Report GIC returns in S$ also so that we know CPF % rates are very good & fair


If GIC reports its returns in S$ also – Singaporeans may complain less about not getting CPF interest rates that are actually good and fair

I refer to the article “GIC records 3.4% long-term return above inflation” (Straits Times, Jul 13).

It states that “Its benchmark 20-year annualised real rate of return between April 1998 and March this year was 3.4 per cent above the rate of global inflation. This number was 3.7 per cent for the 2017 financial year, 4 per cent for 2016 and 4.9 per cent for 2015.

“The line has come down… even though historically, this number hovered around 4 per cent real rate of return over and above global inflation,” chief executive Lim Chow Kiat said at a briefing yesterday. “That is because the high returns at the beginning of the period – the late 1990s – have dropped out of the 20-year window.”

In nominal US dollar terms – not adjusted for inflation – GIC’s portfolio returned 5.9 per cent a year for the 20 years to March 31. That period included the poor market performance due to the global financial crisis and the European debt crisis.”

Since our CPF is managed by GIC – I would like to suggest that it reverts to its past practice (before 2009) of reporting the returns in S$ as well, so that Singaporeans can better relate to it.

In this connection, according to the 2013 GIC annual report, “The nominal rates of return have been reported in USD terms since our 2009 report as the USD is the most common currency base for publishing global investment returns that allows for easy comparison.”

US$ only to avoid confusion?

In this connection, in a Parliamentary reply in 2012 to NCMP Mrs Lina Chiam – the media reported that “Minister of State for Finance Josephine Teo explained that the GIC stopped publishing its nominal returns expressed in Singapore dollars three years ago, to avoid confusion when comparisons are made with other fund managers or global indices.

Its annual reports include the nominal return in US dollars as that is the commonly expressed basis internationally for comparisons of investment returns achieved by global investment funds.

Elaborating on the problem of confusion, Mrs Teo said: “Indeed, in previous years, we found that some readers (of GIC’s annual reports) had compared GIC’s returns in Singapore dollars with the returns of global market indices in US dollars.””

So, what is the return in S$?

In this regard, I understand that it is lower, as according to the Monetary Authority of Singapore’s (MAS) web site – the USD/S$ exchange rate was 1.606 at end March 1998, compared to 1.3117 at end March 2018.

Using these two exchange rates – I have calculated that in nominal S$ terms – not adjusted for inflation – GIC’s portfolio returned 4.8 per cent a year for the 20 years to March 31.

In this connection, what is the weighted average interest rate on all our CPF accounts, for the last 20 years and last year?

In this regard, I understand that the CPF weighted average interest rate credited has been about 3.6 per cent ($7.51 billion % earned divided by $208 billion total net balances in 2011), according to “CPF Trends: Extra interest earned on CPF balances“.

But this report may be a bit dated, as it only gives the “interest earned on balances” up till 2011. So, I believe the rate may even be higher now.

If this is the case, it may reinforce my suggestion to report in S$ terms as well, as this may also mean that the CPF interest rates at 2.5% (Ordinary Account), 4% (Medisave, Special and Retirement Accounts), 5% (on the first $60,000) and 6% (on the first $30,000 from age 55), are very good and fair, compared to GIC’s 4.8%?

This would dispel the consistent talk in social media and even sometimes in our Parliamentary history, that the Government has been keeping a lot of the returns derived from our CPF funds, vis-a-vis the CPF interest rates paid to Singaporeans now and historically.

Leong Sze Hian






About the Author

Leong Sze Hian has served as the 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), Hotel Mumbai (associate producer), invited to speak more than 200 times in about 40 countries, CIFA advisory board member, founding advisor to the Financial Planning Associations of 2 countries. He has 3 Masters, 2 Bachelors degrees and 13 professional  qualifications.