CPF plans to lower interest rates for medisave and retirement accounts
September 4th, 2009 | 
Author: From our Correspondent
According to the latest news release from the Central Provident Fund (CPF) board posted on its website, it will be applying a new floor rate of 2.5% interest for all CPF accounts after 31 December 2009 (Source: CPF)
The government has been maintaining the 4% floor rate for savings in the Special Medisave and Retirement Accounts (SMRA) for two years from 1 January 2008 to 31 December 2009.
The interest rate for SMRA is pegged to the 12-month average yield of the 10-year Singapore Government Security plus 1% for this entire period of time.
The lower interests rate mean that Singaporeans will have less savings in their medisave accounts to be used for medical expenses and retirement account to depend on during their golden years.
In fact their value will probably depreciate with time as the interest (floor) rate of 2.5% is far below the annual inflation rate of 4 to 6%. Last year, inflation hit a record high of 6.7%
The CPF was originally introduced in 1967 to help Singaporeans saved for their old age. Singapore workers are required under the law to contribute 20% of their monthly savings into the CPF together with a lesser percentage from their employers.
The medisave account was subsequently set aside from the holders’ ordinary accounts to pay for hospitalization bills. Most Singaporeans use the funds in their ordinary accounts to service the mortage loans of their homes.
Due to the rising prices of HDB flats, more and more Singaporeans are having insufficient savings in their CPFs left for retirement needs as they are used to repay the bank loans.
The government has rolled out a series of initiatives to help Singaporeans cope with the impending crisis by increasing the retirement age to 62, urging employers to re-hire elderly workers, raising the minimum sum in CPF and introducing a CPF Life (annuity) scheme which will give a monthly allowance to Singaporeans after they retire from working life.
While the cost of living has increased steadily over the last few years, especially that of HDB flats, the wages of Singaporeans have not kept pace with it. The lower income group is the hardest hit as the wages had remained stagnant for the last decade due to the relentless influx of foreign workers.
The government’s open-door policy towards foreigners and the lax criteria for granting PRs had led to an increase in the number of PRs in Singapore. They are allowed to buy resale HDB flats thereby contributing to their demand and eventually prices.
National Development Minister Mah Bow Tan admitted recently that the price of HDB resale flats had reached a record high and will continue to rise. However, he was quick to add that HDB flats remain “affordable”.
Despite repeated reassurances from the ministers and HDB that public housing is affordable to the masses and that the inflationary housing market helps to generate wealth for the people, many are still not convinced.
Recent letters to the Straits Times Forum highlighting the high prices of HDB flats by concerned readers are brushed aside by HDB with the often quoted answer that their prices lie below the internationally accepted benchmark of housing affordability.
Young Singaporeans who have limited savings in their CPFs will be stretched to their limits to start a family under present circumstances.
For Singaporeans who just bought their homes, a grim prospect awaits them that they may end up with literally nothing in their CPFs after paying off their housing loans over a period of 30 years.
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I am afraid you misunderstood the CPF announcement.
what it is conveying is that it will not guarantee a fixed rate of 4 + 1 extra % from next year onwards. instead, it will be pegged to the 10 yr govt bond yield which is about 2.47% as of Aug 2009. it nearly drop below 2% during Jan 09 when ppl ran for cover to govt bonds.
so, we will get avrg(over 3 mth) 10 yr govt bond yield + 1 % from 2010 onwards. Whether it is lower or higher than the current fixed rate of 4 + 1% depends on the supply and demand of 10 yr govt bond yields. govt can control the supply but they can’t control the demand.
Micro-tweaking the CPF formulas and rates will eventually lead to disaster. Will the ministers be there for another 30-50 years to witness this disaster? No.
Will the children and grandchildren of Singaporeans, please speak up?
Hi cy,
Please read the announcement on CPF website:
“The floor of 4% for the SMRA rate will be maintained for two years from 1 January 2008 to 31 December 2009. After 31 December 2009, the 2.5% floor rate will apply for all CPF accounts.”
