I refer to the article “Malaysian pension fund declares record payout” (Straits Times, Feb 17).
Malaysia’s EPF paid 6.35%
It states that “Malaysia’s pension fund has declared a dividend rate of 6.35 per cent for the financial year ending Dec 31, 2013, making it the biggest ever payout to its members.”
EPF historically from 4.25 to 8.5%?
The dividend was 6.15, 5.8 and 5.65 per cent in 2012, 2010 and 2009, respectively, and has historically paid a return of between 4.25 to 8.5 per cent.
CPF 2.5%?
The bulk of Singapore’s CPF only pays an interest of 2.5 per cent on the Ordinary Account (OA). The maximum CPF contribution rate of 36 per cent goes into the OA, Special Account (SA) and Medisave Account (MA) – at 23, 6 and 7 per cent respectively. The interest rate for the SA and RA is 4 per cent, plus an extra 1 per cent on the first $60,000 of the OA (first $20,000 with interest credited to the SA), SA and MA.
Our CPF utilised?
The Government has been utilising our CPF and keeping the excess returns all these years.
CPF balance projections into the future?
With a balance of $248.1 billion in CPF, as of December 2013, and net annual withdrawal retention (contributions – $26.1 billion minus withdrawals – $11.7 billion ) of $14.4 billion in 2012 – if we assume a combined all CPF accounts’ average interest rate of 3 per cent, the total CPF balance is projected to be about $503 and $847 billion, in 10 and 20 years time, respectively.
Versus other pension funds?
If the average rate is say 5 per cent, like Malaysia and other countries – the projected CPF would be $594 and $1.16 billion, respectively.
Losing $313b in the next 20 years?
So, in a sense, the difference of about $91 and $313 billion, is like an “implicit tax” on our CPF savings.
How much “implicit tax” have we lost in the past?
Leong Sze Hian
