We have successfully conducted our Singapore Budget 2019 Forum today.
We thank all who have attended and also great appreciation to those who have helped to make this possible.
The following is our official statement on PAP government's Budget this year:
Budget 2019: Political Gimmicks without Bold Vision
Expansionary Budget with Money locked up in CPF and Medisave?
1. Finance Minister Heng Swee Kiat has declared that his Budget 2019 for Singapore government is an “Expansionary” budget and he cited the projected budget deficit of $3.5 Billion after taking into account of the net effect NIRC and Special Transfers of $3.6 Billion as supporting fact. However when we put the details of the Budget at closer examination, we have come to the conclusion that this Budget is NOT the usual “Expansionary” budget but just full of political gimmicks without bold vision.
2. A government Budget is an important tool of fiscal policy that is used to manage the economy. An Expansionary Budget would result in fiscal stimulations of the Nation’s economy in anticipation or direct mitigation of any potential economic slowdown or recession. But in Minister Heng’s Budget 2019, there is no mention of any job creation initiative nor bold vision for Singapore’s Future Economic development direction.
3. Most of the “additional spending” announced for the populistic Merdeka package ($6.1B), Long Term Care ($5.1B) and other the various injections of money into healthcare, workfare, schemes for SMEs ($4.6B) and education (Total of $15.3B of Special Transfers) are either just money transfers credited into CPF or Medisave accounts or deferred expenditure across a few years which do not have an immediate direct impact on overall spending in the economy.
4. It basically means that these money are effectively an “expected surplus” (over the announced $3.5B deficit) ultimately stashed away into the reserves via such Special Transfers arrangement.
5. Thus we do not really see this year’s Budget as “Expansionary” but rather a pack of Budgeting Acrobatic Gimmicks which channeled money back into the reserves masqueraded as “Goodies” for Singaporeans without real positive impact on the Economy.
Cost of Living
6. In a normal free market economy, inflation is normally caused by an excess demand on goods and services. This will drive up the cost of living for everyone.
7. However, in Singapore, inflation is mostly caused by the PAP government and its Government Linked Companies. The rise in water tax, electricity tariffs, public transport fares, healthcare cost, the rapid increase in rentals by GLC REITS, petrol and diesel prices etc. are the direct results of PAP governance.
8. How could the derisory $300 GST voucher cover the inflation caused by all these increases?
9. The BEST gift to ALL Singaporeans is NO GST instead of GST vouchers!
Cost of Healthcare
10. Any increase in healthcare subsidies for Merdeka generation could easily be offset by another round of increase fees in polyclinics and public hospitals.
11. We have witnessed how fees at public polyclinics and hospitals increased right after the last Pioneer Generation Package was announced in 2015.
12. At many instances, the fees at these public “restructured” healthcare entities are even higher than private clinics or hospitals before subsidies were taken into account.
13. There is a need to rethink whether the current model of “Restructured Hospitals” really serve Singaporeans’ interests at all.
Adverse Impact on SME
14. There are a couple of new but insignificant programs initiated in this year’s budget to help SME and workers to cope with changing dynamics of the economics.
15. However, out of the $4.6B slated to help both SMEs and workers over next three years, only $100million was put into funds for helping SMEs to upscale.
16. Although we agree to the overall strategy of reducing dependency of Foreign Workers in the long run, but we do not think it is a good move at all to apply such one-size-fit-all policy of reducing the Dependency Ratio Ceiling to cut across the board for the whole Service Sector.
17. Local SMEs are always grossly disadvantaged by the foreign workers policy whereby larger foreign companies enjoy concessions through government special incentives or technical advantage in sourcing their foreign labor via internal transfers from foreign bases.
Where are the Good Jobs?
18. Within the Service Sector, there are many sub-sectors which have very different labor situations. Singaporeans generally shy from certain industry or service sectors like hospitality, Food and Beverage sectors while there is a great underemployment for Singapore PMETs who cannot find jobs in other service sectors like banking, finance or IT etc.
19. A more calibrated approach should be implemented to focus more on reclaiming PMET jobs for Singaporeans in service sector instead.
Tax Cut for Taxi Companies while Higher Tax on Taxi Drivers?
20. The increase of diesel tax will affect SMEs greatly with an increase in business cost despite of the cut in road tax for diesel vehicles.
21. We are particular concerned on the impact on taxi drivers. While the PAP government gave a generous reduction in Special Tax on Diesel Taxi by $850, but this may only benefit taxi companies while taxi drivers suffer higher diesel price due to the double of diesel tax.
The Real Vision and Plan to Cut Pollution
22. A great percentage of commercial vehicles used in Singapore runs on diesel engines. The increase of Diesel Tax will not have significant effect on lowering the consumption of diesel for these commercial vehicles because the demand is totally inelastic.
23. Raising Diesel Tax now without providing a viable alternative to businesses will only result in a drastic rise in business cost. This may affect our leading position as logistic hub in Southeast Asia.
24. PAP government lacks the bold vision to explore clean alternatives for commercial vehicles running on diesel.
25. The key problem with diesel engines lies with the toxic cancer-causing nitrogen oxide emission. Thus we should phase out diesel vehicles from our roads totally instead of just raising diesel tax.
26. In fact, our long term plan should aim to reduce air pollution on the roads by phasing out both petrol and diesel vehicles totally by replacing them with electric vehicles.
27. Instead of harming our SMEs and economy by raising diesel tax now, we should be putting more investment and focus efforts to implement a comprehensive plan to promote electric vehicles by building relevant infrastructures and battery waste management system.
28. Singapore is lagging behind countries like China and Norway when it comes to implementation of a systematic plan of replacing diesel and petrol vehicles by electric vehicles to cut down harmful air pollution. This is due to the lack of bold vision and political will of PAP leadership.
CPF Inadequacy
29. About 75% of retirees are getting less than $500 from CPF payout. This is totally inadequate which resulted in many retirees living in absolute poverty.
30. It is an irony that Singaporeans had paid 37% of their monthly salary into CPF but yet they could not retire comfortably with a good payout from CPF.
31. It basically means that the CPF system along with the HDB and Medisave policies had failed to secure a decent retirement for most Singaporeans.
32. This will have to be looked into and only with Bold Vision could a government come up with bold plans to revamp the whole structure.
Long Term Care for Ageing Population
33. We will be facing the Silver Tsunami very soon when the baby boomers from 1950s to 1970s start to reach retirement age.
34. Putting billions into funds as future subsidies is a passive act which lack forward looking planning vision.
35. We would rather spend these billions now to build up both infrastructure and human resource capacity for long term care to prepare for the inevitable Silver Tsunami in the coming decade.
Pre-School Childcare and Education vs Fertility
36. The cost of Pre-school education is extremely high even after subsidies.
37. This is one important factor among the many issues that cause low fertility rate in Singapore.
38. Instead of putting more money in Edusave, it is time to focus to solve this pertaining issue of Pre-school education.
39. A cheap or even free Pre-school education system for all will also level up for children from poor families which will improve future potential social mobility.
Our Concerns:
HDB
40. There is no mention on any plan for PAP to resolve the huge problems which they have created in the past via Asset Enhancement Scheme.
41. No funds is allocated for any initiative on solving the time bomb of a huge stock of ageing HDB flats in the coming decades.
42. On the contrary, the Ministry of National Development has the biggest cut in its budget by 19.3%!
Financing Huge Infrastructure Spending via Borrowing
43. It is mentioned that part of the huge infrastructure spending like Changi Terminal 5 will be partially financed by borrowings.
44. It is also mentioned that Government will provide guarantee to these loans.
45. Is there a necessity for Government to finance such infrastructure spending when we have a huge National Reserve well above $500B?
46. Financing such infrastructure through borrowing would mean such spending on extremely expensive mega projects will escape rigorous scrutiny by parliament while the government has taken up huge potential liability as a guarantor.
47. The lack of accountability to parliament when the government takes up such huge liability will result in unchecked ex-Budget spending which could go wrong.
Conclusion: A Budget that Lacks Bold Vision
48. We are utterly disappointed by this year’s Budget which basically mimics the 2015 Election Budget without Bold Visions and lacks New Ideas.
49. This Budget contains a pack of gimmicks that attempt to make Singaporeans feel good and make believe that they had gained something substantial from it. However, most of these goodies are deferred goodies.
50. Unfortunately, these political gimmicks are done at the expense of the need of REAL immediate expenditures on various areas which we have listed out here.
51. Singaporeans deserve a better deal than what the current Budget could offer.
52. The reduction of GST relief and duty free alcohol concession for travelers is the best key feature to sum up this Budget 2019 – Small Mindedness without Bold Vision.
Goh Meng Seng
Secretary General
For CEC People’s Power Party Singapore
Showing posts with label CPF. Show all posts
Showing posts with label CPF. Show all posts
Sunday, February 24, 2019
Monday, January 28, 2019
The Cheated Generations
The "Cheated" Generations
From 1970s till early 1980s, one can buy a 4 room HDB flats for a mere $20K-$30K. They introduced the inclusion of land price some time in mid 1980s and the prices of HDB flats started to climb.
By early 1990s-1995, GCT came up with the Asset Enhancement Scheme which entice Singaporeans to spend more of their CPF to buy HDB flats. They relaxed the rules on the secondary market for HDB flats. By 1990s, some of the HDB flats were about 20 years old and they started the HDB upgrading.
Unknown to many Singaporeans, they had also started to peg the price of new HDB flats to the "market prices". It was not until a couple of years later, they made known to public that they were giving "market subsidy" for new HDB flats. There is a VAST difference between "Market Subsidy" vs "Real Subsidy". Basically it means the Government can now earn profits from the sale of HDB flats (as a whole) but at lesser amount from market rates.
The impact of such Asset Enhancement Scheme has multiple dimensions.
1) From cashflow perspective, it reduces or even eradicate the burden of the government in providing the return for CPF.
2) If Singaporeans used up half of their CPF to buy their HDB flats taking a loan from HDB, it means they will have to pay 2.6% interests to HDB. To the government, this can be transferred to pay for the interests accrued to the other half of the CPF money which was deposited in CPF.
3) When Singaporeans sell their HDB flats, they have to pay back the amount of CPF money they have spent in paying their mortgages PLUS the accrued CPF compounded rate of 2.5% as return for these CPF money they had used. In effect, Singaporeans are paying 2.6% Plus 2.5% in total interests if they sell their HDB flat. If they only use half of their CPF money to pay their mortgage. it means that Singaporeans are actually paying for ALL the returns of their CPF money and Government didn't need to pay a single cent for their retirement financing. Mortgage rate from HDB is always pegged 0.1% above CPF rate.
4) It means that in reality, Singapore Government basically do not need to pay any Interest to most of our CPF money and in fact, had earned quite a substantial amount of money via land sales and price above the cost of building the flats. These are thrown into Temasek Holdings and GIC. These are basically "Interest Free" money right from our CPF! The buying of government bonds from government by CPF is just a formality.
It was only later that Singaporeans were allowed to take mortgage from private banks for their HDB purchases. On the other hand, CPF was allowed for the purchase of private properties. These policies were made to help boost the banking and private property market.
5) For my generation, we were sold the dream of 5 C and HDB as a "valuable asset" which we could depend for retirement financing. The whole plan is basically flawed.
6) MAS has already fix the rule for the limited loan that financial institutions could make to anybody who is buying a flat which is more than 40 years old.
7) All lawyers know what the 99 year lease means. The value of the property which reached 99 years will become ZERO. How could our HDB flats be growing in value forever?
8) HDB is the only asset most Singaporeans will have. The only way for us to "monetize" HDB for retirement is to either rent it out or downgrade. However, selling an asset which is reaching 40 years old will be challenging unless rules are changed.
9) PAP government has not changed the rules but misled my whole generation and the future generations of Singaporeans after us that HDB could really be a good "investment" asset.
10) In the end, we were made to pay almost 10 times of the price which older generations in 1960s and 1970s had paid, without any promising "investment value" for retirement financing.
11) Singaporeans who bought their flats in 1960s and 1970s, or even 1980s won't understand my generation's anger. We have been misled and felt cheated, suffered high HDB prices and in the end, many of us left very little for our retirement.
12) Asset inflation doesn't really create value but in fact, only create Rent Seeking Economy which only kick the problems down the road. It is basically transferring the problems of retirement financing to the future generations in terms of extraordinary high property or HDB prices.
13) HDB prices for a 4 room flat rises from $20K to $200K in 1990s and continue to rise. Who suffers? Only those who bought early in 1970s and 1980s "enjoy" such wealth effect (most of them cannot just sell their HDB flats off) while their children, grandchildren and future generations suffer.
14) The inflation of HDB prices have outstripped salary increase over the last few decades. This could only mean that we are paying more, maybe not in cash but eating into our CPF savings.
