Your Letters: Boisterous vessels, Empty minds

 

The letter below has been submitted by “Annonymous”.

 

The whole CPF saga has me concerned about how little the nation understands the mechanics of CPF. I’d like to take the chance to share a little. The difference between CPF interest and GIC’s returns on investment is this:

a. CPF Member’s deposit with CPF is free from market risks i.e. CPF member will get his principal and 2.5% interest in his CPF account regardless of whether the Government (I use it loosely to include CPF Board, MAS, GIC and Temasek) makes or loses money from investing the money.

b. The Government’s investments are not risk free. They make $5 billion here, lose $4 billion there (hypothetically speaking of course)

It is a fundamental principle of finance that risks demands an appropriate return. Therefore to say that CPF depositors should get a higher interest rate because the government makes more money is fallacious, unless the member is also exposed to losing all its money. What the member should expect is (1) the risk free rate i.e. the almost 0% interest paid in risk free deposits with banks; and (2) a liquidity premium.

Plenty of what is said about the CPF is hearsay.

The arguments you read online are all “motherhood” at best. Statements that are not able to provide how the system of CPF works. So when someone tells you that you should have all your money taken out of CPF, take investment risks with your CPF – you should be wary what their intentions are.

I understand the frustration, but it doesn’t give anyone an excuse to say untruths just because we’re upset. It does not give sites like “The Real Singapore” or “Heart Truths” to write irresponsibly.

The lobby to change policy needs a shift to lean towards a research-based, academically sound proposition than an emotionally-charged ‘public-service-i-argue’ position tone that will rattle the gates of parliament house for any positive change to happen. Roy’s arguments are shallow, at best, and personal-attack driven. it does neither his cause nor his goal any favour. instead, it undermines what he wants to do, unless making a political martyr of himself is a goal he wants to achieve.

Heng Chee How of the NTUC said CPF contribution is only one way to enhance savings, although obvious, how many people around you know this? If not for NTUC unionists, where would the intricacies of pro-worker policies come from? Who would have pushed for it?

The matter of national savings is a complex one. Although many countries have a national savings program that pays out a little more than us, we discount the fact that our CPF can be used for immediate purchases of housing, investments and eduction. Returns on housing have historically exceeded 100% – isn’t that far better than 16% as what Roy pushes for?

I suggest the boy return to his textbooks before blindly lashing out at what he doesn’t understand.

 

 

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