent over time.” (link http://www.channelnewsasia.com/stories/specialreport/news/295181_43/1/.html )
What is the basis for the statement that “the new rates will be lower initially than the current 4 per cent but it should do better than 4 per cent over time”?
Bonds fluctuate and are dependent on various factors like interest rates, default risks, etc,and have no correlation to the future “should do better” than the present.The only answer to this question is nobody knows.
Since “the new rates will be lower initially than the current rate of 4 percent but it should do better than 4 percent over time”, why not wait until the new rate is better before un-pegging it?
Why give 1 per cent more on the first $60,000 in CPF, and then announce two days later, that the 4 per cent rate will no longer be guaranteed?
Most Singaporeans may not benefitSince most Singaporeans use the bulk of their CPF for housing in the early years of their working lives, many may only enjoy the extra 1 per cent on very small CPF balances. In contrast, as the Special, Medisave and Retirement accounts cannot be used for housing, most Singaporeans may have much larger balances, which may end up earning less than 4 per cent.
I would like to ask how much of the average of about $45,000 in CPF members’ accounts are in the three accounts affected, compared to the balances that are able to earn the extra 1 per cent?
Has any study been done to estimate the net effect on CPF members?
Will some or most Singaporeans be better or worse off?
Contradiction
As to “the one per cent additional bonus interest for the CPF will be put into the Special account and not the Ordinary account” (as) “this additional bonus will enhance the CPF’s existing risk-free framework”, (CNA) I find this to be somewhat contradictory, because isn’t removing the 4 per cent fixed rate increasing the risks of “the CPF’s existing risk-free framework” much more than the small sums from the bonus interest?
Pooling of risks?With regards to every CPF member having to set aside a compulsory amount from their Minimum Sum, as a pooling of risks, so that those who are alive after age 85 will be able to receive a monthly annuity for life of between $250 to $300, I believe Singapore may have achieved another world first and history first.
We are the first and only nation to compulsorily have all citizens contribute towards providing for the annuity payouts of those who live longer.
Those who die before age 85 may receive little or no benefits from the compulsory annuity scheme, as is being proposed now.
In any case, I think it may be quite difficult for anyone to live on just $250 to $300, from age 85 and beyond.
As the compulsory annuity will only apply to those below 50 years old now, the first annuity payout at age 85 will be in 2042. Assuming 1.5 per cent inflation, the $250 to $300 monthly annuity, is equivalent to $149 to $178 today.
Wasn’t raising the GST supposed to help the poor?
As we have more than $250 billion in Temasek and the Government Investment Corporation, why are Singaporeans being required to pay for those who live beyond age 85?As the reason given to raise GST was to help the poor, isn’t the additional estimated annual $1.5 billion revenue enough to provide for Singaporeans who are over age 85 and destitute?
Since the economy is expected to grow at 4 to 6 per cent in future years, to what extent will the increasing GST revenue be able to provide for the increasing over 85 destitutes’ aging population?
One of the key focus of the the Prime Minister’s National Day Rally speech, was reducing the income gap.
As one gets older, earnings tend to decline?
According to the Ministry of Manpower, for workers aged 55 and above, 18,600 earn gross monthly income of under $500, 64,000 earn less than $1,000, and 46,400 earn below $1,500. This means that 42 per cent of elderly workers earn less than $1,000.
The statistics indicate that the older one gets, the larger is the proportion who earn less. For example, those earning less than $500 and $1,000, jumped from 8,600 and 36,600 to 18,600 and 64,000, respectively, from age 50-54 to age 55 and above.
This means that those who crossed from age 50-54 to age 55 and above, who earned less than $500 and $1,000, increased by 116 and 75 per cent respectively.
Why is it that it would appear that as one gets older, earnings tend to decline?
How long has this trend been persistent?
Two policies affecting older workers
The proportion of older workers who are in menial jobs is quite high. 54,300 age 55 and above workers are cleaners, labourers and related workers, and 35,600 are plant and machine operators and assemblers. About 49 per cent of workers aged 65 and older are cleaners, labourers and production line operators.