It is reported in Today as well:
“In its quarterly review, the CPF Board issued its rate for the next three months -with the reminder that from Jan 1, the new floor rate of 2.5 per cent would apply….So come January, when the floating rate kicks in and the floor rate for SMRA resets to 2.5 per cent, it is likely CPF members will enjoy a slightly lower interest on their retirement savings.”
The 2.5% interest rate for SMRA will begin from Jan 1 2010. What you said applies to the two-year period between 2008 and 2010.
to admin,
you are definitely wrong. this is what i copied from todayonline courtesy of your website
Since January last year, the interest rate for SMRA savings has technically been pegged to the 12-month average yield of the 10-year Singapore Government Security plus 1 per cent.
But CPF members were given a two-year reprieve to adjust to this new formula: The Government maintained the 4-per-cent floor rate in practice, even as it gave updates on what the effective floating rate for the quarter would have been.
For October to December, it is 3.4 per cent, based on the 10YSGS from Sept 1 last year to Aug 31 this year.
This is the lowest result yet in all eight quarters – during which the interest rates on paper have consistently come in under 4 per cent. The highest was 3.79 per cent.
Floor rate means minimum rate that cPF must pay, so we are guaranteed 2.5% even if suay suay 10 yr bond yield fall below 1.5%
but i correct my previous comment, the average yield should be a yearly average and not a 3 month average. the 3.4 % reported is actually a average yield of 2.4% + 1 extra %.
Whatever be realistic. I never went beyond sec school but I know no one, no one, can pay beyond the MARKET.
If that’s happening then it has to be a subsidy.
IF it is a subsidy (whatever, even if it was for the good of the citizen’s nest egg) then the money must come from some where.
But where?
So easy to make money? Let alone the PAP, we sure must have a lot of bright Alecs out there, right? People who can make magic.
How er? How is the government able to give its citizens rates above the banks’ all these years?
Hi cy,
Pleasen read the article again. It is about the interest rate NEXT YEAR which is 2.5% to the SMRA accounts – the floor rate. Because of the lower floor rate now, the savings will depreciate. That’s all the article is trying to say.
to admin,
let me repeat again- floor rate means minimum guaranteed rate
from next year onwards, the rate SMRA will pay is (avrg 10yr-govt bond yield + 1 extra%) so for e.g if next year’s avrg bond yield is 2.6%, then SMRA has to pay 3.6%. of course, this figure will be adjusted every quarter.
Since 10yr bond yield flutuates, it can go higher too, so if it goes to 3.2%, then SMRA has to pay 4.2%.
the problem is we are now paid a varying rate rather than a fixed rate of 4%. so,it is wrong to say the rate will definitely be lower but it is right to say in view of the low govt bond yield, we are worse off than when fixed rate was the norm.
where does this extra 1% comes from?
It’s most probably from the yield temasek/GIC gives to govt each year.
Hi cy,
You are arguing over semantics here.
The floor rate for 2008 is 4%. It will be reduced to 2.5% next year. With the low bond yield now and coupled with a 1.5% decrease in the floor rate, how can we have more savings in our SMRA accounts from 2009 onwards? It doesn’t make sense.
The government uses our CPF funds to invest which surely generate returns higher than the rates it is giving us now. Of course, if you look at it another way, CPF rates are actually much higher than the bank and for Singaporeans who know nuts about investment, it is better to leave their monies in the CPF.
However, now that you must keep a minimum sum with CPF, it means that you will never be able to use the full sum of money. If you die prematurely, your money will go to your descendents who cannot withdraw it either and so a certain portion will always remain with the government which will then recycle it to generate more income. Why do you think our government is so filthy rich? The CPF is an accumulation of our entire nation’s savings for three generations!
if 10 yr bond yield > 3%, we will have a higher interest rate, but don’t forget the inflation rate. so what we should be concerned with is the inflation-adjusted rate.
whether the nominal interest rate given by SMRA is greater or below 4% does not matter as much as what is the inflation rate
inflation adjusted rate or real rate is nominal rate – inflation rate.
