Statement by Tan Kin Lian – Ensure CPF savings are secure and adequate for retirement needs

A primary role of the President is to safeguard the past reserves of the country. A large part of the reserves represent the savings of Singaporeans in the Central Provident Fund.

Many Singaporeans have expressed concern about the security of their CPF savings when, from time to time, they hear about the large losses incurred by Temasek Holdings, Government of Singapore Investment Company (GIC) or the Monetary Authority of Singapore (MAS) in their investments. Just a few days ago, MAS reported a loss of $10.9 billion during the past year.

There is a need to inform and educate Singaporeans about the long term nature of the investments and to give them the assurance that the investments are made prudently. This is especially relevant, given the occasional newspaper reports of money from the reserves being invested in foreign companies which report larges losses and go to the brink of bankruptcy. Some of these foreign companies are not well known and have a risk profile that appears to be very high.

A President, who has the financial knowledge and expertise, and backed by a panel of investment experts, can play a useful role in keeping an oversight over the investment policy. As a trusted, independent person, the President can give the assurance that Singaporeans are looking for about the security of their CPF savings.

The CPF savings represent the hard work of Singaporeans made over several decades. They depend on their CPF savings to take care of their financial needs during retirement, to pay for the cost of living and their medical expenses in old age.

Many Singaporeans have found that, in spite of the frugality and savings habit, they still do not have sufficient savings when they reach the retirement age. They have expressed the view that the CPF scheme is not working to their benefit.

I wish to echo their views and call on the Government to review the operations of the Central Provident Fund and implement changes to achieve the following goals:

• Ensure that the CPF is able to provide an investment yield that is higher than the rate of inflation
• Ensure that CPF members have adequate savings for their retirement needs (after paying off the cost of a modest HDB flat)
• Review the contribution rate of older workers to allow our workers to build up adequate savings for retirement.
• Improve transparency and communication, to assure the people that that their CPF savings are being invested prudently.
• Allow partial withdrawals of CPF savings to meet financial needs of people who have lost their jobs due to factors beyond their control.
• Review the use of CPF savings for tertiary education, to see if the scope can be widened

Many people have read news reports that the funds managed by the Government had been able to earn an attractive investment return over the long term, that are well in excess of the interest rate of 2.5% paid on the ordinary account in the CPF. They have expressed the concern that they are not getting a fair share of the investment return. If inflation is higher than the interest rate, the purchasing power of CPF savings is effectively being eroded if the return on CPF savings is kept at a low level.

I call on the Government to from a panel with representation from all segments of the people to carry out this review and that the review should be carried out in a transparent manner, so as to gain the trust of Singaporeans.

Tan Kin Lian