CPF Interest @ 2.5%, Inflation @ 6.7%
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Joint News Release by:
Central Provident Fund Board
Housing & Development Board
12 May 2008 --Interest Rate For Ordinary Account (OA)
The Board will continue to pay 2.50% interest per annum for members’ CPF savings in their OA from 1 July 2008 to 30 September 2008. The computed CPF interest rate derived from the major local banks’ interest rates for the three-month period, 1 February 2008 to 30 April 2008, works out to be 0.74 % per annum. However, the higher rate of 2.50% will be paid as the CPF Act provides for a minimum CPF interest rate of 2.50% per annum.
http://mycpf.cpf.gov.sg/CPF/News/News-Release/N_12May2008.htm
Year-on-Year Changes
Compared with the same month a year ago, the consumer price index in March 2008 went up by 6.7 per cent due largely to higher costs of food, transport & communication and housing. Food prices advanced by 7.6 per cent as a result of dearer cooked food, rice & other cereals, milk products, fresh vegetables, seafood and poultry. Owing to higher petrol prices, car prices and taxi fares, costs of transport & communication increased by 7.9 per cent. Increases in accommodation costs and electricity tariffs raised the housing cost by 8.1 per cent. Excluding accommodation costs, the consumer price index rose by 6.4 per cent in March 2008 compared to that a year ago.
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Since 1st April 2008, the CPF Board has been paying interest rate at 2.50% for Ordinary Accounts. The suppressed interest rate will be extended till 30 September 2008. While Inflation for the first quarter of 2008 has been in the region of 6.6%.
All CPF members are getting negative returns from their retirement funds.
If a house say cost $200,000 and inflates at 6.6% and CPF pays you 2.50% for your retirement funds. If you keep your funds with the CPF board, you won't be able to afford your house at the end of the year. As price has inflated to $213,200, while the funds in your retirement account will only grow to $205,000.
Are Singaporeans being suckered?
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M13, that's the main reason why I'm researching on how to better use my funds (including CPF ones) this week and next before I start work...
Some forumer had kindly reminded me last time of this before... Coupled that with some books I read, my eyes were really opened...
One example, the HDB is $200k, and you buy it. So while it inflates at 6.6%, you pay interest to HDB only at 2.6% ==> am I right in this part?
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Does the HDB still provide ''housing loans'' to new home owners ?
Have they not divested this responsibility to the commercial banks in 2006, which will require new home owners or re-purchasers of HDB units to be subjected to usual commercial bank rates and conditions of loan ?
The CPF has become a monolithic institution that is more concerned with its own interests than that of the Account Holders.
Prior to 2003{?}, account holders were allowed to invest the balance amount in their OA - after providing a minimum amount for their retirement.
The balance amount in the OA was drastically reduced as the minimum amount for Retirement has been bloated from $25K {?} to $45K {?} - and subsequently to a higher raised level of $75K {?}.
Even with the additional interest pay-out for the Retirement Fund, it will hardly make-up for the inflationary pressures that will surely pare down the real value of the Retirement Fund despite the planned Singapore Dollar getting stronger vis-a-vis a basket of foreign currencies.
This Government can directly influence the cost of living, but has locked itself in a predicament caused by its own money-grabbing policies that date back to the 1980s.
Even one of the founding fathers - S.Rajaratnam - had raised his concern then by coining the label - ''Moneytheism'' - in describing the mad fixxation with the money chase.
This social ''dysfunction'' was symptomatic of the Government policies in encouraging the growth of personal wealth at the expense of the other social implications.
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Are Singaporeans being suckered?--> no offense but u 1st day singaporean??
singaporeans are being looked up as suckers overseas as well as your so called leaders.