//cy
Bullshit.
With the new changes, they will provide a glass ceiling interest rate to the accounts because any excess demand for govt bonds will drive the prices of bonds upward while lowering their yield.
Mon explained this earlier in his/her posting.
These changes cannot possibly serve the public because it is widely acknowledge that CPF monies need to have a higher interest rate.
This new measure effectively lows it further making it cheaper for the govt to borrow money from us.
The trick behind the govt new measures:
The original policy was 4% for all amount.
Now it is minimum a variable rate + 1% for any amount within 20K or 60K. The variable rate is the rate of the 10year bond rate. Any amount in excess of 20 or 60K, it is subjected to 2.5%.
Take a look at the bond rate, it is not more than 3%. So you effectively lose out.
Worst, there is a mechanism to keep it lower than 3% for not longer than a year.
Imagine one day the bond yield is 2.6%, the amt within 20K or 60K would receive 3.6%. The amount in excess of 20k/60K will receive 2.5%.
A rational investor will buy the bond since its yield is higher, than 2.5% with the excess money, effectively driving up the price of the bonds and lowering the yield.
If only our govt is as smart as they should be with the foreign investments, then they don’t have to come up with these number schemes to steal our monies under the guise of intellect.
To Admin -
“The government uses our CPF funds to invest which surely generate returns higher than the rates it is giving us now.”
I can’t follow. “surely”? then what abt the risk? like Leeman? since higher than market carries much, much higher risks, isn’t it?
My wife & I collected our CPF monies a couple of years ago upon retirement so have others leaving only a small amount behind (heirloom) because we have a property to secure our old age. And over the years no one has sued the govenment for non-return of CPF since we have self-government. How?
My question is how is the govenment since time immemorial able to pay higher than market rates to CPF members which run into millions?
@cy:
I think what the article is trying to say is that Singaporeans cannot be better off by the lower interest rate floor.
Sure, if the rate for bonds is >3%, CPF payouts will be above 4%, but since it is above both rate floors, it makes no difference.
If the rate for bonds goes below 3%, Singaporeans will definitely be worse off.
Either way, there is no way for Singaporeans to be better off with the lower floor.
to FPC,
you are wrong. the variable rate is applicable to all SMRA account whether they are within 20K/60k or not, in fact those ppl with accounts within 20k/60K gets an extra 1% on top of the (variable rate + 1%)
ie. if variable rate+1% is 3.4%, those within 20K/60K limit will get 4.4% interest in SMRA account.
to lehman brothers, pls refer to my comment on inflation adjusted rate. Inflation will determine whether we are better or worse off from the change.don’t forget that inflation will force up the govt bond yield,this is economic 101. govt cannot rig the govt bond market, though they can control the supply of bonds but the demand is out of their hands
But is anyone missing somethings??? … and so in REVERSE Chrono oreder … I reference …
1. Like isn’t the additional 1% ONLY for the CPF amounts of $40,000 and below? … if my memory wrong … I stand to be corrected haw!
2. cy said upfront that government can control supply but not demand, What cy seem to be trying to explain w/o saying it in more detail is … if demand goes up gove bond yield goes up too .. and vice-versa? But then doesn’t controlling of supply ALSO affect demand … And so … won’t SUPPLYING LESS then Known or Expected DEMAND “Artifically” JACk-UP yield? and vice-versa too? A FINE “Art” is IT not???!!! Just like currencies and stock values!!!???
3. And yah …Leong Woon Wei QUESTIONED PERFECTLY RIGHT … THAT … “My question is how is the govenment since time immemorial able to pay higher than market rates to CPF members which run into millions?”!!!
4. And FPC seems to have said it another way to cy’s comments I quoted in item 2 above … “A rational investor will buy the bond since its yield is higher, than 2.5% with the excess money, effectively driving up the price of the bonds and lowering the yield.