15) If you take any average guy from my generation, those who are late 40s to 50s who are staying in HDB flats, ask them whether they could make money out from their HDB to finance their retirement in 15 years time, the answer is definitely a NO. on average, if they bought their flats when they were 27 years old, by 62 years old official retirement age, their flats would reach 35 years old. They couldn't possibly sell their flats for a profit or with any cash left after repaying the 2.5% CPF compounded interests over 35 years.
16) It would be even worse if they bought their flats from the secondary market.
17) Thus, has the so call Asset Enhancement Scheme helped them?
18) It doesn't need a super Mathematician to calculated in advance how much one would need to sell their aging HDB flats in order to have any cash available for them to retire after 35 years. Was it a deliberate plan to mislead or just a deliberate negligence?
19) As far as I know, we have been misled and cheated by PAP government because the results are obvious. What has been promised, claimed and sold to us, will collapse in time to come.
Goh Meng Seng
From 1970s till early 1980s, one can buy a 4 room HDB flats for a mere $20K-$30K. They introduced the inclusion of land price some time in mid 1980s and the prices of HDB flats started to climb.
By early 1990s-1995, GCT came up with the Asset Enhancement Scheme which entice Singaporeans to spend more of their CPF to buy HDB flats. They relaxed the rules on the secondary market for HDB flats. By 1990s, some of the HDB flats were about 20 years old and they started the HDB upgrading.
Unknown to many Singaporeans, they had also started to peg the price of new HDB flats to the "market prices". It was not until a couple of years later, they made known to public that they were giving "market subsidy" for new HDB flats. There is a VAST difference between "Market Subsidy" vs "Real Subsidy". Basically it means the Government can now earn profits from the sale of HDB flats (as a whole) but at lesser amount from market rates.
The impact of such Asset Enhancement Scheme has multiple dimensions.
1) From cashflow perspective, it reduces or even eradicate the burden of the government in providing the return for CPF.
2) If Singaporeans used up half of their CPF to buy their HDB flats taking a loan from HDB, it means they will have to pay 2.6% interests to HDB. To the government, this can be transferred to pay for the interests accrued to the other half of the CPF money which was deposited in CPF.
3) When Singaporeans sell their HDB flats, they have to pay back the amount of CPF money they have spent in paying their mortgages PLUS the accrued CPF compounded rate of 2.5% as return for these CPF money they had used. In effect, Singaporeans are paying 2.6% Plus 2.5% in total interests if they sell their HDB flat. If they only use half of their CPF money to pay their mortgage. it means that Singaporeans are actually paying for ALL the returns of their CPF money and Government didn't need to pay a single cent for their retirement financing. Mortgage rate from HDB is always pegged 0.1% above CPF rate.
4) It means that in reality, Singapore Government basically do not need to pay any Interest to most of our CPF money and in fact, had earned quite a substantial amount of money via land sales and price above the cost of building the flats. These are thrown into Temasek Holdings and GIC. These are basically "Interest Free" money right from our CPF! The buying of government bonds from government by CPF is just a formality.
It was only later that Singaporeans were allowed to take mortgage from private banks for their HDB purchases. On the other hand, CPF was allowed for the purchase of private properties. These policies were made to help boost the banking and private property market.
5) For my generation, we were sold the dream of 5 C and HDB as a "valuable asset" which we could depend for retirement financing. The whole plan is basically flawed.
6) MAS has already fix the rule for the limited loan that financial institutions could make to anybody who is buying a flat which is more than 40 years old.
7) All lawyers know what the 99 year lease means. The value of the property which reached 99 years will become ZERO. How could our HDB flats be growing in value forever?
8) HDB is the only asset most Singaporeans will have. The only way for us to "monetize" HDB for retirement is to either rent it out or downgrade. However, selling an asset which is reaching 40 years old will be challenging unless rules are changed.
9) PAP government has not changed the rules but misled my whole generation and the future generations of Singaporeans after us that HDB could really be a good "investment" asset.
10) In the end, we were made to pay almost 10 times of the price which older generations in 1960s and 1970s had paid, without any promising "investment value" for retirement financing.
11) Singaporeans who bought their flats in 1960s and 1970s, or even 1980s won't understand my generation's anger. We have been misled and felt cheated, suffered high HDB prices and in the end, many of us left very little for our retirement.
12) Asset inflation doesn't really create value but in fact, only create Rent Seeking Economy which only kick the problems down the road. It is basically transferring the problems of retirement financing to the future generations in terms of extraordinary high property or HDB prices.
13) HDB prices for a 4 room flat rises from $20K to $200K in 1990s and continue to rise. Who suffers? Only those who bought early in 1970s and 1980s "enjoy" such wealth effect (most of them cannot just sell their HDB flats off) while their children, grandchildren and future generations suffer.
14) The inflation of HDB prices have outstripped salary increase over the last few decades. This could only mean that we are paying more, maybe not in cash but eating into our CPF savings.
15) If you take any average guy from my generation, those who are late 40s to 50s who are staying in HDB flats, ask them whether they could make money out from their HDB to finance their retirement in 15 years time, the answer is definitely a NO. on average, if they bought their flats when they were 27 years old, by 62 years old official retirement age, their flats would reach 35 years old. They couldn't possibly sell their flats for a profit or with any cash left after repaying the 2.5% CPF compounded interests over 35 years.
16) It would be even worse if they bought their flats from the secondary market.
17) Thus, has the so call Asset Enhancement Scheme helped them?
18) It doesn't need a super Mathematician to calculated in advance how much one would need to sell their aging HDB flats in order to have any cash available for them to retire after 35 years. Was it a deliberate plan to mislead or just a deliberate negligence?
19) As far as I know, we have been misled and cheated by PAP government because the results are obvious. What has been promised, claimed and sold to us, will collapse in time to come.
Goh Meng Seng
Thursday, June 07, 2018
TOTD: Mis-selling of Dangerous High Risk Financial Bonds to Retail Investors
Thought of the Day - Mis-selling of Dangerous High Risk Financial Bonds to Retail Investors
Just a couple of weeks ago, news broke out on Hyflux defaulting on its interest payment to the perpetual bonds it had sold to investors, which include retail investors.
Most Singaporeans do not understand what is a perpetual bond. For normal bonds, be it government or private company's bonds, they will have an expiry date. It basically means that when you buy these bonds, it promises to pay you an interest every year and at the end of 10 or 20 years, or any number of years dictated on the bond as a contract, it promises to pay you back the amount stated on the bond.
For example, there could be a $100K coupon bond which promises to pay you 5% of $100K each year for 20 years and at the end of the 20 years, it will repay you the 100K stated on bond. You may not pay $100K for the bond because it depends on the interest rates of the market. You may pay higher than $100K if the current interest rate is lower than 5%. Or you may pay lower than $100K for this bond if the current interest rate is higher than 5%. i.e. the price of this bond is inversely related to current interest rate.
Technically speaking, you can trade on these bonds. You can buy or sell these bonds before the maturity of the bonds.
What is perpetual bond then? It basically means that the company will be selling you these bonds and it promises to pay you the coupon rate, eg 5% every year but it will go on forever and it will not repay the principal amount of these bonds. i.e. it will be borrowing these money from you or other investors perpetually... FOREVER.
You can only "cash out" from these bonds by selling to other people who are willing to buy it.
The pricing of such bonds are more complex as the longer the bond maturity is, the higher risk it involves. And now, when technically speaking the maturity is infinity, aka no maturity, then the risk is extremely high.
This is why Perpetual Bonds are NOT MEANT for retail investors but more for institutional or professional investors. MAS, as the regulator of the financial market, should not even allow such perpetual bonds to be sold to retail investors!
But we now know, MAS has actually closed both eyes on such issue. Now that Hyflux has defaulted on the interest payment on its perpetual bonds, these bonds have basically become JUNK bonds in the market with little value left. The retail investors would suffer huge losses in such situation.
Ironically, Termasek Holdings under Ho Ching, has planned to sell perpetual bonds to retail investors, putting up such slogan on "supplementing CPF" earnings!
First of all, it is totally inappropriate to sell perpetual bonds to retail investors.
Secondly, how could a Sovereign Wealth Fund issue such a bond?
Last but not least, 4.5% may look comparatively attractive to the 2.5% or 4% given by CPF, but the amount of risk in perpetual bonds are very much higher! Normally, such bonds are sold at a discount to institution investors but it seems that it is more lucrative to sell to inexperience retail investors at higher price or at its principal value because they do not understand the risks they are taking!
Considering the Prime Lending Rate is at 5% now, the interest for Perpetual Bond should be higher than this rate because, it is basically a loan for forever which will involve greater risk!
Termasek Holdings, as our Sovereign Wealth Fund, is actually taking advantage of Singaporeans, by borrowing from them below Prime Rate with indefinite maturity! Try asking any banks to lend to you $100K FOREVER at prime rate and see what you get from them!
Truly, I must warn all Singaporeans not to be taken advantage by our very own Sovereign Wealth Fund. I do not know why they need to raise funds through perpetual bonds when they are already handling so much funds up to the hundreds of billions but with the opaque manner in which they run their business, the risk is even higher than one could imagine.
Risk arises when there is uncertainty with lack of transparency and information. Please do not be fooled by such "good investment opportunity" sales talk. Else, you may end up like those Minibonds victims, die liao also don't know why and MAS will just brush you aside.
Goh Meng Seng
Tuesday, June 05, 2018
Comprehensive Set of Policy Options for HDB-CPF Mess
The HDB-CPF time bomb will blow up in 10-15 years time with a sudden surge of HDB flats passing their 40 year-lease mark. My estimate is that about 50% or more of HDB flats would have less than 60 years to their expiry by 2035.
As I have mentioned, the HDB problem cannot be tackled without tackling the CPF policies. They are like twin babies right now and the problem is magnified with such linkage between these two entities.
The following are the gist of the time bomb:
1) Inadequacy of Retirement financing due to over-consumption of Housing effected by the devious link between HDB and CPF.
2) PAP has misled a few generations of Singaporeans into believing that they could use their HDB flats for retirement by "monetizing it" and treating it as "pure asset" instead of consumption item. Nothing with an expiry date could be considered as a long term perpetual asset which one could depend on decades later in life. Due to ageing population, there will be higher supply of old HDB flats than demand of these flats which are above 30, 40 or 50 years old. The financial regulations and illogical HDB rules restrictions have aggravated the situation.
3) Ageing population will result in potential oversupply of HDB flats in the long term if it is not kept in check. This is especially so when young couples are "forced" to buy BTO or HDB flats with longer lease while the HDB restrictions basically prevent them from buying old HDB flats with shorter lease left.
4) HDB rules also restrict Singaporeans from buying smaller and cheaper BTOs if their income level is high. These artificial rules will implicitly create over consumption of housing.
5) The valuation system that HDB used has an inherent upward bias when it doesn't include the balance of lease as key consideration. This will create a market with pricing but without demand.
6) The massive problem of having huge number of HDB flats expiring their 99 year lease all within 5 to 10 years time will have to be dealt with careful planning decades in advance. PAP's refusal of initiating Enbloc for old flats will create an even bigger problem later.
The set of solutions are as follow:
A) De-link CPF from HDB or property purchase and Lowering of Employee's CPF contribution
CPF should be kept strictly as a fund catering for retirement. For a good financial planning, 20% of income should be saved for retirement. It means that while CPF could be de-linked from HDB purchases, Singaporeans could lower their Employee's CPF contribution from 20% to 3% while the Employer's CPF contribution shall remain at 17%.
Singaporeans should decide what to do with the excess cash as a result in the lower CPF contribution. They could use it for renting a flat, save it up, invest it in business or other financial products or use it to buy a property (HDB or otherwise) and pay the mortgage.
Such radical policy change will correct the past PAP's mistake in deliberately and artificially channeling Singaporeans' money into buying HDB flats, using more than what they should use of CPF money in paying the down payment and mortgage, resulting in over consumption of housing at the expense of retirement funding. Such problem will only surface decades later as more and more Singaporeans in my generations will realize.
Such social engineering to create an illusion of wealth and property ownership is extremely harmful to the Nation as a whole.
B) Dismantling of Restrictive HDB Rules of Social Engineering Manipulations.
There are many HDB rules which are the results of social engineering attempts, should be removed. Rules that dictates high income level cannot buy smaller flats should be totally abolished. Housing consumption should depend on needs, not on income level. Whatever subsidies the government wanted to give should depend on income level and not HDB flat size. Thus, there is absolutely no reason why Singaporeans should be prevented from buying flats according to their needs.
Rules that dictate singles could only buy HDB flats after they are 35 year old should also be abolished. Such rules are based on "family-centric" reasoning but these rules are too restrictive and not helpful for singles to seek independence in living before they look for their lifetime partners. It also excludes people from other segments of the society to seek independence and privacy for their housing needs. As far as the government is concerned, each and every citizen will only enjoy grants or subsidies once, regardless of their age or whether they bought their flat before or after their marriage.
