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#1
06-02-2015, 11:40 PM
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The Reform Party - CPF Needs Radical Reform Not Cosmetic Changes
An honorable member of the Coffee Shop Has Just Posted the Following:
Source: The Reform Party CPF Needs Radical Reform Not Cosmetic Changes Published: 6th February 2015 We are extremely disappointed by the recommendations of the CPF Advisory Panel, which have been accepted by the Government. The recommended changes amount to the mildest of tweaks to a flawed and conflicted system. In the case of the new tiers (Basic, Full and Enhanced Retirement Sums), which replace the current Minimum Sum, there is no relaxation of the rules just a name change. The Government continues to require Singaporeans to pledge their property if they only have the Basic Retirement Sum at 55. We need radical reform to CPF, which is now widely seen for what it is: a forced savings scheme that exploits middle- to low-income Singaporeans. Fundamental Conflict of Interest There is a fundamental conflict of interest between the interests of Singaporeans as savers and investors and the interests of the Government in borrowing as cheaply as possible. We pointed this out in our White Paper on CPF Reform published in June 2014. The money is lent to GIC (and indirectly allows the Government to inject money into Temasek. The SWFs are able to arbitrage the difference between what we are paid and the yields on higher-risk assets. Many of the assets GIC and Temasek invest in are illiquid and difficult to value. This is the real reason why the PAP keep increasing the Minimum Sum making it more difficult for you to withdraw your money. The PAP claim that your CPF savings are invested in AAA securities issued by the Government. However they are only rated AAA because if the SWFs lose the money through bad investments you would have to repay the money lent to them through higher taxes. Ultimately you are guaranteeing yourself. If the value of GIC’s investments fell by30-40%, as happened during the 2009 financial crisis, there would not be enough money to repay CPF holders and the PAP Government would need to raise taxes. PM and Wife Should Not Head Our SWFs The conflict of interest is made worse by the fact that the PM is Chairman of GIC and his wife is CEO of Temasek. As Chairman of GIC he must act in GIC’s best interests which conflicts with his responsibility to ensure Singaporeans’ interests are protected. The Government refuses to disclose how much the PM’s wife is paid though this is likely to be much more than the PM. However we know that Temasek’s management’s bonuses are dependent on achieving better than a hurdle rate of return. This hurdle will undoubtedly be linked to the Government’s cost of borrowing, which in turn is determined by how low it sets the rates paid to CPF account holders. Unfairness of Current CPF Scheme The Special Advisory Panel has not addressed this fundamental conflict of interest. Nor has it put right the broken promise to return our CPF at 55 or help middle- and low-income Singaporeans deal with financial hardship caused by the PAP policies of needless austerity. As we said in our White Paper, the CPF scheme is inequitable for the following reasons:
Excess Government Savings Nor does the Advisory Panel address our macroeconomic problem, which is one of excess savings. This is a global problem but particularly acute in Singapore. At the same time many Singaporeans struggle to make ends meet, go without seeing a doctor or buying needed medicines and send their children to school hungry or without money to buy lunch. As the PAP Government already runs a Budget surplus of 8-10% of GDP. According to the Monthly Digest of Statistics (MDS) for January 2015, the Government had surplus cash flow over and above its spending commitments of $36 billion in 2011 and $29 billion in 2012. The figure for 2013 has not been released yet but is likely to be of the same size. According to the PAP government’s figures, it has huge external assets of over $800 billion and net assets (after CPF liabilities) of roughly $360 billion. This represents accumulated net assets of over $110,000 per citizen over and above what every Singaporean has in his or her CPF account. In the context of these staggering and immoral surpluses, it is difficult to understand why the PAP Government insists on all Singaporeans, especially the elderly, disabled, and median- to low-income families with children, undergoing unnecessary financial hardship. This is especially true given the low returns achieved by Temasek and GIC over the past few years when converted back into Singapore dollars. In particular why are Singaporeans not allowed to withdraw their CPF in the Special and Ordinary Accounts at the age of 55 as was originally promised? It is not as though the withdrawal of the money will place a fiscal burden on the state. It is only through our citizens’ hard work and sacrifice in going without free education, health care, help for children and dependents, old age pensions and other benefits that citizens of rich countries take for granted that has enabled the PAP to make such huge and immoral surpluses. There is a global glut of savings, which results in low to negative returns on investment. In addition we expect productivity to increase exponentially over the coming decade due to the advance of Artificial Intelligence and automation resulting in higher living standards for all. As a result these surpluses no longer make any sense if they ever did. Special Advisory Panel Recommendations Just A Rebranding Exercise The recommendation of the Special Advisory Panel to allow us to withdraw 20% of our CPF at 65 is totally inadequate. In addition the introduction of three tiers for savings is largely just a cosmetic change without real substance. Singaporeans are already required to pledge their property if bought with CPF savings for half the Minimum Sum if they fall short of the total sum. The Advisory Panel new tier at 50% of the current Minimum Sum allowing you to withdraw money above that level if you pledge your property is theoretically slightly less restrictive than the old rule by which if you failed to meet the full Minimum Sum your property was automatically pledged. This is just the reintroduction of the 50% Withdrawal Rule which the PAP Government scrapped in 2009 when Temasek and GIC had sustained large losses. However most Singaporeans will have used their savings on purchasing their HDB and so will have less than the Basic Sum in their accounts. Thus they will be unable to withdraw any money. In addition the equity in their HDB is likely to be worth considerably more than 50% of the new Full Minimum Sum so in effect they will be pledging more security than the Minimum Sum. Reforming CPF The core of our proposed reforms is essentially the same as in our White Paper published in June 2014:
Individuals to continue to be allowed to use both employee and employer CPF to fund property purchases. Subsidies and tax exemption for housing purchases have helped to fuel the housing bubble. However ending subsidies too quickly could cause a housing price collapse with severe consequences for the economy Reform Party Proposes that Government Fund Most of Basic Old Age Pension
The People Should Own Temasek and GIC Reform Party has since 2009 called for Temasek and GIC to be owned by the Singapore people. We would achieve this through a share listing and distribution of shares directly to the citizens. This would achieve transparency and align the interests of the managers of the SWFs with the people as shareholders. This was in our Election Manifesto for 2011. Also see this article written in 2013: http://sonofadud.com/2013/05/04/how-...masek-and-gic/ End Of Article   Click here to view the whole thread at www.sammyboy.com. 
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