If only our govt is as smart as they should be with the foreign investments, then they don’t have to come up with these number schemes to steal our monies under the guise of intellect.”!!!
5. Admin said quite correctly … that … “However, now that you must keep a minimum sum with CPF, it means that you will never be able to use the full sum of money. If you die prematurely, your money will go to your descendents who cannot withdraw it either and so a certain portion will always remain with the government which will then recycle it to generate more income. Why do you think our government is so filthy rich? The CPF is an accumulation of our entire nation’s savings for three generations!”!!!
6. Going forward in time now … Leong Woon Wei ALSO said … “My wife & I collected our CPF monies a couple of years ago upon retirement so have others leaving only a small amount behind (heirloom) because we have a property to secure our old age”.
Read this one more from Leong Woon Wei closely …
“And over the years no one has sued the govenment for non-return of CPF since we have self-government. How?”!!!?????
+++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
MOST INTERESTING leh … as since govt has changed laws that BACK_DATE like even some 20-30 For Example … INDEED WHY HAS NO ONE “SUED” THE GOVERNMENT FOR UNLAWFUL “TWEAKS” AND “MISAPPROPRIATION” OF CHANGING OF EXISTING LAWS So FAST And Furious and Created “UnLawful” AmentMents THAT ARE “AT Variatiance TO AN Original Or Pristine LAW in Place.
A MOST FINE EXAMPLE of this IS … Worker’s Party Chairman and lawyer Sylvia Lim’s presentation about Such things in parliament concerning the Original GE Laws and The GRC laws being in conflict and at variance Within EACH of these 2 laws themselves TOO!!!??? Of course HER Parliament QUERIES WERE NEVER BROADCAST IN THE MSM … AND SO YOU ‘MAY-HAVE” SEEN IT IN “YouTube”??? THAT”S they PAP “RUB” onto US ALL And Absolutely NO ONE Has found IT Fit or “WorthQhile or Appropriate FOR THEM To Sue the goverment??? Am nno lawyer too … But MY Common Sense beckons a Sensible Common Sense ANSWER!!!
And Finally … Can everyone most kindly ITEMISE their commoents UNLESS it is both short and not about points of this of that. Okay guys & gals!!!???
Either way, if there is confusion in the press release, then it’s not worded properly.
I had thought the 4% is maintained just by looking at the headlines. If it turns out otherwise next year, it probably won’t escape the general public’s eye.
And let’s not argue over something that has yet to happen.
CPF is Central Ponzi Fraud. Now it is reducing the interest rate and forcing us to collect our money to lengthen the lifespan of the bubble.
Once the bubble of the Ponzi scheme burst and it will eventually, I hope I won’t be in anywhere near Singapore.
Lim Swee Say had already gave us a warning “CPF will still be around HOPEFULLY”. Notice the word “HOPEFULLY”? He knows something about the central ponzi fraud and burp it out during his “I feel so rich” speech!
The changing of the interest rate peg goes back to the CPF Reforms of September 2007. The reforms were introduced to ensure that Singaporeans have sufficient retirement savings. The ministerial statement contains the background and justification for the reforms: http://mycpf.cpf.gov.sg/NR/rdonlyres/EEDDE2E3-DA32-4F7D-91B1-ED3EBA90A860/0/MinisterialStatementonCPFReforms.pdf
please note that yield of govt bonds goes down when demand is greater than supply.
Price of govt bonds goes up when yield of govt bonds goes down
cy,
Inflation does somewhat determine the rate on bonds because it affects the demand and supply for bonds. However, it does not translate to a 100% movement in response to inflation due to the fact that there are other factors at hand.
Year Yield CPI(2004 Base Year)
2000 4.09 1.3
2001 3.97 1.0
2002 2.55 -0.4
2003 3.75 0.5
2004 2.58 1.7
2005 3.21 0.5
2006 3.05 1.0
2007 2.68 2.1
2008 2.05 6.5
Here are ur facts. So stop thinking just inflation alone would magically determine the movement of yields. Real life 101.