Rules that dictate young couples cannot buy HDB flats with short lease left should be abolished as well. If HDB flats are treated as a consumption goods, there is absolutely no reason for such rules to exist. Shorter lease, old HDB flats may cost much lesser and with the grants given by the government, young people could well afford to buy their first CHEAP old HDB flat to start their marriage life earlier. This will also encourage them to have children earlier with lower expenditures on housing.
Liberalization of the HDB rules will enhance market efficiency and liquidity, especially for the resale market of old HDB flats which have less than 60 years lease.
C) Re-configuration of Financial Rules and Valuation Methodology
At the moment, there is really an abnormality in the financial rules. For car purchase financing, although the COE restrict the car life span to 10 years, banks and financial institutes are still allowed to finance buyers for up to 7 years of mortgage. However, for some strange reasons, HDB flats with 60 years lease left will face a drastic drop in financial options and the purchase of flats with 20 years left, could not be financed at all!
If we just treat HDB flats simply as a consumption goods, there is no reason why there is a discrepancy in financial treatments by the banks and finance companies.
For owners of HDB flats with less than 60 years lease, they could not "monetize" or sell their flats mainly because of mismatch valuations of their HDB flats as well as liquidity problem due to such financial rules.
Re-configuration of the financing rules of old HDB flats based on the fact that it is just a consumption good like car, washing machine or any hire purchase items would allow adequate liquidity to flow into the resale market of these old flats. Of course, this must be accompanied by a revamped property valuation system which will give a more realistic valuation of old HDB flats based on the leasehold factor. It is just an old car. The older a car is, the lesser its valuation is.
Sellers of HDB flats should not be asked to repay back all the "lost CPF interests" due to their use of CPF funds to finance their HDB flats when they were young. Else, those elderly people who decided to sell their HDB flats to supplement their retirement financing will find it totally meaningless in their attempt to "monetize" their old HDB flats.
D) Kick Start a Redevelopment Plan for old HDB estates
In anticipation of the impact of an ageing population with ageing HDB flats and estates, the government should start planning for the Redevelopment of these old HDB estates in stages. Instead of limiting SERS to 4% of total HDB stock of flats, there is an urgent need to kick start a Total Redevelopment Plan for ageing HDB estates.
This will of course involve enbloc of HDB flats in phases.
Although it is going to be an expensive ever-lasting process but it is a necessity to pre-empt a total chaos and collapse of the whole HDB resale market.
As the ageing population would mean that some land acquired via enbloc can be released for private development use while the resulting higher pricing of the redeveloped flats would make older flats with less than 60 or 50 years lease more attractive. This will create a new equilibrium which will effect a more efficient use of land and housing stock.
Redevelopment of old HDB estates will have to be carried out in phases, most probably stretching over 20 to 30 years time frame for one estate. Such staggered redevelopment plan will prevent a sudden chaotic situation whereby the whole old HDB estates with lots of HDB flats expiring within a short span of time resulting in a sudden shock shortage of housing stock to provide for those who are going to give back their HDB flats to the government.
It is totally irresponsible for PAP government to say that they will only redevelop 4% of HDB flats via SERS while just waiting to take back all other HDB flats from Singaporeans when their lease expired. Such method may save the government lots of money but it will create a great turbulence to the whole resale market for HDB.
Conclusion
The above outline of the combined policies needed to address the HDB-CPF Axis of Evil Problems will not prevent some Singaporeans from losing great amount of money from their misguided belief in PAP's Asset Enhancement Scam, especially so when they use lots of money to buy from the HDB resale market.
However, at the very least, we could achieve the objective to create a viable resale market demand for their old HDB flats which have less than 60 years lease left. This is done through liberalizing rules on HDB flats purchase, expanding the potential pool of buyers of these old HDB flats to singles and young couples with viable financing plan achieved by re-configuring of financial rules and valuation system based on rational reasoning.
While some Singaporeans will have to suffer a huge and painful cost of greatly depreciated old HDB flats, the government should also bear the big bulk of the cost in creating this whole mess via a rational staggered enbloc redevelopment of those old HDB estates.
This is a very painful lesson for all Singaporeans that property transactions and speculations on your only residential home are simply a Zero Sum Game eventually. Anyone's gain will be somebody's loss.
Goh Meng Seng
As I have mentioned, the HDB problem cannot be tackled without tackling the CPF policies. They are like twin babies right now and the problem is magnified with such linkage between these two entities.
The following are the gist of the time bomb:
1) Inadequacy of Retirement financing due to over-consumption of Housing effected by the devious link between HDB and CPF.
2) PAP has misled a few generations of Singaporeans into believing that they could use their HDB flats for retirement by "monetizing it" and treating it as "pure asset" instead of consumption item. Nothing with an expiry date could be considered as a long term perpetual asset which one could depend on decades later in life. Due to ageing population, there will be higher supply of old HDB flats than demand of these flats which are above 30, 40 or 50 years old. The financial regulations and illogical HDB rules restrictions have aggravated the situation.
3) Ageing population will result in potential oversupply of HDB flats in the long term if it is not kept in check. This is especially so when young couples are "forced" to buy BTO or HDB flats with longer lease while the HDB restrictions basically prevent them from buying old HDB flats with shorter lease left.
4) HDB rules also restrict Singaporeans from buying smaller and cheaper BTOs if their income level is high. These artificial rules will implicitly create over consumption of housing.
5) The valuation system that HDB used has an inherent upward bias when it doesn't include the balance of lease as key consideration. This will create a market with pricing but without demand.
6) The massive problem of having huge number of HDB flats expiring their 99 year lease all within 5 to 10 years time will have to be dealt with careful planning decades in advance. PAP's refusal of initiating Enbloc for old flats will create an even bigger problem later.
The set of solutions are as follow:
A) De-link CPF from HDB or property purchase and Lowering of Employee's CPF contribution
CPF should be kept strictly as a fund catering for retirement. For a good financial planning, 20% of income should be saved for retirement. It means that while CPF could be de-linked from HDB purchases, Singaporeans could lower their Employee's CPF contribution from 20% to 3% while the Employer's CPF contribution shall remain at 17%.
Singaporeans should decide what to do with the excess cash as a result in the lower CPF contribution. They could use it for renting a flat, save it up, invest it in business or other financial products or use it to buy a property (HDB or otherwise) and pay the mortgage.
Such radical policy change will correct the past PAP's mistake in deliberately and artificially channeling Singaporeans' money into buying HDB flats, using more than what they should use of CPF money in paying the down payment and mortgage, resulting in over consumption of housing at the expense of retirement funding. Such problem will only surface decades later as more and more Singaporeans in my generations will realize.
Such social engineering to create an illusion of wealth and property ownership is extremely harmful to the Nation as a whole.
B) Dismantling of Restrictive HDB Rules of Social Engineering Manipulations.
There are many HDB rules which are the results of social engineering attempts, should be removed. Rules that dictates high income level cannot buy smaller flats should be totally abolished. Housing consumption should depend on needs, not on income level. Whatever subsidies the government wanted to give should depend on income level and not HDB flat size. Thus, there is absolutely no reason why Singaporeans should be prevented from buying flats according to their needs.
Rules that dictate singles could only buy HDB flats after they are 35 year old should also be abolished. Such rules are based on "family-centric" reasoning but these rules are too restrictive and not helpful for singles to seek independence in living before they look for their lifetime partners. It also excludes people from other segments of the society to seek independence and privacy for their housing needs. As far as the government is concerned, each and every citizen will only enjoy grants or subsidies once, regardless of their age or whether they bought their flat before or after their marriage.
Rules that dictate young couples cannot buy HDB flats with short lease left should be abolished as well. If HDB flats are treated as a consumption goods, there is absolutely no reason for such rules to exist. Shorter lease, old HDB flats may cost much lesser and with the grants given by the government, young people could well afford to buy their first CHEAP old HDB flat to start their marriage life earlier. This will also encourage them to have children earlier with lower expenditures on housing.
Liberalization of the HDB rules will enhance market efficiency and liquidity, especially for the resale market of old HDB flats which have less than 60 years lease.
C) Re-configuration of Financial Rules and Valuation Methodology
At the moment, there is really an abnormality in the financial rules. For car purchase financing, although the COE restrict the car life span to 10 years, banks and financial institutes are still allowed to finance buyers for up to 7 years of mortgage. However, for some strange reasons, HDB flats with 60 years lease left will face a drastic drop in financial options and the purchase of flats with 20 years left, could not be financed at all!
If we just treat HDB flats simply as a consumption goods, there is no reason why there is a discrepancy in financial treatments by the banks and finance companies.
For owners of HDB flats with less than 60 years lease, they could not "monetize" or sell their flats mainly because of mismatch valuations of their HDB flats as well as liquidity problem due to such financial rules.
Re-configuration of the financing rules of old HDB flats based on the fact that it is just a consumption good like car, washing machine or any hire purchase items would allow adequate liquidity to flow into the resale market of these old flats. Of course, this must be accompanied by a revamped property valuation system which will give a more realistic valuation of old HDB flats based on the leasehold factor. It is just an old car. The older a car is, the lesser its valuation is.
Sellers of HDB flats should not be asked to repay back all the "lost CPF interests" due to their use of CPF funds to finance their HDB flats when they were young. Else, those elderly people who decided to sell their HDB flats to supplement their retirement financing will find it totally meaningless in their attempt to "monetize" their old HDB flats.
D) Kick Start a Redevelopment Plan for old HDB estates
In anticipation of the impact of an ageing population with ageing HDB flats and estates, the government should start planning for the Redevelopment of these old HDB estates in stages. Instead of limiting SERS to 4% of total HDB stock of flats, there is an urgent need to kick start a Total Redevelopment Plan for ageing HDB estates.
This will of course involve enbloc of HDB flats in phases.
Although it is going to be an expensive ever-lasting process but it is a necessity to pre-empt a total chaos and collapse of the whole HDB resale market.
As the ageing population would mean that some land acquired via enbloc can be released for private development use while the resulting higher pricing of the redeveloped flats would make older flats with less than 60 or 50 years lease more attractive. This will create a new equilibrium which will effect a more efficient use of land and housing stock.
Redevelopment of old HDB estates will have to be carried out in phases, most probably stretching over 20 to 30 years time frame for one estate. Such staggered redevelopment plan will prevent a sudden chaotic situation whereby the whole old HDB estates with lots of HDB flats expiring within a short span of time resulting in a sudden shock shortage of housing stock to provide for those who are going to give back their HDB flats to the government.
It is totally irresponsible for PAP government to say that they will only redevelop 4% of HDB flats via SERS while just waiting to take back all other HDB flats from Singaporeans when their lease expired. Such method may save the government lots of money but it will create a great turbulence to the whole resale market for HDB.
Conclusion
The above outline of the combined policies needed to address the HDB-CPF Axis of Evil Problems will not prevent some Singaporeans from losing great amount of money from their misguided belief in PAP's Asset Enhancement Scam, especially so when they use lots of money to buy from the HDB resale market.
However, at the very least, we could achieve the objective to create a viable resale market demand for their old HDB flats which have less than 60 years lease left. This is done through liberalizing rules on HDB flats purchase, expanding the potential pool of buyers of these old HDB flats to singles and young couples with viable financing plan achieved by re-configuring of financial rules and valuation system based on rational reasoning.
While some Singaporeans will have to suffer a huge and painful cost of greatly depreciated old HDB flats, the government should also bear the big bulk of the cost in creating this whole mess via a rational staggered enbloc redevelopment of those old HDB estates.
This is a very painful lesson for all Singaporeans that property transactions and speculations on your only residential home are simply a Zero Sum Game eventually. Anyone's gain will be somebody's loss.
Goh Meng Seng
Monday, June 04, 2018
Solutions to HDB-CPF Mess MUST Address These Issues
Solutions to HDB-CPF Mess must address the following few issues:
1) Provide stability to the HDB resale market, preventing big crash or huge hike in prices.
2) Solve the inadequacy problem of CPF for retirement due to HDB purchase
3) Solve the insolvency problem of old HDB flats above 40 or 50 years old.
4) Guard against oversupply of HDB flats in the long run
5) Tackle the potential problems of massive expiry of 99 year lease in less than 60 years time.
6) The system of Valuation of HDB Flats has to have realistic reflection of leasehold terms of flats.
7) Cater to the needs of an ageing population with changing social-housing reconfiguration.
8) Choice and options for Singaporeans should be widen.
9) Re-calibrating social mindset and financial system to treat HDB as public housing, a consumption good instead of investment good.
This list may not be exhaustive but the Core of problems which need immediate solutions to address the short-mid-long term needs of the Nation.
Goh Meng Seng
1) Provide stability to the HDB resale market, preventing big crash or huge hike in prices.
2) Solve the inadequacy problem of CPF for retirement due to HDB purchase
3) Solve the insolvency problem of old HDB flats above 40 or 50 years old.