2.5% interest on OA is way to low.they compare to banks interest rate of ).something percent is totally wrong.
bank do not hold your funds for more than 30 years collectively.banks offer low interests rate because fluidity of your $$ means they gt no time to play with your $ to diversify the risk vs returns ratio.your fixed d earns a much better interest because of time. works same way as your insurance savings. or you own investments in world wide funds( i dont mean 4d/toto)
CPF, works just like the bank except they force you to contribute. and they give lesser returns in terms of proportion to time and time horizon.similarity to bank is they are more interested in their own already fat wallets.
so once you have the 25k in your CPF and dont need to buy house,go invest. dont waste time in CPF.
a bad investment stretched over a long time horizon say 30 yrs yields around 6% returns even if no monitoring and re balancing is done.$$ with CPF over the same time horizon yields you an amazing 2.5% returns. you go do the math n decide.
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Originally posted by domonkassyu:
Are Singaporeans being suckered?--> no offense but u 1st day singaporean??
singaporeans are being looked up as suckers overseas as well as your so called leaders.
2.5% interest on OA is way to low.they compare to banks interest rate of ).something percent is totally wrong.
bank do not hold your funds for more than 30 years collectively.banks offer low interests rate because fluidity of your $$ means they gt no time to play with your $ to diversify the risk vs returns ratio.your fixed d earns a much better interest because of time. works same way as your insurance savings. or you own investments in world wide funds( i dont mean 4d/toto)
CPF, works just like the bank except they force you to contribute. and they give lesser returns in terms of proportion to time and time horizon.similarity to bank is they are more interested in their own already fat wallets.
so once you have the 25k in your CPF and dont need to buy house,go invest. dont waste time in CPF.
a bad investment stretched over a long time horizon say 30 yrs yields around 6% returns even if no monitoring and re balancing is done.$$ with CPF over the same time horizon yields you an amazing 2.5% returns. you go do the math n decide.
I am torn between making a witty remark on your ignorance, and yet, I am not sure whether your abysmal english leads you to contradict yourself.
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CPF monies don't really belong to you until you are 65 or 75 or 85 or whatever age you start drawing out the money.
Really.
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Originally posted by eagle:
M13, that's the main reason why I'm researching on how to better use my funds (including CPF ones) this week and next before I start work...
Some forumer had kindly reminded me last time of this before... Coupled that with some books I read, my eyes were really opened...
One example, the HDB is $200k, and you buy it. So while it inflates at 6.6%, you pay interest to HDB only at 2.6% ==> am I right in this part?
but these days got $20,000 cap, before you can use the excess for investment.much worthwhile to buy properties than to keep in CPF, those that are just keeping money are making negative interest rates of at least 4%.
but timing is everything in investment.
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This thread is a classic example of an armchair critic in action. If you dont think so, lets ask the thread starter, if you have 2 billion dollars today, where will you be putting your money to get a RISK FREE ROI of 2.5%.
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Originally posted by Love Supreme:
This thread is a classic example of an armchair critic in action. If you dont think so, lets ask the thread starter, if you have 2 billion dollars today, where will you be putting your money to get a RISK FREE ROI of 2.5%.
diversified investment portfolio.i suppose you would put all your money in the bank?
this is a classic example of a non financial savvy believing that risk free means putting all the money in the bank.
with a divestiture of 2 billion dollars into a various asset class, it would yield more than 2.5%. get a basic education in finance before you start talking to me about investment. i guess markowitz must have been a million times smarter than you, else investments in current time would never have been possible.
risk free by putting all your money in the bank does not imply totally free from risk, though you are free from default risk, ask central banks are able to print money (fiat money) and release into the money supply. default free risk does not imply you are free from inflation risk.
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Originally posted by Love Supreme:
This thread is a classic example of an armchair critic in action. If you dont think so, lets ask the thread starter, if you have 2 billion dollars today, where will you be putting your money to get a RISK FREE ROI of 2.5%.
with 250k, I know of a bond of almost neglible risks giving a minimum of 5.28% if you hold it for 5 years to maturity because it has also capital protection.
This is bearing in mind that 5.28% is still rather low... With 2 billion, I would even consider snapping up a few 1.4 million sgd 2nd hand terrace houses at certain areas and renting them out at around 5k a month. The options are many many...