Furthermore, your argument against a lower floor is moot, you are practically saying, it does not matter if the floor is lower because there is always a chance the 10 year yield will go above 3 + 1% which is the rate at which the CPF floor is at right now.
How bout you lend me $100 right now and there’s a chance that i’ll give u $200 back. See the point here? What u’re arguing is a probability which might or might not happen, how can there be no significant reduction in benefit to the reduction of the floor. Plus if u factor in global data, this recession is not YET over. The forecast right now is more on the side of a prolonged recovery rather than quick one, and whats going to happen to yields? Obviously it’ll have a higher chance of staying low.
Another unrelated point is that the Government is not giving us a good deal. If you think a 4% guaranteed rate right now is already good because its guaranteed, do not forget your money is basically LOCKED up for 30-40 years, this commands a much higher liquidity premium. 4% is lol. Plus any decent fund manager would be able to generate returns at least on par with the benchmarked average which is still more than 4%.
Furthermore, Temasek has been generating 17% compounded returns over the past 10 years excluding 2009. I personally feel they should at least maintain the floor of 4% for a bit longer on the basis of giving back something to singaporeans. There’s no use rolling over and having huge surpluses when we can’t even spend it. This is my opinin anyways.
//cy
No you are wrong!
the new mechanism will ensure that the bond yield stays below 2.5%.
//you are wrong. the variable rate is applicable to all SMRA account whether they are within 20K/60k or not, in fact those ppl with accounts within 20k/60K gets an extra 1% on top of the (variable rate + 1%)
There is a rate that is applicable across all sums and for amt within 20k/60K, it will receive 1%+the bond yeild rate (average)
Anything above, it will receive less.
Don’t believe, check with the CPF staff. ask them what is the 2 rates you are getting after 2009 based on current yield and you will know to do the calculation.
I don’t blame you that you don’t understand:
1. the formulation is designed deliberately to confuse.
2. There is a brutal change in the scheme before 2009 and after 2009 and all hinge around the +1% word.
you have been confused.
//cy
//please note that yield of govt bonds goes down when demand is greater than supply.
//Price of govt bonds goes up when yield of govt bonds goes down
This is exactly the mechanism that get the 10 year bond yield down.
Like I said, when people flock to buy the bond because of high yield, the increase in demand will drive down the price, lowering the yield in the process.
In so doing, the government will ensure a supply of lower cost funding be it from CPF or from the bond market, the a lower bond yield in the 10 years will/should force the yield of all the earlier bonds down.
//indexer
This is another joker again.
Hen said that Singaporeans need higher return rate but with his laws, he effectively lows the rate for Singaporeans.
the justification you listed is a load of crap. It is to save their own ass from poor returns overseas.
BTW, this is not the first time, you post that article in this blog.
I don’t know how much the govt is paying to do this , but it is a sick way of making a living.
//cy
Thank you for reminding us that the govt can control the supply of bonds.
It is econ000 that says that supply and demand controls price and since the govt can control the supply, it can control the price.
Especially so that now it has a cheaper source of CPF monies to fund its operations. It has less incentives to issue bonds.
I don’t know which part of econ101 that says that inflation determines bond yield. The general statement, it CAN influence bond yield.
However, in Singapore, we have a situation where deposits (a kind of bond) that receives quasi 0%, while inflation can go all the way to 6% for a year and change nothing.
Please, don’t act smart here. your govt is cheating you.
We all have our CFAs. We know how it works financially.
