We refer to the article “Joint responsibility for old age income security” (Straits Times, Jul 21).

Best article on CPF?

This is the best article ever on “CPF”, and we hope that the Government will take on most if not all of the writer, NMP Lawrence Lien’s suggestions.

We have reproduced some extracts from the article, with our comments.

Lack of clarity in CPF?

“At first, it was not my intention to write about the Central Providend Fund (CPF). But I feel compelled to do so given the persistent lack of clarity about what the real issues are.”

– Our comments: The “lack of clarity” from the Government cannot continue.

Transparency and accountability please?

“Citizens may not be similarly reassured because the Government has chosen not to release detailed numbers of the Government’s balance sheet, including the actual size of GIC’s assets under management.

Ironically, in the Singapore Government’s case, the reticence is borne out of a desire to be conservative – to reduce the pressure to be profligate – and not a need to hide losses.

However, we have reached a stage of our political maturation process in which the lack of transparency, and perceived lack of public accountability, needs to be addressed. Transparency breeds trust.”

– Our comments: We cannot but agree more that despite all the recent disclosures in Parliament, papers and advertisements about how the CPF system works – there is still a great deal of lacking in transparency and accountability.

The silence is deafening?

“each cohort does not get much advanced notice. Someone who turns 55 between July 2014 and June 2015, will need to set aside a Minimum Sum of $155,000, which is equivalent to $117,000 in 2003 dollar terms.

But this figure was announced only in May 2014.

… I am sure CPF members would welcome the Government setting the limits early and giving sufficient notice of future changes.”

Our comments: Despite questions every year – Why has the Government been silent as to whether the Minimum Sum will continue to increase and how the increase will be determined, given that we have almost reached the original target of $120,000 in 2003 dollar terms?

How many met Minimum Sum?

“Apart from inflation eroding retirement savings, the widening income inequality here means that pitching it for the lower middle income household would make it increasingly less relavant for large segments of the population.

… Meanwhile, many other CPF members are not able to accumulate the Minimum Sum by age 55.”

Our comments: The Government should disclose how many Singaporeans (active and inactive CPF members and self-employed) who reached 55 last year were able to meet the Minimum Sum of $155,000 in cash, without pledging property?

Double whammy?

“Multiple uses of CPF for purposes other than directly meeting retirement needs and the insufficient social safety nets … have increased the pressures to expand the uses of the CPF.”

Our comments: We cannot continue with the current system where there is hardly any welfare for the poor or unemployed Singaporeans, whilst ironically, they may have sizable sums in their CPF that they cannot use.

CPF returns are fair?

“Many have also asked whether the CPF returns are fair. They are, if they are measured against what is available in the market. The current yield on a 30-year Singapore Government security, which is considered a long-term risk-free investment, is only 3.1 per cent per annum.”

Our comments: By definition, the risk-free rate is the yield on long-term Government bonds. So, it is inconceivable that the benchmark return on a nation pension fund, or for that matter any investment portfolio, can be lower than the risk-free rate, like our OA interest rate of 2.5%.

Govt is not commercial entity – make money out of the people?

“But the Government is not a commercial entity that needs to be profitable and obtain compensation in return for taking risks. It can take a long-term view and smoothen returns on behalf of CPF members.”

Our comments: Singapore has the lowest real rate of return amongst all national pension funds in the world. The people should not suffer but taking the risk of low returns, so that the Government in a sense, arguably takes no risk at all – by taking the excess returns and not having to spend any money at all on our pension system, because it is all the contributions of the people.

Who is taking the risk?

“Even the Ordinary Account Account can be invested in the long term. Although more liquid by design, the net contributions into the Ordinary Account are generally positive year on year.

In fact, the total balances of CPF members have increased every year from $52 billion in 1993 to $253 billion in 2013. This gives GIC the stability that it needs to invest CPF funds for the long term.”

Our comments: What risk is the Government talking about when the contributions have always exceeded the withdrawals every year, and also conceivably into the future? It is non-sensical and illogical to say that by guaranteeing a risk-free rate of only 2.5% is fair.

GIC’s returns?

“Currently, the Government is between a rock and a hard place. If it makes high returns, it will be accused of creaming off excess returns to fund already large coffers. If it makes low returns, people may worry that their fund are not safe.”

Our comments: The Government should disclose what is the annualised return in S$ of GIC since its inception?

CPF should be “revenue neutral”?

“Apart from more transpareny, I believe the Government should commit to being revenue neutral over the long term on the investments of CPF funds. Based on GIC’s current asset allocation, the Government should be able to accumulate excess returns on invested CPF funds over the long term and pay out bonus returns periodically.”

Our comments: The Government should be “revenue neutral” like all other national pension funds in the world, and return the excess returns to the people.

We should all work together?

“The sooner everybody – government and people – starts working together, with openess and cool heads, to address it today, the better off everyone will be in the future.”

Our comments: There should no more attacks on Singaporeans who ask questions about our CPF – especially the IBs employed on the internet.

S Y Lee and Leong Sze Hian

P.S. Come with your family and friends to the 3rd Return Our CPF – HDB protest on 23 August 4 pm to 6.30 pm at Speakers’ Corner https://www.facebook.com/events/648543138548193/