4) Guard against oversupply of HDB flats in the long run
5) Tackle the potential problems of massive expiry of 99 year lease in less than 60 years time.
6) The system of Valuation of HDB Flats has to have realistic reflection of leasehold terms of flats.
7) Cater to the needs of an ageing population with changing social-housing reconfiguration.
8) Choice and options for Singaporeans should be widen.
9) Re-calibrating social mindset and financial system to treat HDB as public housing, a consumption good instead of investment good.
This list may not be exhaustive but the Core of problems which need immediate solutions to address the short-mid-long term needs of the Nation.
Goh Meng Seng
Wednesday, May 02, 2018
TOTD- No Quick Simple Fix for Asset Enhancement Scam
Thought of the Day - No Quick Simple Fix for Asset Enhancement Scam
There are quite a number of people trying to offer quick fixes to the HDB Time Bomb without understanding ALL the problems and BAD impact created by the Asset Enhancement Scam which ultimately linked HDB to CPF, retirement financing.
It is a complex problem which involves multiple dimensions with complex tensions and competing needs. PAP's mistake in its Asset Enhancement Scam has pushed every Singaporeans in HDB towards a narrow dead end which entangles everything in a massive mess.
The fundamental problem of Asset Enhancement Scam is that PAP had changed Singaporeans' mindset and perception towards public housing, HDB. Instead of viewing HDB as a pure consumption commodity which serves as a mere safe roof over our heads, PAP had evoked the Greed factor by treating such basic needs of housing into some Grand Scam of treating it as an "Investment Asset" and releasing huge liquidity of FORCED retirement savings from CPF into HDB.
This created a "self-fulfilling prophecy" that your HDB will increase in price and value which was merely a short term phenomenon rather than a REAL high quality long term investment return. The excess liquidity forcefully released via CPF has created inflationary impact on HDB prices that created that delusion.
Furthermore, it has also transformed our CPF retirement financing model from "Self-sufficiency" towards "Cross-Generation Funding" via the inflation of HDB prices which CPF funds were poured into. i.e. our children, grand children and future generations will be the ones who will suffer and indirectly become the ones who financed the retirement finances of the older generations/our generation due to higher HDB prices!
However, such inflationary path of HDB cannot be sustainable due to the very nature that IT IS STILL PUBLIC Housing in essence and HDB dwellers DO NOT OWN the land at all. The eventual ZERO valuation of HDB flats while they approach their end of lease is INEVITABLE.
This will create a great silver tsunami that would overwhelm Singaporeans.
They must face the reality that PAP has scammed and fooled them into believing something that will never work nor come true.
I will provide a multi-prone approach solution to this mess in time to come. But this will come with a cost to most Singaporeans and please remember, such second best solution will have huge cost and PAP should be made responsible to it politically.
Goh Meng Seng
There are quite a number of people trying to offer quick fixes to the HDB Time Bomb without understanding ALL the problems and BAD impact created by the Asset Enhancement Scam which ultimately linked HDB to CPF, retirement financing.
It is a complex problem which involves multiple dimensions with complex tensions and competing needs. PAP's mistake in its Asset Enhancement Scam has pushed every Singaporeans in HDB towards a narrow dead end which entangles everything in a massive mess.
The fundamental problem of Asset Enhancement Scam is that PAP had changed Singaporeans' mindset and perception towards public housing, HDB. Instead of viewing HDB as a pure consumption commodity which serves as a mere safe roof over our heads, PAP had evoked the Greed factor by treating such basic needs of housing into some Grand Scam of treating it as an "Investment Asset" and releasing huge liquidity of FORCED retirement savings from CPF into HDB.
This created a "self-fulfilling prophecy" that your HDB will increase in price and value which was merely a short term phenomenon rather than a REAL high quality long term investment return. The excess liquidity forcefully released via CPF has created inflationary impact on HDB prices that created that delusion.
Furthermore, it has also transformed our CPF retirement financing model from "Self-sufficiency" towards "Cross-Generation Funding" via the inflation of HDB prices which CPF funds were poured into. i.e. our children, grand children and future generations will be the ones who will suffer and indirectly become the ones who financed the retirement finances of the older generations/our generation due to higher HDB prices!
However, such inflationary path of HDB cannot be sustainable due to the very nature that IT IS STILL PUBLIC Housing in essence and HDB dwellers DO NOT OWN the land at all. The eventual ZERO valuation of HDB flats while they approach their end of lease is INEVITABLE.
This will create a great silver tsunami that would overwhelm Singaporeans.
They must face the reality that PAP has scammed and fooled them into believing something that will never work nor come true.
I will provide a multi-prone approach solution to this mess in time to come. But this will come with a cost to most Singaporeans and please remember, such second best solution will have huge cost and PAP should be made responsible to it politically.
Goh Meng Seng
Tuesday, May 01, 2018
People's Power Party Labour Day Message
People's Power Party Labour Day Message
First and foremost, our deepest condolences to the family of Pte Dave Lee Han Xuan who had died of heat injury. PPP takes a serious view on such death of our NS men as they are all underpaid service men without proper insurance coverage by their direct employer, SAF.
We have heard of constant boast of the SAF on how advance their medical service is, especially in dealing with common problem of heat stroke among our soldiers, but yet, we are still losing a good soldier like Pte Dave Lee. Such Death is really one too many and it shouldn't happen in the first place if proper protocols are observed. We urge the authorities to hold an independent inquiry into this incident with external audit on the processes and protocols.
Work place safety seems to be neglected in many other places as well, including GLCs. The recent case of technician bringing PSA to court for exposing him to cancer causing substance asbestos resulting him to develop lung cancer is one fine example. We would not speculate how the court will make their judgement on this case but the fact that PSA had brought its defence based on technicality (of 15 years legal claim time frame) instead of admitting its management neglect and make good of its mistake, is a glaring display of irresponsible corporate culture and management. We condemn such irresponsible management culture which disregard work safety practice that put our workers at great health risk. It is totally unacceptable for a Government Linked Company to attempt brushing its corporate responsibility towards its workers' health safety aside via mere legal technicality.
For all workers in Singapore, we only want to earn our money in a safe environment and return to our home safely to enjoy the fruits of our labour. On top of that, we want to protect the value of the money we had earned but it seems that PAP government has been creaming off our hard earn money through increasing prices of electricity, water tariff, gas, etc. Inflation is the number one enemy to workers and inflating prices on basic necessities is the most damaging to our workers.
To add salt to injury, PAP government has announced that they will be increasing GST from 7% to 9% in the near future! We do not see the need for PAP government to increase GST when it continues to enjoy hefty surplus throughout the years. We do not even see the need for PAP to have GST at all when they are creaming off the returns of our CPF money which was invested in the two Sovereign Wealth Funds; they reportedly earn huge returns more than 4% but we are only given 2.5% to 4% for our CPF savings!
PPP would also urge financial prudence to many Singaporeans who are pouring huge money into their HDB purchases. Whenever there are reports of record high transactions of HDB flats in the resale market, we are very worried. Contrary to what PAP has been propagating throughout the decades, HDB is largely a consumption item rather than an "investment nest" which will help you to fund your retirement. The mis-selling of Asset Enhancement Scheme is politically motivated but financially misleading to all Singaporeans. Any increase in HDB price should NOT be celebrated but be feared as INFLATION on our consumption. The truth is, you will be paying more "property tax" on your HDB if the prices in the resale market continued to increase! But ultimately, our HDB flats will be ZERO in value when its lease expired and there will be little chance of SERS.
We would urge Singaporeans not to be misled by PAP's propaganda into treating your only home as some "great investment" for retirement. Paying huge amount of money, up to million dollars will only increase the cost of your consumption of housing and will not make you rich at all.
While PAP had always boasted about how well our GDP has grown, we would urge all Singaporeans to do a reality check of your salary increase in comparison with GDP growth rates. If there is a shortfall, it would mean that all these talks of good economic growth are quite meaningless.
Last but not least, we wish all Singaporeans a Happy Labour Day.
People's Power Party Singapore
Friday, October 06, 2017
TOTD: Awakening from the HDB-Asset Enhancement Myth
Thought of the Day - Awakening from the HDB-Asset Enhancement Myth
Several friends asked me "What is Lawrence Wong trying to do?"
They are referring to why Lawrence Wong keeps reminding Singaporeans that your HDB flat will have ZERO value when the 99 Lease hold expires.
They are confused and full of anxiety.
I simply told them, this is nothing new, I have talked about it more than a decade ago!
Almost all of them now consider to sell off their HDB flats in anxiety. Then I ask, where are you going to live?
Some ask me is that the reason why I sold my own HDB flat back in 2010? I said, yes, partly so but most importantly, I need the cash for the General Elections. I have no regrets.
Then they ask me, why didn't my relatives or the flat my mother owns in Ang Mo Kio sold? Here again, I said, where can they live if they sell their HDB flats?
The key difference here is that, my parents bought their flat in Ang Mo Kio, way before this nonsensical "Asset Enhancement Scheme" came about in late 1980s throughout 1990s, Goh Chok Tong's time. They bought it cheap. There is no anxiety of having a "costly HDB flat" turned into worthless ashes in the end.
Unfortunately, many people were caught by that TOTALLY MISLEADING Koyok of "Asset Enhancement Scheme" which was the Theme of PAP back in 1990s till 2000s that kept them in total monopoly of power. A few generations of Singaporeans have been misled into believe in such nonsense. Even up till GE 2011, PAP's MBT still tried to sing song about Asset Enhancement Scheme for "Monetizing HDB Flat" for retirement financing.
Well, lucky for MBT and PAP, he didn't dare to take up my challenge of OPEN LIVE DEBATE over his HDB-Asset Enhancement Scheme Policy, else he will be knocked out and black out totally. But their lucky is Singaporeans' misfortune. Most Singaporeans are still submerged in such devious myth of HDB Asset Enhancement Scheme for another 6 years, until Lawrence Wong broke the truth.
Lawrence Wong is simply telling the Truth, nothing but the Truth. Your HDB flat will become Zero Value when the 99 year lease expires. Why is he talking about this NOW?
This is because PAP government is not going to carry out SERS Enblock for most of the HDB flats, which is the only way to save you from the eventuality of Zero Value, because it is not profitable for PAP government to do it. They are just mentally preparing the massive Singaporeans living in HDB flats that they should not expect much from their HDB flats at the end of the 99 lease. They should be prepared to live with their whole life's saving in CPF being wiped off when the lease is nearing expiration.
The PAP government, if they still exist by then, will not renew your HDB lease at all.
Singaporeans should wake up from this TWO DECADES Myth about HDB-Asset Enhancement Scheme. This is especially so for the younger generations, those who are thinking of paying extraordinary high prices for their BTO or HDB resale flats.
I was amused and worried for those people who are forking out near to a Million dollars for a resale flat in some Prime location. You have to know that even if your HDB flat is located at Prime district or location, IT WILL DEPRECIATE eventually and BECOME ZERO in value when the lease expires.
Your HDB flat will start to depreciate when it reaches 40 year old. No banks will make normal loan when it passes 50 years old. When it reaches 70 years old, basically no bank will provide loan to any buyer at all, regardless of where the flat is situated.
This is something PAP has been hiding from you while they were singing and praising themselves about HDB-Asset Enhancement Scheme as a political tool of Pork-Barrel politicking! I would say that over 80% of all old HDB flats will not be Enblock. You just cannot "enhance" your HDB value when the eventuality of ZERO Value is definite!
The faster and earlier Singaporeans realize this FACT and TRUTH, the better it is for them. Else, you will end up destroying your own retirement financing plan.
I have not come to the CPF-HDB financing part yet.... that's for another article another day.
Goh Meng Seng
Several friends asked me "What is Lawrence Wong trying to do?"
They are referring to why Lawrence Wong keeps reminding Singaporeans that your HDB flat will have ZERO value when the 99 Lease hold expires.
They are confused and full of anxiety.
I simply told them, this is nothing new, I have talked about it more than a decade ago!
Almost all of them now consider to sell off their HDB flats in anxiety. Then I ask, where are you going to live?
Some ask me is that the reason why I sold my own HDB flat back in 2010? I said, yes, partly so but most importantly, I need the cash for the General Elections. I have no regrets.
Then they ask me, why didn't my relatives or the flat my mother owns in Ang Mo Kio sold? Here again, I said, where can they live if they sell their HDB flats?
The key difference here is that, my parents bought their flat in Ang Mo Kio, way before this nonsensical "Asset Enhancement Scheme" came about in late 1980s throughout 1990s, Goh Chok Tong's time. They bought it cheap. There is no anxiety of having a "costly HDB flat" turned into worthless ashes in the end.
Unfortunately, many people were caught by that TOTALLY MISLEADING Koyok of "Asset Enhancement Scheme" which was the Theme of PAP back in 1990s till 2000s that kept them in total monopoly of power. A few generations of Singaporeans have been misled into believe in such nonsense. Even up till GE 2011, PAP's MBT still tried to sing song about Asset Enhancement Scheme for "Monetizing HDB Flat" for retirement financing.