But first “Rainnix on Sat, 5th Sep 2009 1:33 am’ … You ARE right the “HOPEFULLY” word uttered BY NTUC Secretary General Lim Swee Say. AND I wish MORE Singaporeans WILL read text for KEY Words AND Phrases. Very OFTEN Singaporeans rather carelessly “navigate around” THESE KEY things and start arguing with others. Me thinks that FAR Too of US have what is call “ADS or ADD” … “Attention DEFICEIT Syndrome or Attention DEFICEIT Disorder” … even in reading and it’s usually worse when listening. SO BUCK-UP” Singaporeans If YOU WANT TO BE HEARD WITH RESPECT FOR SUBSTANCE!!! …
It WAS The late JBJ of he’s latest Reform Party who once queried the gahmen of PM Lee about …
1. Not raising the CPF interest rate then which was always 1/2% above HDB loans. It was at a time when commercial bank rates sky-rocketted pass 10%. But then what gahment when it “wise” and did later WAS to LOWER CPF interests pegged to private commercial rates. And now CHANGED DIRECTION YET again And pegged TO gahmen bonds!!!
2. Aside from Item 1 … JBJ also “unwisely” brought up about higher prices of HDB compared to the higher prices of “Good Views” private condos … But then views got blocked by gahmen approved nearby developments AFTER then 1st PM took JBJ’s cues AND INCREASED PRICES Of HIGHER FLOOR HDB FLATS!!!
So now you KNOW WHY “This gahmen” Will BE MOST Reluctent to SHUTDOWN EFFECTIVE Blogs like TR.WP!!! … BeCawS “WE GIVE them GREAT IDEAS … Even iF THEY ARE IN REVERSED oR OPPOSITE PHASE”!!! GET THE IDEA??? fOR OUR “SMART” COMMENTS May JUST BE What WILL Help to keep them in POWER FOREVER??? Alamak … This PROS AND cons thing and let your ‘Opponent’ HAVE The BEST OF BOTH WORLDS IS INDEED A “MOST Troubling thought Eh!!!
NOW! What “Good IDEAS” I and you too may have given OUR GAME AWAY for “their” benefit???
//CY
In case, you didn’t get it:
inflation does not drive bond yield.
Supply and demand determine price.
since government can control supply, it can influence price.
This govt loves to pretend that it has nothing to do with anything in Singapore. It is a free market here.
However, it owns most of the banks here.
It is one of the largest employers (if not the largest).
It sets the tax rates. from gst 3% to 7%.
It sets the regulation rules that causes people to lose monies in LB minibonds.
It refuses to push the banks to compensate sufficiently when there is mis-selling.
It can triple the minimum sum in CPF life over 5 years and can include clauses that stop paying you and delay the time when it starts paying you.
So, all you have in the mean time is a number in the CPF website that keeps increasing but you cannot use it.
Much like Madoff’s investors prior to the crash.
there was this news that this mercenary that parked his monies in Madoff. this guy had his hand blown off. killed people in wars. So, he went through big things in life.
but when he learnt that his monies had been lost in Madoff investment, he killed himself.
Supporting evil, knowing that it is evil, is evil.
Cy go wake up!
by the way, admin.
I need to congratulate for your effort.
It is bearing fruit.
This website is seen as a threat by the govt.
Evidence: every time, you post a new article these days, a govt people will post a comment after it.
For them to mobilise that kind of effort, it goes to show how important this site is to them.
Please keep it up. Singapore needs your site!
//More BackGround to THIS CPF Issue
I don’t quite get what you are saying but I do agree that this govt is so lazy and lack moral character that it has to fish around for ideas to squeeze its people.
If only they could do a better overseas….
Time to change the Minister for National Development. How can he allow HDB flat prices to escalate at such rapid pace. He gives me the impression that he is not compassionate and is too business-like. If he is really for us, he will should implement regulations to put a cap on PRs who purchase resale flats at 20 years so that they don’t buy and sell and make fast bucks out of Singapore. We should know by now what they do with the money they make – build nice homes in their own homelands.
It is simple logic, if you put a cap, you can also test their sincereity in wanting to become Singapore citizens. As for genuine Singaporeans who purchase HDB flats, we should also increase the cap to prevent speculation.
A realistic price for 3-room HDB flat should cost not more than $80K while 4-room HDB flat not more than $150K. This is what I call subsidized housing. How can a new 4-room HDB cost more than $200K – it is so ridiculous??
