Five Cents Ten Cents

I read Minister Gan Kim Yong’s remarks relating to the amendments to CPF Life with incredulity and shock.

The article by the Straits Times “CPFLife payouts for Life” is very misleading as the content of the article focuses on the questions raised by Mdm Halimah Yacob. Her concern is expressed here:

The remark was directed at Madam Halimah, chairman of the Government Parliamentary Committee for Manpower, who noted that the law allows the CPF Board to stop CPFLife payments unless the Lifelong Income Fund is solvent. ‘While I can understand the legal basis for this provision, I find it quite disturbing to have it reflected in the Bill,’ she said.

The Government never giveth but the Government can taketh away

So it appears that the Government is able to legally STOP paying you out of YOUR savings accumulated from YOUR hardwork and locked by a portion of YOUR MINIMUM SUM CPF balances if the Lifelong Income Fund is insolvent.

However, given that the Lifelong Income Fund is mandatory for most CPF members and that you don’t really have much of a choice, if the fund is at risk of being insolvent, that would speak volumes about the quality of the people paid to run it. If you were given a monopoly and could control how much expense (payouts) to incur and can take other people’s money to invest (unlimited upside), some risk takers may use that money to make bets on the market. If the bets turn out well, 8 month (or more bonuses). If the bets turn sour, quit and find a new job while the members payouts get cut?!

Is the scenario I imagine realistic? Did we go through the last year or so since the sub-prime where we learnt nothing about putting people in such scenarios?

Minister Gan didn’t mention what happens if it is the CPF Board itself that makes investment mistakes that causes the Lifelong Income Fund to be insolvent in the first place or if the CPF Board is unable to generate sufficient income from its investments using YOUR portion of MINIMUM SUM locked away for CPF Life.

Those are very real possibilities for the Lifelong Income Fund to be insolvent and to be unable to fund future payouts. Even MAS can lose $9 billion in 1 year from investments and Temasek/GIC can lose BILLIONS in a year. What happens if CPF Board makes use of GIC to invest and they lose millions (not to say BILLIONS) in a “bad” year.

Would CPF members be screwed because of the mistakes made by the CPF Board?

Would CPF members be deprived of their right to their CPF Life income payouts that come from their OWN SAVINGS that they have NO CHOICE but to participate as opposed to private insurance/annuities?

And more importantly, Minister Gan’s promise as stated:

MANPOWER Minister Gan Kim Yong has assured Singaporeans they will receive a monthly payout from the CPFLife annuity scheme for the rest of their lives, despite a ‘disturbing’ provision in the new law.

But I am not sure if our esteemed Minister is aware that even if the payout is reduced to $1 a month (which the CPF Board is legally empowered to do so under these amendments to keep the Lifelong Income Fund solvent), he would still be honouring his promise while CPF Life members starve to death?

I cannot understand how we have a system where our forced savings from contributing to the Central Provident Fund is being managed with the risk borne by members. Not only do we lose the ability to decide what we want to do with our retirement monies, we’ve given the Government so much power that even if they make mistakes with our hard-earned savings, we will have to suffer for it.

If the CPF Board cannot generate sufficient income from CPF Life, we the CPF members are well and royally SCREWED.

If this doesn’t convince you to save for retirement OUTSIDE the CPF system, nothing else will.

Be well and prosper.