For these lower-income elderly Singaporeans, two policy changes may affect them more adversely, than the general population.
The first, is the gradual phase-out of the 50 per cent CPF Minimum Sum (MS) withdrawal starting 1 January 2008. From 2013, those with less than the then prevailing MS of $120,000 at age 55, can only withdraw $5,000.
The second, is the compulsory purchase of a deferred to age 85 life annuity, with the premiums deducted from the MS. This will reduce the monthly MS payout from age 65 to 85.
I would like to suggest that the above policies be reviewed, perhaps along the lines of Workfare, that is to help to increase the ultimate total disposable income of older lower-income Singaporean workers.
The reduction in CPF cash-flows due to these two changes, may further strain their meagre income sources, after age 55.
Minimum Sum
The above CPF cash-flow issue is perhaps exasperated by the CPF Board’s statistics that “The percentage of active members who met the required MS when they turned 55 declined from 57.1% in 1996 to 36.4% in 2006… The proportion of members aged 55 years and above displayed a four-fold jump from 5.5% in 1985 to 22.9% in 2005″.
The MS which started in 1987 has increased by 232 per cent from $30,000 to $99,600 now. This is an annual compound rate of increase of 6.2 per cent.
To what extent has the 6.2 per cent rate of increase, relative to inflation of only 2 per cent, contributed to the CPF cash-flow woes and corresponding total disposable income of lower-income Singaporeans when they cross age 55?
Also, to what extent will the one per cent increase in CPF interest rate, one-off CPF bonus for those affected, and higher workfare for older workers, offset the reduced CPF cash-flow sources described above, in the light of the increasing trend of more elderly Singaporeans in menial jobs earning less wages?
Sze Hian is the President of the Society of Financial Service Professionals. His personal website is http://leongszehian.com/.
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Originally posted by phil30k:
That option still does not address the retirement fund. The retirement fund is calculated based on a few things. How much you contribute to it and how much you'll need at the point you retire. Other effects are that the rate of return has to at least cover inflation.For example, if the worker opts not to contribute to CPF and relies on employer's contribution alone, the monthly addition to his retirement fund would not be sufficient. On retirement he'll find his CPF insufficient to survive on.
Lets just put it this way. Something is better than nothing. If low-income workers earn the same rate throughout their lifetime, they may not have enough for retirement as well. If they have more now they may afford better things for their kids etc etc and enable them to get out of the poverty trap earlier. If they ever pass the limit then they resume the mandatory scheme.
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"Firstly, the low-risk yield on the free market is 3-10%. The CPF, with its 2.5% yield (now going to be increased to 3.5%), falls way short of this."
I hadn't realized they took the lowest rate in the market as a guide. That changes everything.
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I suspect that CPF is actually the PAP's bank account.Anyone can prove this?
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Originally posted by phil30k:
"Firstly, the low-risk yield on the free market is 3-10%. The CPF, with its 2.5% yield (now going to be increased to 3.5%), falls way short of this."
I hadn't realized they took the lowest rate in the market as a guide. That changes everything.
But the risk-free rate is 2.5-3.5 ? Individuals who want to bear higher risks for greater return are eligible to invest a portion at their own peril ?
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Originally posted by phil30k:
"Firstly, the low-risk yield on the free market is 3-10%. The CPF, with its 2.5% yield (now going to be increased to 3.5%), falls way short of this."
I hadn't realized they took the lowest rate in the market as a guide. That changes everything.
yup, they peg their salaries to the top 5 earners, but they peg your 'savings' to the lowest... how ironic..
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low risk and risk free is pretty different you know
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if everyone in SG is able to withdraw their money from CPF, they would; and if it happened... I think our gahmen will crumple....
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Originally posted by caleb_chiang:
if everyone in SG is able to withdraw their money from CPF, they would; and if it happened... I think our gahmen will crumple....
Suppose if that happens and suppose there is no way they have the means to repay then not only the government will crumble but the entire nation as well.
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Originally posted by EarlNeo:
Seriously, I still dun see the benefit of having CPF. The return is so marginal that it din even manage to offset the inflation rate last year. It is like a slap in ur face saying that u cant be trusted with ur money and that you are most likely to squander it away if we dun lock it up. So it is only right that we use it to make a profit out of it, but since we help prevent u from squandering it away, it is only right that we dont need to share the profit.