With the horrendous price increase in HDB flats, I felt very discouraged and more encouraged to vote PAP out in the next election!
We forget to add one more part.
if you have finished paying off the loan at 50, you won’t have a chance to monetise it. (if you are singaporean and intend to stay in Singapore).
You cannot take up a hdb loan at 50 to buy that new flat. HDB will tell you that you only have 15 years to pay off the new flat and the monthly installment over 15 years will kill you.
If you try, you might end up to be one of those people who ended up living in the streets because the monthly payment is so big.
If you sell it back to HDB, we all know how low the price is.
Like in most of this govt’s tactics, numbers are only shown when they look good. The substance is not important at all to them.
Wonder what Harvard, MIT and the likes taught them when they were studying there.
MBT is not compassionate?
Since when we have the idea that he is human?
We don’t even know if he eats or pass motion.
So, it should be normal that he doesn’t demonstrate that he has a heart.
LATEST
Govt extends 4% interest rate for CPF savings till Dec 2010
Channel NewsAsia | Posted: 05 September 2009 1325 hrs
SINGAPORE: The government will extend the 4 per cent floor rate for CPF savings by another year till December 2010.
Speaking at a CPF LIFE roadshow on Saturday morning, Manpower Minister Gan Kim Yong said this is in light of global economic conditions and exceptionally low interest rate environment.
The 4 per cent interest rate will apply to savings in the special, medisave and retirement accounts.
Some 700,000 Singaporeans who are CPF members will benefit when the opt-in phase for CPF LIFE kicks in. The first phase of the opt-in exercise will be on a voluntary basis and it will be offered to CPF members born in or before 1954.
Mr Gan said the move is in response to requests from older CPF members who want to join CPF LIFE ahead of 2013 when it will be implemented for all members turning 55.
CPF LIFE, which provides members with a lifelong monthly income from age 65, offers members four plans to choose from.
Members who opt for the LIFE Plus Plan will get a higher monthly income, but leave behind less for beneficiaries, while those under the LIFE Basic Plan will get a lower monthly income and a higher bequest amount.
The LIFE Income Plan offers the highest monthly income, but members will leave nothing behind when they pass away, while the LIFE Balanced Plan – the default plan – provides a balance between the level of retirement income and bequest amount.
The CPF Board said it will send out invitation packages to members aged 55 and above from Monday over the next few weeks. Those below 55 will receive their invitation two months before they turn 55.
Mr Gan also explained that it is important for retirement income not to be too volatile so as to have greater certainty. To achieve this, the interest rate earned by the CPF LIFE funds must be stable.
This is a sign.
They have finally run out of ammunition to defend the Singapore currency.
They had to raise interest rates (at least from their previous intention).
If I were you now, I will change my currencies to Aus as a hedge first.
Gan is doing that after he included a clause to stop payment.
Many uncle and aunties will be disappointed.
See when they need monies, they will increase interest rate.
But be warned, they can reduce it just as fast.
CPF monies is hard to take out.
So when you can, please take out.
Next, use the monies to buy Singapore govt bonds.
Singapore govt bonds have higher ratings than CPF.
Why? CPF life, they can choose not to pay you.
But if they stop making payments to bond holders which include foreigners. Their reputation will go to the shit with the foreigners and we all know how important this is imprt to the current govt.
So, please don’t be foolish with the 4%. Just buy govt bonds.
It is better and you can take out your monies as and when you want.
@wow
Firstly, we’re a net exporting country, we do not need to defend the dollar, as long as exports > import, our currency will always go up. The floating band where our currency is allowed to float, seems more of a way to devalue our currency so that we would have trade surplus, just look at china n japan. The policy of net exporting countries are always devaluing their currency so that they would earn more.
Secondly, the extension of the floor rate is for the CPF account. It says basically nothing on the outlook of the singapore dollar. Extension of this floor doesnt even do anything significant to the CPF money, it is still with the CPF board, maybe a lesser transfer to the special account. They are not raising rates because they NEED money for sure, this does not make sense.