Well, lucky for MBT and PAP, he didn't dare to take up my challenge of OPEN LIVE DEBATE over his HDB-Asset Enhancement Scheme Policy, else he will be knocked out and black out totally. But their lucky is Singaporeans' misfortune. Most Singaporeans are still submerged in such devious myth of HDB Asset Enhancement Scheme for another 6 years, until Lawrence Wong broke the truth.
Lawrence Wong is simply telling the Truth, nothing but the Truth. Your HDB flat will become Zero Value when the 99 year lease expires. Why is he talking about this NOW?
This is because PAP government is not going to carry out SERS Enblock for most of the HDB flats, which is the only way to save you from the eventuality of Zero Value, because it is not profitable for PAP government to do it. They are just mentally preparing the massive Singaporeans living in HDB flats that they should not expect much from their HDB flats at the end of the 99 lease. They should be prepared to live with their whole life's saving in CPF being wiped off when the lease is nearing expiration.
The PAP government, if they still exist by then, will not renew your HDB lease at all.
Singaporeans should wake up from this TWO DECADES Myth about HDB-Asset Enhancement Scheme. This is especially so for the younger generations, those who are thinking of paying extraordinary high prices for their BTO or HDB resale flats.
I was amused and worried for those people who are forking out near to a Million dollars for a resale flat in some Prime location. You have to know that even if your HDB flat is located at Prime district or location, IT WILL DEPRECIATE eventually and BECOME ZERO in value when the lease expires.
Your HDB flat will start to depreciate when it reaches 40 year old. No banks will make normal loan when it passes 50 years old. When it reaches 70 years old, basically no bank will provide loan to any buyer at all, regardless of where the flat is situated.
This is something PAP has been hiding from you while they were singing and praising themselves about HDB-Asset Enhancement Scheme as a political tool of Pork-Barrel politicking! I would say that over 80% of all old HDB flats will not be Enblock. You just cannot "enhance" your HDB value when the eventuality of ZERO Value is definite!
The faster and earlier Singaporeans realize this FACT and TRUTH, the better it is for them. Else, you will end up destroying your own retirement financing plan.
I have not come to the CPF-HDB financing part yet.... that's for another article another day.
Goh Meng Seng
Monday, January 16, 2017
TOTD: Back to Fundamental of CPF
Thought of the Day -
Back to Fundamental of CPF
I was talking to a friend over CPF issues recently and it seems that I have some of the more "radical" thought over CPF.
CPF was supposed to be meant for retirement financing but in the end, it becomes some sort of "piggy bank" for PAP as well as Singaporeans for many purposes.
First, PAP allowed you to use CPF to buy properties. Most Singaporeans are happy with such arrangement as they feel that they will be able to own a property in their lifetime. I also used up all my CPF available to buy property but that is because I do not trust PAP with my money. This is another issue for another day.
Then PAP says that you can use your parents' CPF or your own CPF to pay for higher education. On top of that, you can use your CPF to pay for your parents, children, brothers, sisters etc medical fees!
Singaporeans thought that these are all "good arrangement" but the truth is, it will create two/three problems:
1) Over consumption of housing, education and medical care
2) Depleted CPF for your retirement
3) Kicking the can down the road
On top of that, it will create other problem of another dimension:
1) Over reliance on CPF money for anything, everything
2) Weakening of Financial management skills and planning
3) Total lack of saving habits
Most financial planners will tell you that you will need to save a certain percentage of your salaries every month for future retirement. It is normally set at 20% to 25% of your income, depending on your income level.
But due to PAP's conflicting policy needs, it has totally messed up the CPF system and in the end, it resorts to setting some unrealistic arbitrary "minimum sum" which many lower income earners could not meet mainly due to the over consumption of housing. i.e. they were allowed to buy properties which they couldn't afford and shouldn't buy in the first place, if they were to stick to the 25% savings rule for retirement!
The only right way to due with this situation is set the saving rate for CPF at 25% (contribution of employee and employer add together) while banning people from using it for just any other thing, especially for housing and medical fees for other family members!
Employer's CPF contribution should stay at 17% while employees' contribution should be cut from 20% to 8%. This would mean that employees or Singaporeans will have additional 12% of their income in cash. If they need to buy property and use it to pay their mortgage, they can use this additional 12% cash to do so. However, they should not use any CPF money for mortgage payment.
For young people, they should start to learn how to do financial planning and I reiterate this point that basic financial planning concepts and knowledge should be taught in the common school curriculum! They should make it a habit to save for down payment for their first property purchase and plan for their mortgage payment as well. In general, for middle-lower income earners, they should not be using more than 35% or 40% of their income to pay for mortgage. This will prevent them from over-consuming housing and it will keep property prices in check.
If they intend to start their own little business, they could save up these extra 12% of their income for future business plan!
Our property prices have been artificially pushed up due to the excess liquidity which PAP allows Singaporeans to use CPF in doing so. This applies to prices of Medical care as well. It is precisely that Singaporeans do not "feel the direct pinch" from using their CPF money to pay for Medical care or housing, they tend to not mind spending excessively on these products and services. Of course, HDB and hospitals alike, are also happy to charge higher prices because "it is affordable" to Singaporeans due to the excess liquidity provided by CPF!
PAP has abused the system in skewing the "affordable" argument. It is not affordable when Singaporeans are paying more than 35% or 40% of their salary for a 30 year mortgage. That is totally rubbish argument of affordability because if you purchase your property at the age of 30, by 60 years old, you will have very little left in your CPF account for retirement!
The proper way of inducing better financial management by Singaporeans is to make them manage their finances according to the fixed CPF retirement saving rate (which could be adjusted according to income level) so that they would make better rational choice in their spending in housing, education as well as medical care.
This may sound "radical" to many unthinking Singaporeans and they may just jump up and down denouncing such plan but this is the only right thing to do in the face of ageing population.
Goh Meng Seng
Back to Fundamental of CPF
I was talking to a friend over CPF issues recently and it seems that I have some of the more "radical" thought over CPF.
CPF was supposed to be meant for retirement financing but in the end, it becomes some sort of "piggy bank" for PAP as well as Singaporeans for many purposes.
First, PAP allowed you to use CPF to buy properties. Most Singaporeans are happy with such arrangement as they feel that they will be able to own a property in their lifetime. I also used up all my CPF available to buy property but that is because I do not trust PAP with my money. This is another issue for another day.
Then PAP says that you can use your parents' CPF or your own CPF to pay for higher education. On top of that, you can use your CPF to pay for your parents, children, brothers, sisters etc medical fees!
Singaporeans thought that these are all "good arrangement" but the truth is, it will create two/three problems:
1) Over consumption of housing, education and medical care
2) Depleted CPF for your retirement
3) Kicking the can down the road
On top of that, it will create other problem of another dimension:
1) Over reliance on CPF money for anything, everything
2) Weakening of Financial management skills and planning
3) Total lack of saving habits
Most financial planners will tell you that you will need to save a certain percentage of your salaries every month for future retirement. It is normally set at 20% to 25% of your income, depending on your income level.
But due to PAP's conflicting policy needs, it has totally messed up the CPF system and in the end, it resorts to setting some unrealistic arbitrary "minimum sum" which many lower income earners could not meet mainly due to the over consumption of housing. i.e. they were allowed to buy properties which they couldn't afford and shouldn't buy in the first place, if they were to stick to the 25% savings rule for retirement!
The only right way to due with this situation is set the saving rate for CPF at 25% (contribution of employee and employer add together) while banning people from using it for just any other thing, especially for housing and medical fees for other family members!
Employer's CPF contribution should stay at 17% while employees' contribution should be cut from 20% to 8%. This would mean that employees or Singaporeans will have additional 12% of their income in cash. If they need to buy property and use it to pay their mortgage, they can use this additional 12% cash to do so. However, they should not use any CPF money for mortgage payment.
For young people, they should start to learn how to do financial planning and I reiterate this point that basic financial planning concepts and knowledge should be taught in the common school curriculum! They should make it a habit to save for down payment for their first property purchase and plan for their mortgage payment as well. In general, for middle-lower income earners, they should not be using more than 35% or 40% of their income to pay for mortgage. This will prevent them from over-consuming housing and it will keep property prices in check.
If they intend to start their own little business, they could save up these extra 12% of their income for future business plan!
Our property prices have been artificially pushed up due to the excess liquidity which PAP allows Singaporeans to use CPF in doing so. This applies to prices of Medical care as well. It is precisely that Singaporeans do not "feel the direct pinch" from using their CPF money to pay for Medical care or housing, they tend to not mind spending excessively on these products and services. Of course, HDB and hospitals alike, are also happy to charge higher prices because "it is affordable" to Singaporeans due to the excess liquidity provided by CPF!
PAP has abused the system in skewing the "affordable" argument. It is not affordable when Singaporeans are paying more than 35% or 40% of their salary for a 30 year mortgage. That is totally rubbish argument of affordability because if you purchase your property at the age of 30, by 60 years old, you will have very little left in your CPF account for retirement!
The proper way of inducing better financial management by Singaporeans is to make them manage their finances according to the fixed CPF retirement saving rate (which could be adjusted according to income level) so that they would make better rational choice in their spending in housing, education as well as medical care.
This may sound "radical" to many unthinking Singaporeans and they may just jump up and down denouncing such plan but this is the only right thing to do in the face of ageing population.
Goh Meng Seng
Monday, August 10, 2015
Campaign Trail - 10 Aug 2015
Campaign Trail - 10 Aug 2015
We did a low profile outreach to the "far outpost" of CCK GRC at Nanyang which has common boundaries with Pioneer, Hong Kah SMCs as well as West Coast GRC.
This part of CCK is pretty tricky as it has several shared community amenities with other surrounding wards. It makes campaigning very tricky as there will be overlapping interests.
Anyway, we met a couple of groups of retired uncles having coffee and they were pretty angry about the No-alcohol rule after 10pm as well as CPF minimum sum. The anger is real and I guess these will become some issues which must be addressed during the coming GE.
When we were about to end the outreach, suddenly a Malay lady called out "Mr Goh!". I didn't recognize the lady but she was very happy to see me. She was with her daughter and son-in-law. Her daughter happened to be our helper at Tampines in 2011 as counting agent!
This Malay lady told me that she has learned about the "bad" of HDB while attending my rally at Tampines! She said that she didn't know about the problem of HDB until she learned about it during my rally back then.
I realize that it is important to have rallies not only for the rah rah and political rhetoric but most importantly, political rallies can be an important avenues to better inform voters and Singaporeans about the Real problems of policies and how such flaws are affecting us as a whole.
I told her that I am glad she has learned something about such important policy such as HDB from my past rally. I told her that I am going to talk about our Healthcare policies and Medishield Life in the coming General Elections and hope that she could attend even though she isn't my voter in CCK.
I met my friend after my outreach today and he was very concerned why I am continuing to do all these things which have wasted much of my time, effort and resources for the past 15 years. I told him about the Malay lady's little happy learning from my rally and I said, it is really all worthwhile, even though if it means that I have to sell off my HDB flat just to do this.
Most important, Lim Peh Happy!
However, I hope that Singaporeans should also try to share our burden of carrying on this fight and providing such political exercise which will help to increase political awareness of our citizens. I hope you guys and gals out there will donate generously to our cause and help us sustain this political movement.
We should not take the existence of good opposition for granted and we need to do our part to sustain it and make sure good people are sent into parliament from the opposition. I will do my part to persuade good people to fight the good cause but I hope others would help us to sustain our effort.
Donate to People's Power Party!
(Please PM us)
We did a low profile outreach to the "far outpost" of CCK GRC at Nanyang which has common boundaries with Pioneer, Hong Kah SMCs as well as West Coast GRC.
This part of CCK is pretty tricky as it has several shared community amenities with other surrounding wards. It makes campaigning very tricky as there will be overlapping interests.
Anyway, we met a couple of groups of retired uncles having coffee and they were pretty angry about the No-alcohol rule after 10pm as well as CPF minimum sum. The anger is real and I guess these will become some issues which must be addressed during the coming GE.
When we were about to end the outreach, suddenly a Malay lady called out "Mr Goh!". I didn't recognize the lady but she was very happy to see me. She was with her daughter and son-in-law. Her daughter happened to be our helper at Tampines in 2011 as counting agent!
This Malay lady told me that she has learned about the "bad" of HDB while attending my rally at Tampines! She said that she didn't know about the problem of HDB until she learned about it during my rally back then.
I realize that it is important to have rallies not only for the rah rah and political rhetoric but most importantly, political rallies can be an important avenues to better inform voters and Singaporeans about the Real problems of policies and how such flaws are affecting us as a whole.
