An unofficial history of the CPF?

cpf-building

A look back on the history of CPF may give an insight as to how the CPF scheme has evolved? 

My regular insider ES sent me some very interesting historical information about CPF.

… In a speech on CPF at the Pasir Panjang Forum on 31 October 1982 – the Minister for Labour and Communications said “Capital Formation: CPF savings form a large portion of Singapore’s savings. These savings are used for capital formation, which means the construction of new factories, installation of new plant and equipment, expansion of infrastructure such as roads, ports and telecommunications, the building of houses and so on”.
So, arguably Temasek Holdings’ 15 per cent annualised return from its inception was derived significantly from the state assets built up with our CPF in the early years.

… When Singapore became independent in 1965, the CPF Ordinary Account(OA) interest rate was 5.25 per cent。It increased gradually to 6.5 per cent in 1974, and remained at this rate until February  1986. In 1986, we started to peg the CPF interest rate to the banks’ interest rates. It then declined more or less gradually to 2.5 per cent in July 1999, and has remained at this rate until now.

So, arguably, 1986 may have been the turning point for Singaporeans – which may have resulted in the lowest real rate of return (on the CPF Ordinary Account)  of all national pension funds in the world since 1999.

Why was the policy changed in 1986 to peg the CPF rates to the banks’ rates, which I understand no other national pension fund in the world does?

Leong Sze Hian

 

About the Author

Leong
Leong Sze Hian has served as president of 4 professional bodies, honorary consul of 2 countries, an alumnus of Harvard University, authored 4 books, quoted over 1500 times in the media , has been a radio talkshow host, a newspaper daily columnist, Wharton Fellow, SEACeM Fellow, columnist for theonlinecitizen and Malaysiakini, executive producer of Ilo Ilo (40 international awards), invited to speak more than 200 times in over 30 countries, CIFA advisory board member, founding advisor to the Financial Planning Associations of Indonesia and Brunei. He has 3 Masters, 2 Bachelors degrees and 13 professional  qualifications.