Thirdly, if u already changed ur $$ to aussie to “hedge” then i wish you good luck. Aussie is one of the most volatile and risk adverse currency, it makes no sense to even change the dollar to aussie to hedge it.
//Ironic
Yeah, what do we export now? Any buyers?
With our current exchange rate, our goods are so expensive and our labor costs from the US, Europe perspective is so expensive. As if the current exchange rate can support the value of the goods we produce in view of declining demand. We can keep selling at the same price even if our customers are not buying as much.
I think you would not be counting on local demand.
also, a high exchange rate will favor those FTs who are retiring to remove their retirement back to their home countries.
Are you so sure that the extension of the floor rate has nothing to do with the outlook of our currency?
They are definitely raising the interest rate because they need money. That is the principle of interest. You pay a high price for borrowing people’s money when you need it urgently. This is universal. I don’t know how this does not make sense.
Loan sharks and bankers have been doing that all their lives.
Like you mention, the outflow out of the CPF system is bigger than inflow. That’s why they need monies. Especially after their failed investments.
I think LKY dumped monies into the failed banks earlier on because he needed to make the scheduled payments for CPF this year and the year after. He thought he could make a quick buck. Only to be deceived by the banks.
Now, they are really short of cash.
aussie $ has a much higher interest rate than Sing dollars. so what if it is volatile. (which I am not even sure)
I only need to know that the Chinese needs Australian $ to pay for the commodities that its factories consumme and Chinese monies will appreciate against S$.
In addition, Australia also attract a lot of singaporean students over, earning our s$.
The most I keep it for 5 years and I still can eat the interest as and when I want while leaving the principle there. And the exchange rate cannot be deviate too much for too long. their economy is still strong. They have natural resource to export.
Still better than putting it back CPF and get locked up for 10 years. I cannot even touch the interest. What use is that?
Better still, put 10K in pounds (interest ~3%) 10K in Swiss dollar, 10K in Chinese monies, 10K in Euros, 10K in NZD.
The combined interest rate is still higher than the 1% you get in banks in Singapore.
Then you can take out the interest and spend if you want.
And you can take out the money as and when the exchange rate is in your favor.
Also, these monies at those amt are insured.
As good as S$ but with a higher interest rate. You also don’t take out 1 shot 50K to spend like that what.
Legally, BANKS DO “shark” UNsuspecting, INExperienced AND Naive customers … Otherwise HOW THIS Economic Bubble??? … And…
Our pap gahmen would have US ALL believe that BeCAWs our people’s losses in those FI’s minibonds, maxibonds and et cetera seem ’smaller’ in monetery AMOUNT … ‘We ARE better manageD financially’ … OH REALLY??? IS this CONCLUDED IN PROPORTION TO OVERALL Citizens’ Cash-Wealth-POOL???
Then gahmen OUTLAWED By ‘Legal-Speak’ IMPOSES Penalties on “Loan-Sharks” more commonly known here as “Ah-longs” … AND SO … By … AND In
1. Legalistic Speak … BANKS here ARE LEGALLY ‘CORRECT’ … BUT …
2. “Loan-Shark” Ah-Longs ARE LEGALLY “WRONG” Or “SALAH” in Malay!!! BUT then …
3. IN Moral AND Ethical Speak … ARE BANKS HERE “In their CAT & MOUSE’ games of “LURING” the Innocent AND IGNORANT TOO … ANY BEYYER THAN … Those Loans-Sharks???
4. And ARE Loan-Sharks W/O “LEGALISED-PROTECIONS” Any MORE Immoral THAN BANKS WITH “LEGAL-PROTECTIONS”!!!???
5. Think about Item 4 carefully in balance reasoning … and one would soon realise THAT … IN FACT … LEGALISED-Loan-Sharking IS “ACTUALLY LOAN-SHARKING-AT-LARGE” isn’t IT???!!!
BE WISE Dear Fellow Singaporeans.