I told her that I am glad she has learned something about such important policy such as HDB from my past rally. I told her that I am going to talk about our Healthcare policies and Medishield Life in the coming General Elections and hope that she could attend even though she isn't my voter in CCK.
I met my friend after my outreach today and he was very concerned why I am continuing to do all these things which have wasted much of my time, effort and resources for the past 15 years. I told him about the Malay lady's little happy learning from my rally and I said, it is really all worthwhile, even though if it means that I have to sell off my HDB flat just to do this.
Most important, Lim Peh Happy!
However, I hope that Singaporeans should also try to share our burden of carrying on this fight and providing such political exercise which will help to increase political awareness of our citizens. I hope you guys and gals out there will donate generously to our cause and help us sustain this political movement.
We should not take the existence of good opposition for granted and we need to do our part to sustain it and make sure good people are sent into parliament from the opposition. I will do my part to persuade good people to fight the good cause but I hope others would help us to sustain our effort.
Donate to People's Power Party!
(Please PM us)
Monday, December 15, 2014
CPF Life Annuity is a Money Making Machine for PAP government!
I have prepared a spreadsheet for anyone to calculate the age that he needs to live in order to "exhaust" his Minimum Sum he puts into CPF Life Annuity. (You can Private Message me to ask me for this spreadsheet if you want to).
Based on the typical Minimum Sum of $155K paid at age 55 years old, interests @ 4% (this is the PAP's claim of "Risk Free Interests" from them) with a monthly payout of $1200 (or $14400 per year) starting at age 65 years old, the BREAK EVEN age is 90!
It means that only when you can live BEYOND 90 years old, then you can get MORE than what you have put in. However, please bear in mind that if you died at 85 years old or after, there will be no bequest. Even if you die at age 65, your family will get only slightly more than $155K which is FAR lesser than the amount if you earn 4% per annum. If you die at age 75 (which most people do), your family will get only about 13% of the amount which is rightfully yours at 4% compounding rate! (This is based on the example given for CPF Life Plus).
| Minimum Sum (paid @ 55 yrs old) |
Interest | Monthly Payout (Starting 65 yrs old) |
Annual Payout |
|
| 155000 | 4.00% | 1200 | -14400 | |
| Age | Starting Balace | Amount
after Adding Interest |
Total
Yearly Deductions |
Ending Balance |
| 65 | 229437.86 | 238615.37 | -14400 | 224215.37 |
| 66 | 224215.37 | 233183.98 | -14400 | 218783.98 |
| 67 | 218783.98 | 227535.34 | -14400 | 213135.34 |
| 68 | 213135.34 | 221660.75 | -14400 | 207260.75 |
| 69 | 207260.75 | 215551.18 | -14400 | 201151.18 |
| 70 | 201151.18 | 209197.23 | -14400 | 194797.23 |
| 71 | 194797.23 | 202589.12 | -14400 | 188189.12 |
| 72 | 188189.12 | 195716.68 | -14400 | 181316.68 |
| 73 | 181316.68 | 188569.35 | -14400 | 174169.35 |
| 74 | 174169.35 | 181136.12 | -14400 | 166736.12 |
| 75 | 166736.12 | 173405.56 | -14400 | 159005.56 |
| 76 | 159005.56 | 165365.78 | -14400 | 150965.78 |
| 77 | 150965.78 | 157004.41 | -14400 | 142604.41 |
| 78 | 142604.41 | 148308.59 | -14400 | 133908.59 |
| 79 | 133908.59 | 139264.93 | -14400 | 124864.93 |
| 80 | 124864.93 | 129859.53 | -14400 | 115459.53 |
| 81 | 115459.53 | 120077.91 | -14400 | 105677.91 |
| 82 | 105677.91 | 109905.03 | -14400 | 95505.03 |
| 83 | 95505.03 | 99325.23 | -14400 | 84925.23 |
| 84 | 84925.23 | 88322.24 | -14400 | 73922.24 |
| 85 | 73922.24 | 76879.13 | -14400 | 62479.13 |
| 86 | 62479.13 | 64978.3 | -14400 | 50578.3 |
| 87 | 50578.3 | 52601.43 | -14400 | 38201.43 |
| 88 | 38201.43 | 39729.49 | -14400 | 25329.49 |
| 89 | 25329.49 | 26342.67 | -14400 | 11942.67 |
| 90 | 11942.67 | 12420.38 | -14400 | -1979.62 |
| 91 | -1979.62 | -2058.8 | -14400 | -16458.8 |
| 92 | -16458.8 | -17117.15 | -14400 | -31517.15 |
| 93 | -31517.15 | -32777.84 | -14400 | -47177.84 |
| 94 | -47177.84 | -49064.95 | -14400 | -63464.95 |
| 95 | -63464.95 | -66003.55 | -14400 | -80403.55 |
| 96 | -80403.55 | -83619.69 | -14400 | -98019.69 |
| 97 | -98019.69 | -101940.48 | -14400 | -116340.48 |
| 98 | -116340.48 | -120994.1 | -14400 | -135394.1 |
| 99 | -135394.1 | -140809.86 | -14400 | -155209.86 |
| 100 | -155209.86 | -161418.25 | -14400 | -175818.25 |
Thus, my conclusion is that CPF Life Annuity is just a money making machine for PAP government! It will end like the Medishield whereby the payout is pathetic and it will accumulate huge amount of surpluses ever year. The payout and bequest is designed to make MOST Singaporeans to forgo most of their hard earned CPF money and given to the government.
The implication of this finding is that PAP could have set up this system WITHOUT the need of CONFISCATING your money when you die. If a person has $155K in his CPF account, he can just put this money in CPF to further grow his retirement nest (at PAP's "risk free" 4% return) and then get $1200 per month until 90 years old. If he died before reaching 90 years old, his family will get the balance of his money in CPF. If he lived beyond 90 years old (very few could reach that age), then I do not think it will bankrupt PAP government by showing these elders a little respect by providing them the necessary funding for the rest of their life.
If PAP is really stingy, then the alternative way is to get provide the retirees INDEFINITE payout from the interests earn throughout this period. i.e. give them $764 every month if they have the initial $155K in their CPF account until they die. When they die, the seed money of $229437 will be given back to their family. They can live up to 100 years old if they want and they won't burden the government at all.
Such arrangement is fully in Singaporeans' interests without risking their money which naturally, they would want to let their family member inherit them.
If insurance companies refused to give coverage to anyone who is 65 years old or above, why should we be forced to gamble with our hard earn money of $155K to put into CPF Life Annuity when we are 55 years old and risk losing it all by betting that we can live beyond 90 years old?
A good government will not be constantly thinking of ways in sucking off the citizens' hard earn money even when they die! They should be thinking of a more viable options for the sake of everyone's interests. A good government will not PUSH the responsibility of feeding the elders (over 90 years old) to other Singaporeans. Worse of all, this CPF Life Annuity scheme will become yet another tool for PAP to milk Singaporeans out as it will definitely have earned excess funds indefinitely as most people will only live till 75 years old and the government would have creamed off huge amount of money from these people.
If Singaporeans do not stop PAP government from such scheme, they will eventually find themselves being reaped off totally and their children and future generation will never be able to enjoy a kick start with more accumulated wealth.
All these funny schemes put up by PAP are the very reasons that I do not trust PAP at all. A government is here to serve the interests of Singaporeans, not trying with every means to EARN or cream off Singaporeans' money while shying away from its responsibilities.
Goh Meng Seng
Afternote: If you are really stuck with PAP and its CPF Life scheme, then I would advise my readers to choose CPF Life BASIC instead of CPF Life PLUS. According to the brochure posted by CPF (here), CPF Life PLUS is really a reap off and it doesn't give you a FAIR deal at all. (Read Pg 29-30). The CPF Life BASIC plan is a better deal although it still "earns" a few thousands of dollars when you die from the fund you left.
Wednesday, August 20, 2014
PM Lee is a TOTAL Failure
A month or two prior to this National Day Rally (NDR) speech of PM
Lee, there was much hype about it with rumours that "Major announcement"
and Major changes will be made during his speech. But in the end, it is
a total let down. Apparently, PM Lee has totally lost touch of the
ground and didn't really know nor understand what is expected from him
and his government by the people.
The THEME of this year's NDR is supposedly to be "Honouring Pioneer Generation" and retirement financing is inevitably the hottest topic in town after the numerous CPF protests held in Hong Lim Park earlier this year, along with PM Lee suing a blogger Roy Ngern over his CPF articles. A lot of CPF issues have been brought to light and public discourse has been ongoing but PM Lee has just done a cosmetic surgery on the whole lot of issues without addressing the REAL PROBLEMS of the inadequacy of CPF for retirement financing.
Is Singapore our HOME for our Retirement?
I have the opportunities to talk to two "Foreign Talents" with regards to their choice of place for retirement. They are regarded as the "upper middle class" people with very high earnings. One of them is Director M, who is a Regional Director of a MNC, Malaysian citizen. The other is Professor D, a lecturer and head of department from a university, Hong Konger.
Both of them are in their late forties or early fifties. Both of them were having a dilemma of whether they should get Singapore citizenship and retire in Singapore. They were discussing this with me a couple of years ago but this year, it seems that BOTH have concluded that they would rather retire in their respective country or city of birth. i.e. Malaysia and Hong Kong.
Both of them do not know each other but somehow, they have come to the same conclusion that it is best for them to retire in their respective home base. Director M has been a Singapore PR for decades but after learning about the horrendous HIGH COST of healthcare services in Singapore as compared to Malaysia, he has finally decided that it is totally not worth retiring in Singapore after all.
He has a relative who was on treatment for cancer in Malaysia and he only paid Malaysian Ringgit $50 for each jab of chemotherapy! Imagine how much it will cost in Singapore? Furthermore, cost of living in Malaysia is relatively much lower than Singapore! Thus, he has decided that, despite the fact that he is pretty wealthy, he still prefers to go back to Malaysia to retire and live like a King!
Similarly for Professor D. He felt that Hong Kong has excellent healthcare system which is TRULY affordable, unlike Singapore. He said that cost of living in Singapore is really on par if not higher than Hong Kong. There is no reason for him to migrate to Singapore to suffer HIGHER medical cost since it is expected that for an aging person like him, he would have needed more healthcare for the rest of his life.
It is truly enlightening to see that BOTH people from the "Third World" and "First World" places like Malaysia and Hong Kong are shunning Singapore for "retirement". But as Singaporeans, do we have a choice at all? We are born in Singapore and we have little choice but live, retire and die in Singapore. However, under PAP rule, we are going to suffer, after decades of contributing to Singapore's development, we will die poor, having to be forced to sell off our HDB flat for our retirement.
I guess the ultimate aim of PAP has been leaked before, they wanted us to retire in JB (Johor Bahru)!
Who is responsible for CPF's inadequacy?
No matter how much PAP is going to raise the Minimum Sum for CPF, the fact still remains, despite of a high CPF contribution rate over the decades, at least 70% of Singaporeans are not going to have enough money in CPF to meet their retirement needs. Why so?
There are three key reasons why CPF has failed for its primary purpose of retirement financing.
First of all, PAP has deliberately reduced the interest returns for CPF since 1990s to a marginal amount of 2.5% to 4%.
The Second reason is that PAP has increased HDB flat prices since 1980s and it went into full steam of escalating the prices in 1990s in the name of "Asset Enhancement Scheme". This is a plot to siphon off Singaporeans' money from CPF to Main Reserves through "Land Sales" or higher "Land Pricing" for HDB flats. Of course the "Market Subsidy Pricing" logic has helped PAP to escalate the HDB prices for this purpose.
Whatever is left in your CPF is "partitioned off" for Medisave. For this money, you will never see it unless you use it to cover the ever increasing medical cost or until the day you die. Else, it will stay in the Main Reserves and kept in GIC or Temasek Holdings for their investment. Make no mistake about it, no matter how PAP tries to side track or hide the fact, the truth is, part of the funds Temasek Holdings is investing comes from our CPF monies. The high healthcare cost, hospitalization cost accompanied by long waiting time for hospital beds will negate whatever money you have in your Medisave.
It is a kind of irony that PAP tries to make you feel good with "Asset Enhancement Scheme" in order to make you pay extraordinary high prices for a PUBLIC HOUSING flat which you do not really own in essence but in the end, turn around and corner you, forcing you when you are old to sell off your flat for your own retirement needs!
PAP is the MAIN Culprit in creating the situation of inadequate CPF for your retirement financing via their flawed policies in public housing, healthcare and investment returns from our sovereign funds. But in the end, instead of addressing these issues effectively, they turn around and say the best they can do is to help you to sell your HDB flat.
Well, imagine this, first they make you pay high price for your HDB flat and then they will force you to sell your flat cheap back to them for retirement. Or force you to downgrade to some overpriced studio apartment with a limited lease when you do not have enough money for retirement.