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US seems to have lower inflation than Singapore, despite all the increases in money supply to help shore up the sub-prime mortgage crisis. Shouldn't increases in money supply depreciate the USD against all other currencies?
The US inflation for 3 months ending April 2008 was 2.3% while an unadjusted 12 months rate was 3.9%.
http://www.bls.gov/news.release/cpi.nr0.htm
Inflation in the UK was 3.0% for 12 months ending April 2008.
http://www.statistics.gov.uk/CCI/nugget.asp?ID=19
Inflation in Australia was 3.5% for 12 months ending March 2008.
http://www.rba.gov.au/Statistics/measures_of_cpi.html#year_ended
Inflation in New Zealand was 3.4% for 12 months ending March 2008.
http://www.rbnz.govt.nz/statistics/econind/a3/data.html
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Originally posted by eagle:
with 250k, I know of a bond of almost neglible risks giving a minimum of 5.28% if you hold it for 5 years to maturity because it has also capital protection.
This is bearing in mind that 5.28% is still rather low... With 2 billion, I would even consider snapping up a few 1.4 million sgd 2nd hand terrace houses at certain areas and renting them out at around 5k a month. The options are many many...
Care to tell us which bond are you talking about?There is no such thing as a 2nd/3rd/4th/5th hand property, they are call resale property.
$5K over $1,400,000 property only gives you an yield of 4.28%, and that is excluding the maintenance cost, property tax, income tax , stamp fee ($36,600), and factoring opportunity cost. And for $1.4m terrace house, it is most likely to be a leasehold property or some shabby freehold terrace which is located in some secluded location which you cant really command such high rental. Investing in property is not risk free either as property prices do fluctuate and they are not a liquid investment. Plus who can guarantee that you will be able to get $5K rental on a consistant basis?
It is always easy for armchair critics to talk about investing in this and that, all you need is to buy a copy of BT and choose what is up and avoid what is down.
Care to share with us,your investment portfolio?
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Originally posted by maurizio13:
diversified investment portfolio.i suppose you would put all your money in the bank?
this is a classic example of a non financial savvy believing that risk free means putting all the money in the bank.
with a divestiture of 2 billion dollars into a various asset class, it would yield more than 2.5%. get a basic education in finance before you start talking to me about investment. i guess markowitz must have been a million times smarter than you, else investments in current time would never have been possible.
risk free by putting all your money in the bank does not imply totally free from risk, though you are free from default risk, ask central banks are able to print money (fiat money) and release into the money supply. default free risk does not imply you are free from inflation risk.
show me the money.
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Originally posted by Love Supreme:
Care to tell us which bond are you talking about?There is no such thing as a 2nd/3rd/4th/5th hand property, they are call resale property.
$5K over $1,400,000 property only gives you an yield of 4.28%, and that is excluding the maintenance cost, property tax, income tax , stamp fee ($36,600), and factoring opportunity cost. And for $1.4m terrace house, it is most likely to be a leasehold property or some shabby freehold terrace which is located in some secluded location which you cant really command such high rental. Investing in property is not risk free either as property prices do fluctuate and they are not a liquid investment. Plus who can guarantee that you will be able to get $5K rental on a consistant basis?
It is always easy for armchair critics to talk about investing in this and that, all you need is to buy a copy of BT and choose what is up and avoid what is down.
Care to share with us,your investment portfolio?
I guess you pretty much don't know what you are talking about. You don't even know what is inflation.The second element is inflation, the property you bought for $1,400,000 with an inflation of 6.7% a year, would have been priced at $1,493,800 at the end of 1 year.
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Originally posted by Love Supreme:
show me the money.
What's the point of telling me "show me the money"? Your understanding of investments from some movies?If you are interested, invest $3 million with me for 20 years. Give me your lawyer's contact? I will get the lawyers to draft a contract with a reputable bank guaranteeing you the 3% interest and capital risk free. 3% interest is substantially higher than your 2.5% risk free you are getting from CPF Board. But whatever profits that is above 3% is mine and you have no claim to it. Do you have the guts to put your money where your mouth is? Or are you just talking crap?
