Dispelling Untruths About CPF

Temasek Review
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(This article was clipped from Calvin Cheng’s FB page, give a like here: http://www.facebook.com/calvinchengnmp?fref=ts)
Roy Ngerng, the blogger at The Heart Truths, wrote an article on CPF that is fundamentally wrong.

He compares Singapore’s CPF with Western Social Security schemes.

Social Security is a TAX. The money deducted from payrolls goes into Government REVENUE which is then used to fund welfare payouts and pensions for the general population. What you pay in Social Security Tax is used not only to fund yourself, but every other citizen. You could have paid a lot of Social Security Tax as an individual, but receive very little back if you do not qualify for any welfare assistance; on the other hand, your neighbour who does not go to work, and does not pay any tax could be receiving handouts that YOUR TAX funds.

CPF is compulsory PERSONAL SAVINGS. The money that is goes into our CPF account are OUR PERSONAL SAVINGS that we can use to buy homes, unit trusts, and eventually help fund our own retirement. Whatever we have in our CPF is directly correlated to how much we make in our lifetimes. It is not a TAX. It is our own savings. If a person has little in his CPF at retirement, it is entirely because his income was low during his lifetime. Other assistance would then be given to these low-income individuals, assistance funded by TAX not by other people’s CPF contributions.

Secondly, Roy takes issue with the returns on CPF. He obviously has done very little investment himself.

The returns on CPF paid to us are GUARANTEED.

Investment returns are a function of risk.

You will find that there are almost no investments that GUARANTEE an interest rate of 2.5% a year much less 4% on investments.

Contrary to what Roy asserts, because they are guaranteed, these are HIGH interest rates.

It is also completely silly to compare what GIC and Temasek gets in returns, to what the CPF pays. GIC and Temasek’s returns are risk-adjusted and obtained from a portfolio of investments. They are not guaranteed. Moreover, any government investments that make losses, like during the GLOBAL financial crisis, are not deducted from our CPFs because they are Singaporean’s personal savings.

Thus, contrary to being truths, the ‘shocking revelations’ on CPF in the article are built on basic falsehoods.

Please share.

P.S. I would like to end by saying that I have met Roy and I think his heart is in the right place :)







  1. The problem is, the G uses our CPF savings to invest and because of the huge amount of $ available, it is able to take risks to achieve high returns. I didn’t consent to that, you know? Although you say we should be grateful for the risk free guaranteed interest, do I have any choice? It’s a ‘forced’ savings as you mentioned. I could have invested on my own and gotten higher returns, who knows? So the G just get the bulk of the profit and so stingy in sharing them with us all these years?

    1. But the money you put in the bank is also used to be invested – they don’t seek your consent to that either. Only the dumbest of governments would allow so much money to sit and not be used for investments. We’ll be providing some insights into this in a future article. Thank you for your comments :)

  2. Personal savings that cannot be touched are a euphemism for taxes. At least they are upfront about taxes, and they get used somewhere specific. :(

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