When you are old and don't have enough cash for retirement or to pay your medical fees and you think you can approach them for help, the first thing they will tell you and aim for, is to ask you to sell off your HDB flat! Never mind if you have some fond memories attached to your home but you have to sell off your HDB flat and no, they won't provide another cheap rental flat for you to live after you sell your HDB flat.
They will ask you to pay hefty and horrendous prices again, for a small studio apartment which will have only a 30 years lease. This will technically make the value of this studio apartment unattractive because no bank will make any mortgage loan to anyone to buy a property with only 20 or 30 years lease! There is absolutely no value for inheritance by your children even though you have paid a gross $70K or $80K for such studio apartment.
Yes, they will continue to squeeze every bits from you even when you are old, retired and without a job and this is done with such a beautiful name of wanting to help you with your retirement!
They have made up a beautiful empty dream of "Asset Enhancement" to make believe that you will be rich by paying horrendous prices for your HDB flats which technically, you don't really own it. You can't even re-mortgage it if you need to when you are short of cash for anything, least, retirement. So what this talk about "Asset Enhancement" when eventually, you will be forced to sell off every assets you have? Worse still, they pray on your greed but eventually your children and grandchildren will eventually be the ones who will suffer under high HDB prices!
Inadequate Hospital Care with Squeeze You further
My mother has suffered during one of the hospitalization saga. Due to over-population and shortage of infrastructures, there will be but a total lack of C class beds which "promised" a "market subsidy" price to Singaporeans. Imagine when you are so uncomfortably in pain but you are asked to wait more than 36 hours or even 48 hours for a proper bed in the ward, UNLESS you upgrade yourself to those "less subsidize" B1 or A class wards!
Avoiding to Solve the REAL Problems
If you look at the WHOLE picture closely, it is not difficult for you to realize that the main problem lies with the Sovereign Funds, aka GIC and Temasek Holdings. They are just like a HUGE MONEY VACUUM CLEANERS, sucking lots of money into it but not giving the appropriate returns to our CPF.
When PAP raise the HDB prices, it basically justify it by the "market pricing" of the land which your flats are built on. But bear in mind that most of these land are acquired at dirt cheap prices from our forefathers. All Land Sales proceeds via SLA will go into the Main reserves and thus our sovereign funds, GIC and Temasek. At the same time, our CPF monies are transferred to these two entities via the special Singapore government bonds as well, which give a pitiful returns to our people.
The only difference is that funds that acquired from selling HDB flats to Singaporeans will bear no "burden" on these Sovereign Funds to provide returns while the CPF monies via SSGB will require them to produce return. Thus, right from 1990s, they have capped the returns to our CPF monies while increased new HDB prices. It basically means that they are reducing their obligations of providing adequate returns to our CPF as a whole. They have systematically tweak the system and fooling us into believing they are doing good to us via "Asset Enhancement Scheme" and quietly reducing returns on our CPF.
For some strange reasons, it seems that this is just not enough for them. They have also systematically dragged on the period for these Sovereign Funds to give us back our CPF monies. First, Medisave has been created and whatever money you have in this account, you won't be able to see them in broad daylight till the day you die but only be "transferred" as digits into the big black hole of high medical cost you will face in life.
I believe they will try to make it a law that whatever inheritance your children will get from your CPF, including your Medisave, will be transferred to your children CPF accounts in the near future! They have already tried to tweak the system by introducing such similar mechanism into the CPF nomination scheme as "option" but I believe they will make it "opt-out" instead for those who didn't make clear of their intentions. It just reminds me of the HOTA legislation whereby an initial "volunteer option" of organ donation has become the default choice unless you opt out.
It seems to me that they are doing everything they can to feed these monsters (GIC and Temasek) with money and trying their very best to delay any payment and thus, cash outflow from these monsters.
I do not know why they are trying everything to keep the cash in these two Sovereign Funds but apparently if this is what they are striving for, there is no reason for them to solve the three problems of Inadequate CPF for retirement financing.
1) Low CPF returns
2) High HDB price
3) High Medical Cost
What needs to be done is simply:
1) Raise the CPF returns or liberalize the system to allow Singaporeans to invest their own funds in appropriate trust funds or even directly into Temasek and GIC! To get this work effectively, basic financial management skills should be taught in our schools. If most Singaporeans are to be proficient in managing their own funds, I do not see why we should just settle for that miserable 2.5% from CPF. They could even withdraw their CPF at age 55 and manage their own funds for their own retirement if they can prove their proficiency in financial management!
2) Change the HDB pricing mechanism to Cost-plus pricing system for New Flats. This will reduce BTO prices with minimum impact on resale market.
3) Public Hospitals should remain as Public, instead of thinking making money via Medical Tourism. There should only be one class of beds with REAL subsidies to citizens. A fair Universal Healthcare Insurance should be put in place.
There are many other things that need to be looked into. eg. The CPF Life Annuity system is really a joke. I do not know whether it is just another scheme for PAP to make money or what but the payout is definitely "profit-bias". This has been explained by many other bloggers in Singapore.
Nevertheless, to solve the inadequacy problem of CPF, PAP will have to look hard at these three fundamentals first.
Conclusion
This is where PM Lee has failed badly. He thought he could hoodwink us with such small cosmetic surgery by allowing us to request (approval is not guaranteed!!!) to withdraw part of our CPF money at 65 years old and putting up some measures for us to reverse-mortgage or sell off our flats to solve the problems created by them, in terms of inadequate CPF for retirement financing. What PM Lee should do is to address these fundamental problems that are creating a huge gap in the adequacy of our CPF which is meant for our retirement financing. It is totally a joke for a country which has a mandatory contribution rate of 36% of our gross salary but in the end, we ended up with insufficient funds to finance our retirement and most of us will be forced to sell our flats for retirement!
But I guess Singaporeans are not that stupid at all. The fundamental question we want to ask is that, will PAP take up the responsibility of providing for those who can't have enough money for their retirement? This is especially a REAL problem for many Singaporeans because apart from the above 3 main problems created by PAP, its ultra-liberal FT policy has basically depressed Singaporeans' wages over these two decades and worse of all, displaced quite a number of Singaporeans from their proper jobs. Many professionals or PMETs were forced out by cheaper Foreign labour and have no choice, to become Taxi Drivers! This will add to the difficulties for these Singaporeans to have enough savings in their CPF to cater to their retirement needs.
All in all, I have basically lost confidence in PAP's manipulation of the whole system and this is why, I do not trust them at all. Not with my CPF money. Their past and present tweaking of the CPF, HDB and Healthcare systems, on top of it, the ultra-liberal FT policy, have basically made me skeptical about their real intentions.
My gut feeling is that there is a bigger problem in this whole system which is totally opaque to us. The only way to find out is to kick PAP out of power first.
Goh Meng Seng
The THEME of this year's NDR is supposedly to be "Honouring Pioneer Generation" and retirement financing is inevitably the hottest topic in town after the numerous CPF protests held in Hong Lim Park earlier this year, along with PM Lee suing a blogger Roy Ngern over his CPF articles. A lot of CPF issues have been brought to light and public discourse has been ongoing but PM Lee has just done a cosmetic surgery on the whole lot of issues without addressing the REAL PROBLEMS of the inadequacy of CPF for retirement financing.
Is Singapore our HOME for our Retirement?
I have the opportunities to talk to two "Foreign Talents" with regards to their choice of place for retirement. They are regarded as the "upper middle class" people with very high earnings. One of them is Director M, who is a Regional Director of a MNC, Malaysian citizen. The other is Professor D, a lecturer and head of department from a university, Hong Konger.
Both of them are in their late forties or early fifties. Both of them were having a dilemma of whether they should get Singapore citizenship and retire in Singapore. They were discussing this with me a couple of years ago but this year, it seems that BOTH have concluded that they would rather retire in their respective country or city of birth. i.e. Malaysia and Hong Kong.
Both of them do not know each other but somehow, they have come to the same conclusion that it is best for them to retire in their respective home base. Director M has been a Singapore PR for decades but after learning about the horrendous HIGH COST of healthcare services in Singapore as compared to Malaysia, he has finally decided that it is totally not worth retiring in Singapore after all.
He has a relative who was on treatment for cancer in Malaysia and he only paid Malaysian Ringgit $50 for each jab of chemotherapy! Imagine how much it will cost in Singapore? Furthermore, cost of living in Malaysia is relatively much lower than Singapore! Thus, he has decided that, despite the fact that he is pretty wealthy, he still prefers to go back to Malaysia to retire and live like a King!
Similarly for Professor D. He felt that Hong Kong has excellent healthcare system which is TRULY affordable, unlike Singapore. He said that cost of living in Singapore is really on par if not higher than Hong Kong. There is no reason for him to migrate to Singapore to suffer HIGHER medical cost since it is expected that for an aging person like him, he would have needed more healthcare for the rest of his life.
It is truly enlightening to see that BOTH people from the "Third World" and "First World" places like Malaysia and Hong Kong are shunning Singapore for "retirement". But as Singaporeans, do we have a choice at all? We are born in Singapore and we have little choice but live, retire and die in Singapore. However, under PAP rule, we are going to suffer, after decades of contributing to Singapore's development, we will die poor, having to be forced to sell off our HDB flat for our retirement.
I guess the ultimate aim of PAP has been leaked before, they wanted us to retire in JB (Johor Bahru)!
Who is responsible for CPF's inadequacy?
No matter how much PAP is going to raise the Minimum Sum for CPF, the fact still remains, despite of a high CPF contribution rate over the decades, at least 70% of Singaporeans are not going to have enough money in CPF to meet their retirement needs. Why so?
There are three key reasons why CPF has failed for its primary purpose of retirement financing.
First of all, PAP has deliberately reduced the interest returns for CPF since 1990s to a marginal amount of 2.5% to 4%.
The Second reason is that PAP has increased HDB flat prices since 1980s and it went into full steam of escalating the prices in 1990s in the name of "Asset Enhancement Scheme". This is a plot to siphon off Singaporeans' money from CPF to Main Reserves through "Land Sales" or higher "Land Pricing" for HDB flats. Of course the "Market Subsidy Pricing" logic has helped PAP to escalate the HDB prices for this purpose.
Whatever is left in your CPF is "partitioned off" for Medisave. For this money, you will never see it unless you use it to cover the ever increasing medical cost or until the day you die. Else, it will stay in the Main Reserves and kept in GIC or Temasek Holdings for their investment. Make no mistake about it, no matter how PAP tries to side track or hide the fact, the truth is, part of the funds Temasek Holdings is investing comes from our CPF monies. The high healthcare cost, hospitalization cost accompanied by long waiting time for hospital beds will negate whatever money you have in your Medisave.
It is a kind of irony that PAP tries to make you feel good with "Asset Enhancement Scheme" in order to make you pay extraordinary high prices for a PUBLIC HOUSING flat which you do not really own in essence but in the end, turn around and corner you, forcing you when you are old to sell off your flat for your own retirement needs!
PAP is the MAIN Culprit in creating the situation of inadequate CPF for your retirement financing via their flawed policies in public housing, healthcare and investment returns from our sovereign funds. But in the end, instead of addressing these issues effectively, they turn around and say the best they can do is to help you to sell your HDB flat.
Well, imagine this, first they make you pay high price for your HDB flat and then they will force you to sell your flat cheap back to them for retirement. Or force you to downgrade to some overpriced studio apartment with a limited lease when you do not have enough money for retirement.
When you are old and don't have enough cash for retirement or to pay your medical fees and you think you can approach them for help, the first thing they will tell you and aim for, is to ask you to sell off your HDB flat! Never mind if you have some fond memories attached to your home but you have to sell off your HDB flat and no, they won't provide another cheap rental flat for you to live after you sell your HDB flat.
They will ask you to pay hefty and horrendous prices again, for a small studio apartment which will have only a 30 years lease. This will technically make the value of this studio apartment unattractive because no bank will make any mortgage loan to anyone to buy a property with only 20 or 30 years lease! There is absolutely no value for inheritance by your children even though you have paid a gross $70K or $80K for such studio apartment.
Yes, they will continue to squeeze every bits from you even when you are old, retired and without a job and this is done with such a beautiful name of wanting to help you with your retirement!
They have made up a beautiful empty dream of "Asset Enhancement" to make believe that you will be rich by paying horrendous prices for your HDB flats which technically, you don't really own it. You can't even re-mortgage it if you need to when you are short of cash for anything, least, retirement. So what this talk about "Asset Enhancement" when eventually, you will be forced to sell off every assets you have? Worse still, they pray on your greed but eventually your children and grandchildren will eventually be the ones who will suffer under high HDB prices!
Inadequate Hospital Care with Squeeze You further
My mother has suffered during one of the hospitalization saga. Due to over-population and shortage of infrastructures, there will be but a total lack of C class beds which "promised" a "market subsidy" price to Singaporeans. Imagine when you are so uncomfortably in pain but you are asked to wait more than 36 hours or even 48 hours for a proper bed in the ward, UNLESS you upgrade yourself to those "less subsidize" B1 or A class wards!