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but timing is everything in investment...maybe should re phrase to time is everything in investment?? there is never a right timing to do investment until they are a thing of the past.unless you know the future.. there is no way to catch the right timing..the commonly known right timing is not for investment, but for speculation...
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Originally posted by Love Supreme:
Care to tell us which bond are you talking about?There is no such thing as a 2nd/3rd/4th/5th hand property, they are call resale property.
$5K over $1,400,000 property only gives you an yield of 4.28%, and that is excluding the maintenance cost, property tax, income tax , stamp fee ($36,600), and factoring opportunity cost. And for $1.4m terrace house, it is most likely to be a leasehold property or some shabby freehold terrace which is located in some secluded location which you cant really command such high rental. Investing in property is not risk free either as property prices do fluctuate and they are not a liquid investment. Plus who can guarantee that you will be able to get $5K rental on a consistant basis?
It is always easy for armchair critics to talk about investing in this and that, all you need is to buy a copy of BT and choose what is up and avoid what is down.
Care to share with us,your investment portfolio?
Suntec City bond. My gf has already put the money in, so I can definitely say for sure. Already bought it in March. Armchair critic?
It is fact!Property goes up in price with inflation. You forgot about that.
For SPH and ComfortDelGro stocks, they have been consistently giving out 5% (6% if you buy at the low) dividends each year.
There's one more way to achieve even greater returns (~10%) with equally low risk, but you have to hold if for long term (at least 10 years). But I guess since you won't understand the market, no point sharing with you.
And for $1.4m terrace house, it is most likely to be a leasehold property or some shabby freehold terrace which is located in some secluded location which you cant really command such high rental.
A perfectly new one costs around $1.6 to $1.7 million. Again, my gf's family bought it (because their current house has gone to en bloc sale). And according to my property agent friend, that type of house (supposed not new), even if in ulu area, can fetch minimum of $5k a month for rental.
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Originally posted by maurizio13:
US seems to have lower inflation than Singapore, despite all the increases in money supply to help shore up the sub-prime mortgage crisis. Shouldn't increases in money supply depreciate the USD against all other currencies?
The US inflation for 3 months ending April 2008 was 2.3% while an unadjusted 12 months rate was 3.9%.
You may wish to further strengthen your case on the seemingly irreconcilable paradox with the following : in theory (ceteris paribus), this regime's artificially-induced brand of wage suppression to prevent a wage-price spiral (notwithstanding Keynesian's view that prices and wages are particularly sticky downwards, which actually compounds the dire reality) on the pretext of curtailing inflation, coupled with its exchange rate targetted measures in controlling inflation, should actually churn out a lower inflation rate than that in the US (whose more acute brand of wage-price spiral and interest rate-targetting should be pivotal to a higher inflation).Just as this regime chooses to adopt a brand of democracy that fits its own demographic, the cause of your paradigm may very well lay in the brand of economics which is quite simply also "uniquely Singapore"!
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The US inflation for 3 months ending April 2008 was 2.3% while an unadjusted 12 months rate was 3.9%.
http://www.bls.gov/news.release/cpi.nr0.htm
Inflation in the UK was 3.0% for 12 months ending April 2008.
http://www.statistics.gov.uk/CCI/nugget.asp?ID=19
Inflation in Australia was 3.5% for 12 months ending March 2008.
http://www.rba.gov.au/Statistics/measures_of_cpi.html#year_ended
Inflation in New Zealand was 3.4% for 12 months ending March 2008.
could it be due to the lower housing prices these country are experiencing now?
while in singapore, inflation is across all categories of products, services, property alike. there is no way we can save from one area to complement the other.
