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An alternative view of 55% of Singaporeans not being able to meet the Minimum Sum

In a previous commentary, I tried to ask some questions to the readers what they should be unhappy about, when the minimum sum keeps rising.

What refuses to go away is the preaching of Roy Ngerng on 55% of the population not being able to meet the minimum sum.

There are a few things we cannot run away from:

  • CPF and Your networth sans CPF make up your total networth
  • Its just that your CPF is locked up. But its still part of your networth
  • What is meant for retirement (CPF) becomes available to be used for mortgage payments. 50% of your property can go towards meeting the minimum sum
  • Normal folks hate that their money is locked up for a long time, CPF or no CPF. They would rather put it in endowments since at most they can surrender them at a loss
  • The majority of the people don’t understand why do you need an annuity like the CPF Life and treat it as something they won’t see it forever
  • The rates at 2.5% and 4% are reasonable but not the 6-7% to attract people to lock up their money to see good growth

If you hate to see your money being locked up, and that you understand that you won’t see your money forever, why would you want to top up something like that?

It seems we don’t have much statistics showing how much networth folks have sans the CPF and their housing. They could very well top up with their savings if they want to. Perhaps a statistic how many own endowments, second property, cost value at CDP accounts would answer that.

What would make people force top up? I believe the rates are too low. If you pump it up 1.5% for both, or that you introduce some TEMASEK or GIC good investment bonus, people will top it up.

Kyith

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Micky Neo

Wednesday 21st of May 2014

"Normal folks hate that their money is locked up for a long time, CPF or no CPF. They would rather put it in endowments since at most they can surrender them at a loss" OR THEY CAN TRANSFER AND SELL IT.

Kyith

Wednesday 21st of May 2014

Not many know they can see it

Regis

Wednesday 21st of May 2014

Hi,

Challenging the minimum amount of the CPF is equivalent to challenging the existence of the CPF (IMHO). I find the CPF as a very healthy way of saving for retirement. In most countries (I'm very familiar with France) you pay for the elders pensions, but nothing guarantees that someone will pay for yours. At least the CPF is money you will find down the road when you reach the minimum retirement age. To give you an insight about the situation in France which is sometimes referred to as a model, 25% of your gross salary goes in a common pot to fund retirement pensions, unemployment pensions and health care (you will pay income tax on top). But for sure the 25% is already spent before you even paid as the system is in deficit. This system tends to encourage cheaters as the less you declare the less you pay. But the main issue is that for the generation that follows baby boom, there will be no funds for their retirement pensions. Today's retired people benefit from generous pensions, but the pensions will decrease, age for retirement will reach 65-67 very soon. In other words the younger generations are going to pay for the baby boomers excesses. Whereas in Singapore, you know what your contributions are, you can make projections and thus you feel more confident. Your money is locked, but that's normal (it's for your retirement no?) but still you can fund your home with it, you can buy stocks and funds, etc... At least you are not paying for the past generations. The way the MAS this using the money is a different question. But so far IMHO they did a good job. There are certainly some drawbacks to the system but all in all I find it healthy for the government to force people to save a bear minimum. At least it minimizes the chances we end up selling tissue paper on the street once we are not good at working hard anymore. Regarding the minimum amount of CPF, IMHO, it should be higher. You cannot make a living with 150k for the rest of your life (at least 10 years for the weaker of us, 30 years for the strongers). And there is inflation, cost of living etc... I can understand that very disciplined people with state of art bucket budgeting are not happy with the CPF. But how many of us are in this case? Not me for sure ;) At least the CPF will be a small parachute for most of us. Finally as a side note, the CPF allows Singapore to weight on the global economy with a massive amount of assets (remember StanChart was not Singaporean initially...) Cheers Regis

Kyith

Wednesday 21st of May 2014

Hi Regis, Finally as a side note, the CPF allows Singapore to weight on the global economy with a massive amount of assets (remember StanChart was not Singaporean initially...)

What do you meant by this

Kyith

Wednesday 21st of May 2014

Hi Regis,

Thanks for writing in and for providing an alternative worse situation to be in. I think you basically took the words from my mouth regarding the strength of this ownership kind of pension.

Do u felt the returns are too low? Perhaps u can share a bit why the familiarity with France and perhaps you have friends who have a perspective on other European pension

mike

Tuesday 20th of May 2014

I have worked in the civil service for about 4 years so I have only about a bit more than 60k in CPF. After that working overseas doesn't require me to put money into CPF. And now that I'm self employed I choose not to put money into CPF except of course the mandatory medisave. All money I've earned is within easy access, not locked up. Part of these are invested in stocks, precious metals and my business. I have no properties yet. I consider what little amount left in CPF as money lost. Dead money. A tax. I also do not consider CPF as part of my net worth. By the way, I am about your age kyith.

Kyith

Wednesday 21st of May 2014

Hi Mike, that's good to hear. I think end of the day it is still your money. Do you lock up your money outside

Renzie

Monday 19th of May 2014

Hello,

The background makes it hard to read the texts. :(

regards,

renzie

Renzie

Monday 19th of May 2014

sorry. it was a problem on my browser.

Nice blog! :)

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