Avoiding to Solve the REAL Problems
If you look at the WHOLE picture closely, it is not difficult for you to realize that the main problem lies with the Sovereign Funds, aka GIC and Temasek Holdings. They are just like a HUGE MONEY VACUUM CLEANERS, sucking lots of money into it but not giving the appropriate returns to our CPF.
When PAP raise the HDB prices, it basically justify it by the "market pricing" of the land which your flats are built on. But bear in mind that most of these land are acquired at dirt cheap prices from our forefathers. All Land Sales proceeds via SLA will go into the Main reserves and thus our sovereign funds, GIC and Temasek. At the same time, our CPF monies are transferred to these two entities via the special Singapore government bonds as well, which give a pitiful returns to our people.
The only difference is that funds that acquired from selling HDB flats to Singaporeans will bear no "burden" on these Sovereign Funds to provide returns while the CPF monies via SSGB will require them to produce return. Thus, right from 1990s, they have capped the returns to our CPF monies while increased new HDB prices. It basically means that they are reducing their obligations of providing adequate returns to our CPF as a whole. They have systematically tweak the system and fooling us into believing they are doing good to us via "Asset Enhancement Scheme" and quietly reducing returns on our CPF.
For some strange reasons, it seems that this is just not enough for them. They have also systematically dragged on the period for these Sovereign Funds to give us back our CPF monies. First, Medisave has been created and whatever money you have in this account, you won't be able to see them in broad daylight till the day you die but only be "transferred" as digits into the big black hole of high medical cost you will face in life.
I believe they will try to make it a law that whatever inheritance your children will get from your CPF, including your Medisave, will be transferred to your children CPF accounts in the near future! They have already tried to tweak the system by introducing such similar mechanism into the CPF nomination scheme as "option" but I believe they will make it "opt-out" instead for those who didn't make clear of their intentions. It just reminds me of the HOTA legislation whereby an initial "volunteer option" of organ donation has become the default choice unless you opt out.
It seems to me that they are doing everything they can to feed these monsters (GIC and Temasek) with money and trying their very best to delay any payment and thus, cash outflow from these monsters.
I do not know why they are trying everything to keep the cash in these two Sovereign Funds but apparently if this is what they are striving for, there is no reason for them to solve the three problems of Inadequate CPF for retirement financing.
1) Low CPF returns
2) High HDB price
3) High Medical Cost
What needs to be done is simply:
1) Raise the CPF returns or liberalize the system to allow Singaporeans to invest their own funds in appropriate trust funds or even directly into Temasek and GIC! To get this work effectively, basic financial management skills should be taught in our schools. If most Singaporeans are to be proficient in managing their own funds, I do not see why we should just settle for that miserable 2.5% from CPF. They could even withdraw their CPF at age 55 and manage their own funds for their own retirement if they can prove their proficiency in financial management!
2) Change the HDB pricing mechanism to Cost-plus pricing system for New Flats. This will reduce BTO prices with minimum impact on resale market.
3) Public Hospitals should remain as Public, instead of thinking making money via Medical Tourism. There should only be one class of beds with REAL subsidies to citizens. A fair Universal Healthcare Insurance should be put in place.
There are many other things that need to be looked into. eg. The CPF Life Annuity system is really a joke. I do not know whether it is just another scheme for PAP to make money or what but the payout is definitely "profit-bias". This has been explained by many other bloggers in Singapore.
Nevertheless, to solve the inadequacy problem of CPF, PAP will have to look hard at these three fundamentals first.
Conclusion
This is where PM Lee has failed badly. He thought he could hoodwink us with such small cosmetic surgery by allowing us to request (approval is not guaranteed!!!) to withdraw part of our CPF money at 65 years old and putting up some measures for us to reverse-mortgage or sell off our flats to solve the problems created by them, in terms of inadequate CPF for retirement financing. What PM Lee should do is to address these fundamental problems that are creating a huge gap in the adequacy of our CPF which is meant for our retirement financing. It is totally a joke for a country which has a mandatory contribution rate of 36% of our gross salary but in the end, we ended up with insufficient funds to finance our retirement and most of us will be forced to sell our flats for retirement!
But I guess Singaporeans are not that stupid at all. The fundamental question we want to ask is that, will PAP take up the responsibility of providing for those who can't have enough money for their retirement? This is especially a REAL problem for many Singaporeans because apart from the above 3 main problems created by PAP, its ultra-liberal FT policy has basically depressed Singaporeans' wages over these two decades and worse of all, displaced quite a number of Singaporeans from their proper jobs. Many professionals or PMETs were forced out by cheaper Foreign labour and have no choice, to become Taxi Drivers! This will add to the difficulties for these Singaporeans to have enough savings in their CPF to cater to their retirement needs.
All in all, I have basically lost confidence in PAP's manipulation of the whole system and this is why, I do not trust them at all. Not with my CPF money. Their past and present tweaking of the CPF, HDB and Healthcare systems, on top of it, the ultra-liberal FT policy, have basically made me skeptical about their real intentions.
My gut feeling is that there is a bigger problem in this whole system which is totally opaque to us. The only way to find out is to kick PAP out of power first.
Goh Meng Seng
Friday, July 25, 2014
Nonsensical Reply from Tharman II
The first OBVIOUS NONSENSICAL CONTRADICTION put up by Tharman in his effort to disassociate CPF from Temasek is that prior to 1992 CPF was used for investment in Infrastructure and Temasek was set up by putting together a few companies set up by PAP government without injection of CPF money.
First of all, assets in these companies Didnt just pop up from nowhere. Secondly, most of these companies are companies with massive infrastructure built into them! Eg Singtel with communication infrastructure, Singapore Power, PSA with massive port infrastructure ...etc. Thus Tharman just contradicts himself in such spectacular way because he has just said CPF was used to invest in these infrastructure!
So make no mistake about it. The very existence of Temasek Holdings depended on our CPF monies invested in these infrastructure in the early days. Without our citizens CPF there can be no Temasek Holdings.
It is just counter-intuitive for Tharman to suggest that all our CPF was SPENT instead of INVESTED somewhere because it would mean PAP was very irresponsible because how would PAP government REPAY our CPF monies if it did not invest in something that generated return?
The second contradiction comes obvious on his explanation of "how CPF money is being invested". In this part, there are DOUBLE CONTRADICTIONS. In his first part, he tried to give the impression that CPF has nothing to do with Temasek because it was used by PAP government to use in infrastructure construction. The truth is, although the PAP government is allowed to use CPF for building up of infrastructure, it doesn't necessary mean that ALL CPF has been used for that purpose. This is especially so when there were budget surpluses over those years. It would mean that some of our CPF had to be managed and invested somewhere else via MAS!
Thus, Tharman said that prior to the formation of GIC (1981), MAS was the one which managed the CPF as part of the National Reserves. MAS was formed in 1971 while Temasek Holdings was incorporated in 1974. Prior to the formation of MAS, all those GLCs set up prior to the formation of Temasek Holdings, were directly managed by MAS! Thus we can only conclude that part, if not all, of the CPF were used to create these GLCs which subsequently transferred to Temasek Holdings.
Furthermore, it is not entirely accurate to say that Temasek Holdings only manages funds that were invested in these initial number of GLCs. Throughout the decades, Temasek Holdings have received additional injections of funds periodically, with the recent injection of $5 billions only a few years ago! Where do these monies come from? The National Reserves which includes our CPF monies transferred via the issuance of government bonds!
The Third nonsensical contradiction of Tharman lies in the explanation of GIC. Tharman claims that GIC was formed because they wanted to invest CPF into "longer term" assets. Pray tell, Temasek's investment isn't "long term" in any sense?
The formation of GIC is for solving a few STRATEGIC problems. Temasek back then mainly managed the GLCs which were basically local entities. It is deemed inadequate for our reserves to be invested only in Singapore companies and a "foreign investment" arm has to be catered for. Furthermore, in the event of any invasion like what happened to Kuwait which was invaded by Iraq, money invested in Singapore would be trapped and rendered "captured" by enemy forces while money invested overseas could be used to pay foreign powers like USA to help us to fight back and regain our land in Singapore. This was what happened Kuwait whereby it was said to pay USA over US$300 Billions for Desert Storm Operations.
The most absurd contradictory assertion made by Tharman is that GIC is formed so to invest CPF along with other Government reserves for longer terms but when explaining whether CPF is managed by GIC, he did a spectacular UP turn and say that GIC did not manage CPF but Government reserves or assets which just happened to include CPF!
Tharman is trying to obfuscate the issue here. We just want to know whether CPF is invested in Temasek, GIC or both. Why would PAP government refuse to acknowledge any of these? The reason, my fellow Singaporeans, is that they DO NOT WANT YOU TO THINK THAT YOUR MONEY HAS ANYTHING TO DO WITH GIC or Temasek so that YOU WILL NOT THINK ABOUT the OBSCENE amount of money they have earned by utilizing your money to invest in these two entities, while giving you pittance return of 2.5% or 4%!
They cannot continue to claim how superb their brains are in making good investment returns from Temasek and GIC without making you angry that you are not benefiting from all these even though your CPF are involved in these investment. That's the crux of the matter!
Tharman's reply on whether GIC knows they are managing CPF money has in fact CHANGED from GIC's initial stance that "it does not know" whether they are managing CPF money. This is after we have exposed the fact that Tharman himself, along with the Prime Minister, are sitting on the Board of GIC! If they don't know, who know? Now he has changed tune, just saying that GIC will "disregard" whether CPF was in fact within the government funds it is managing! This flipping of prata is really great!
He further claims that GIC should not view itself as investing CPF money only else it would have very different investment strategy which will not enable it to pay CPF members the current amount of return! For goodness sake, at current situation, CPF members DIDN'T benefit from higher return which GIC has achieved and thus, what difference does it make for us? It just means that by disregarding the fact that CPF is part of these government fund, GIC is taking MORE RISK than it should at the expense of CPF members? i.e. taking more risk, earning higher returns but not giving them to CPF members? What is Tharman trying to say here?
Furthermore, is Tharman trying to say that GIC is actually such a lousy investment vehicle as compared to other funds in the world that it could only garner an average of 5% return over the 10 or 20 years even when it is taking more risk than it should, assuming it is investing only CPF funds?
The truth is, GIC can and should invest in different portfolios of differential risks. It could take into account of CPF funds is within the assets entrusted to it and invested accordingly to the desire risk portfolio adhered to it. It could have allowed CPF members to invest directly into GIC with directed differential risk portfolios. And this is WHAT PROFESSIONAL fund managers would do! The more I listen to Tharman's nonsensical reply, the more I get worried!
As I have illustrated in my previous post on CPF, if you put coffee powder into the water along with the milk (budget surpluses) and sugar (land sales) to make coffee, you just cannot claim that there is no coffee powder in the coffee you made. Any coffee (or funds) given (or injected) into Temasek or GIC via this coffee mixer (Government Reserves) must contain a certain percentage of coffee powder in it! Thus Tharman's claim that Temasek doesn't have CPF money is absolutely nonsensical as we know money has been injected into Temasek throughout the decades using this common fund called Main Reserves. It is even more nonsensical to claim that GIC should disregard the fact that CPF is in the funds it is managing.
Whether it is Government Funds derived from Land Sales (Sugar), Budget Surplus (Milk) or simply CPF, THEY ARE ALL LONG TERM entities and that is precisely the reason why they are ALL invested in GIC. The risk profile of these entities should be more or less the same! The only problem is that GIC is UNDER-PERFORMING as compared to other pension funds or sovereign funds! People are getting 6% to 8% over the 20 years period while GIC is just getting merely 5%! And even with that, GIC is not giving FAIR RETURN to CPF and in fact, acting like a parasite, creaming off the rightful returns and gave back only 2.5% or 4% to CPF holders! That's the crux of the matter.
The truth is, for any sovereign fund or National Pension Fund, there will be a few important components. If you look at the Japanese National Pension Fund, most of it has been invested in LOCAL equities to reduce the foreign exchange risks. That may not be a good idea for a small market like Singapore with a huge amount of funds but at the very least, PAP should acknowledge the fact that Temasek has indeed utilized part of CPF money in its foundation years as well as the periodical injections of money into it. Temasek should be the "local investment" vehicle for CPF so to reduce the huge amount of foreign exchange risks, especially so when we are maintaining a strong Singapore Dollar as our international monetary policy.
Although it is strategic for us to invest in foreign land via GIC, but we must also be mindful of the great foreign exchange risks we face, as seen in the continuous weakening of US dollars against Singapore Dollars. Thus, it is TOTALLY UNPROFESSIONAL for Tharman and PAP to just focus ALL our CPF funds in GIC! Tharman, it is only PROFESSIONAL to diversify our CPF money into investment LOCAL and FOREIGN entities. Please stop your nonsensical statements here!
Goh Meng Seng
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