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Originally posted by Love Supreme:
This thread is a classic example of an armchair critic in action. If you dont think so, lets ask the thread starter, if you have 2 billion dollars today, where will you be putting your money to get a RISK FREE ROI of 2.5%.
RISK FREE ROI of 2.5% payable to the CPF accounts of all Singaporeans ?What was the price that Singaporeans have to pay to enjoy this ROI of 2.5% ?
With the CPF managed in non-transparent manner by this Government, who is to know how our monies are managed ?
If GIC and Temasek had claimed to have a ROI performance of 18% p.a. for the last 20 years, has the CPF Board been able to achieve the same ?
What happened to the other 15.5% after paying the CPF Accounts the 2.5% - if they also achieved the same annual ROI of 18% ?
Are Singaporeans being short-changed ?
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Originally posted by reyes:
could it be due to the lower housing prices these country are experiencing now?
while in singapore, inflation is across all categories of products, services, property alike. there is no way we can save from one area to complement the other.
US is almost a perfect market based economy in which Free Enterprise compete for the consumer dollar, unlike Singapore which pretend to be a market based economy when in actual fact all the essential goods and services are provided by the Government.The Singapore Government has its hand in every aspect of the market economy that manipulate the supply chains, and help the suppliers when demand slacken - so that its own investments in the entire economy is not jeopardised.
It had claimed to divest its own interest in all the essential services - through its ownership of Temasek - but the moves to divest resulted in more subordinate companies with working capital and personnel transferred from the previous defunt Statutory Boards and Government Departments.
Can competition exist in a controlled environment ?
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Originally posted by eagle:
Suntec City bond. My gf has already put the money in, so I can definitely say for sure. Already bought it in March. Armchair critic?
It is fact!Property goes up in price with inflation. You forgot about that.
For SPH and ComfortDelGro stocks, they have been consistently giving out 5% (6% if you buy at the low) dividends each year.
There's one more way to achieve even greater returns (~10%) with equally low risk, but you have to hold if for long term (at least 10 years). But I guess since you won't understand the market, no point sharing with you.
A perfectly new one costs around $1.6 to $1.7 million. Again, my gf's family bought it (because their current house has gone to en bloc sale). And according to my property agent friend, that type of house (supposed not new), even if in ulu area, can fetch minimum of $5k a month for rental
1) Are you talking about Suntec City Reits or Bond?
2) I am not sure which university or "experts" in this forum teaches you that, value of property always move in tandem with inflation.
If you are so sure about what you are saying, I would appreciate if you could help explain why in the US, UK and Spain for example, the price of food, energy, gas are all going up, while property price are falling?
I suppose if Singapore would to adopt your sort of investment strategy for our CPF, we would have been going belly up by now.
3) Your property friend must be lying to you, or he is just a rookie property agent who doesnt know what he is talking about.
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Originally posted by Love Supreme:
1) Are you talking about Suntec City Reits or Bond?
2) I am not sure which university or "experts" in this forum teaches you that, value of property always move in tandem with inflation.
If you are so sure about what you are saying, I would appreciate if you could help explain why in the US, UK and Spain for example, the price of food, energy, gas are all going up, while property price are falling?
I suppose if Singapore would to adopt your sort of investment strategy for our CPF, we would have been going belly up by now.
3) Your property friend must be lying to you, or he is just a rookie property agent who doesnt know what he is talking about.
2) Pwned again!!! Seriously, do consider getting a proper education."The results show that real estate provides a better hedge against inflation than does stock and securitized real estate"
http://sbaeweb.fullerton.edu/finance/jrepm/pdf/vol06n04/v06p373.pdf
Don't expect me to explain what is a hedge to you. It's too complex for your feeble mind.
On the other hand. Why not you explain why the properties of Singapore is rising while other countries are falling?
You mean if Singapore adopts portfolio style of investment strategy it will go belly up?
3) I guess those adverts in mocca which shows rental for a 1,200 sq feet condo going for $3,000 were lying.
I don't know if you need a brain or need an education. If you are stupid an education won't make any difference.