Why are they targeting the lower poor class now? Those old folk are not even get paid decently enough to meet days end, just to stay being a competitive cheap lobour work force against even cheaper FT as it is. If CPF is the way to retirement, why would our MP even have to crack his head to come up with compulsory annuity? Coffer running short and in need of new blood?
Earlneo,
What is the average return from your saving and investment for the past 10 years? And what is your saving rate?
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Originally posted by kramnave:
Ultimately people are bad at handling their money. I'm not saying all. Of course I think I'm quite good at handling my money. Nothing however is stopping me from using that money to invest in a risky business venture, paying my relative's horse racing debts, servicing my credit card debts, paying transaction fees for lotteries i "win" once a week at least over the internet etc.
Like it or not, pension plans so to speak locks down your money. You can't withdraw your CPF now but you still can choose to invest a portion of it on shares, gold, unit trusts, insurance etc to get a better return for yourself if you think that you are good at handling your investment returns. Suppose we do away with CPF and adopt a pension plan that adopts a pay-as-you-go system. Tax may have to be increased to say in excess of 40% or above. This is "your money"(actually it's not) too. You are not going to receive any pension till your retirement too and its "locked away" and your "freedom is lost" as well. I'm not going compare both systems but just to show you that whatever plan will result in you paying now and getting something in return much later and autonomy on some part of your income is lost.
I don't know why you are so adamant that our CPF is in Temasek / GIC. I also don't know what is the problem with Temasek/GIC "making big bucks".
Whether or not Singaporeans will lose their jobs to cheaper labour because of mandatory CPF contributions is up to government policy. If they are encouraging low income (part-time, contract or otherwise) workers to sign up for CPF scheme, why not let them have a choice as i previously mentioned. Like it or not, in this case, the employers have to make contributions if they sign up. What i'm proposing is for them to tweak the system to make it voluntary for these workers.
1st of all, the cpf was voluntary to those of very low income. That is why they are forcing them now. FT aside.
Try tracing where GIC and Temasek got their loan to finances their investment. That will lead to our CPF. Try imagining what if both those company gone bankrupt? What happen to ur CPF? Then u might say that it wont happen. So are u saying that our cpf that our gov invested on is after all not risk free? if so, why dun we get a decent amount of return rather then the mini? I am not talking about high rish or low rish investment, for every investment, there is a risk. If the CPF investment by our gov is risk free, why wasn't any infor about what is being done to our CPF ever release? Just what was know or release as to where the CPF gone to? 2% return is way too low my friend. U get 4% to 5% for fixed deposit in bank FOR 40yrs? Unless u turn around and tell me bank FD is deem risky compare to the unknow acc of our so call CPF.
Now u are telling me that I cant take care of my money, so i need to have my money taken away from me to save guard it. What is next? I cant take care of children and u take it away?
Locking it away and only letting u use it after retirement age of 55yrs was the original plan. Now 72yrs? what is next? If CPF does work and is the right way to go, do u think it need to be make compulsory?
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Originally posted by TCH05:
Earlneo,
What is the average return from your saving and investment for the past 10 years? And what is your saving rate?
My insurance gives me a 7% return for a 10yrs contribution plans and if only i make withdrawal after another 15yrs. so to sum it up, i pay 140k at the end of 10yrs and i get 357k +- after 25yrs. abt 7% principle return. During the 1st 10yrs, I am insure to a sum of 100k if anything happen to me. That is with one of the top 5 insurance company in the world and in term of asset, they are also in the top 5, just under wal mart. So given a choice like this, which will u choose? CPF or that?
I shallnt disclose my saving coz this ain my clone acc. As for investment wise, i prefer to keep it private. But safe to say that it pay off way better then CPF.
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Wow, more money for PAP. Good for PAP, they can afford to lose more money in their investments with more people contributing CPF. Everything is money, money, money and money for PAP. Money is the main motivator for PAP to exist as gahmen in Singapore the small island.