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11-06-2014, 03:00 AM
An honorable member of the Coffee Shop Has Just Posted the Following:
CPF: Did every Singaporean lose $1m? (http://www.tremeritus.com/2014/06/10/cpf-did-every-singaporean-lose-1m/)
http://www.tremeritus.com/simages/dmca_protected_sml_120n.png http://www.tremeritus.org/wp-content/themes/WP_010/images/PostDateIcon.png June 10th, 2014 | http://www.tremeritus.org/wp-content/themes/WP_010/images/PostAuthorIcon.png Author: Contributions (http://www.tremeritus.com/author/contributor/)
http://www.tremeritus.org/wp-content/uploads/2014/06/2014.06.07-Return-Our-CPF-Leong-Sze-Hian-300x169.png
07.06.2014 Return Our CPF@HLP - Leong Sze
Hian
Speech at CPF protest
In my
speech (http://www.youtube.com/watch?v=FI4oUL3NmCY) during the CPF Protest (Return My CPF) on 7 Jun at Speakers’
Corner, I said that Singaporeans may be short-changed by about $1 million
because we probably pay the lowest real rate of return amongst national pension
schemes in the world, historically in the last 25 years or so.
How to calculate lost $1m?
Quite a number of people have asked me as to how the figures can be
derived.
Difference between 3 and 6% from age 21 to 65?
So, here’s an example.
If you start work at say 21 years old with a salary of $1,500 – increasing at
4% per annum until age 65 – at 3% interest, you would have accumulated
$1,491,087 at age 65.
Average overall interest rate on CPF accounts?
As there is no disclosure as to what is the average overall interest rate on
all the different CPF accounts (Ordinary 2.5%, Special, Medisave and Retirement
4.0% plus an extra 1% on the first $60,000) – we have assumed the average
overall CPF interest rate of 3% in the above computation projection.
If the nominal rate of return is say 6% (the historical average real rate of
return after adjusting for inflation of national pension schemes in the world is
we believe about 4%) – you would have accumulated $2,953,777.
Difference of $1.5m in 44 years?
So, you may in a sense, have been short-changed by $1,462,690 ($2,953,777
minus $1,491,087)! And we have not even factored in the difference in the
returns of 3% (6 minus 3%) from age 65 onwards until death under the CPF Life
scheme which pays 4% on the Retirement Account balance plus an extra 1% interest
on the first $60,000 only (with any excess CPF that can be withdrawn but is left
in the CPF earning 2.5% only).
Assumptions?
Note: We have assumed a 4% increase annually in the salary because the
annualised real total wage growth from 2003 to 2013 was 1.5% and historical
inflation in Singapore is about 2 plus % – and the Government’s target for real
wage growth for the decade is 30% (2.7% per annum). Also, assuming that CPF
contribution rates and ceilings may also increase in nominal terms in the future
because of inflation, in line with the 4% salary
increase.
SY Lee and Leong Sze Hian
Click here to view the whole thread at www.sammyboy.com (http://www.singsupplies.com/showthread.php?183809-Uncle-Leong-Every-SG-is-Short-Changed-by-1M-by-SeePeeF!-60-Song-Bo&goto=newpost).
CPF: Did every Singaporean lose $1m? (http://www.tremeritus.com/2014/06/10/cpf-did-every-singaporean-lose-1m/)
http://www.tremeritus.com/simages/dmca_protected_sml_120n.png http://www.tremeritus.org/wp-content/themes/WP_010/images/PostDateIcon.png June 10th, 2014 | http://www.tremeritus.org/wp-content/themes/WP_010/images/PostAuthorIcon.png Author: Contributions (http://www.tremeritus.com/author/contributor/)
http://www.tremeritus.org/wp-content/uploads/2014/06/2014.06.07-Return-Our-CPF-Leong-Sze-Hian-300x169.png
07.06.2014 Return Our CPF@HLP - Leong Sze
Hian
Speech at CPF protest
In my
speech (http://www.youtube.com/watch?v=FI4oUL3NmCY) during the CPF Protest (Return My CPF) on 7 Jun at Speakers’
Corner, I said that Singaporeans may be short-changed by about $1 million
because we probably pay the lowest real rate of return amongst national pension
schemes in the world, historically in the last 25 years or so.
How to calculate lost $1m?
Quite a number of people have asked me as to how the figures can be
derived.
Difference between 3 and 6% from age 21 to 65?
So, here’s an example.
If you start work at say 21 years old with a salary of $1,500 – increasing at
4% per annum until age 65 – at 3% interest, you would have accumulated
$1,491,087 at age 65.
Average overall interest rate on CPF accounts?
As there is no disclosure as to what is the average overall interest rate on
all the different CPF accounts (Ordinary 2.5%, Special, Medisave and Retirement
4.0% plus an extra 1% on the first $60,000) – we have assumed the average
overall CPF interest rate of 3% in the above computation projection.
If the nominal rate of return is say 6% (the historical average real rate of
return after adjusting for inflation of national pension schemes in the world is
we believe about 4%) – you would have accumulated $2,953,777.
Difference of $1.5m in 44 years?
So, you may in a sense, have been short-changed by $1,462,690 ($2,953,777
minus $1,491,087)! And we have not even factored in the difference in the
returns of 3% (6 minus 3%) from age 65 onwards until death under the CPF Life
scheme which pays 4% on the Retirement Account balance plus an extra 1% interest
on the first $60,000 only (with any excess CPF that can be withdrawn but is left
in the CPF earning 2.5% only).
Assumptions?
Note: We have assumed a 4% increase annually in the salary because the
annualised real total wage growth from 2003 to 2013 was 1.5% and historical
inflation in Singapore is about 2 plus % – and the Government’s target for real
wage growth for the decade is 30% (2.7% per annum). Also, assuming that CPF
contribution rates and ceilings may also increase in nominal terms in the future
because of inflation, in line with the 4% salary
increase.
SY Lee and Leong Sze Hian
Click here to view the whole thread at www.sammyboy.com (http://www.singsupplies.com/showthread.php?183809-Uncle-Leong-Every-SG-is-Short-Changed-by-1M-by-SeePeeF!-60-Song-Bo&goto=newpost).