The interest rates on our CPF accounts are very good and fair?

I refer to the article “MAS’ net profit declines to S$5.3 billion due to strong Sing dollar” (Channel NewsAsia, Jul 4).

It states that “The Monetary Authority of Singapore (MAS) made a net profit of S$5.3 billion in the previous financial year, according to its annual report for FY2017/18 released on Wednesday (Jul 4).

The figure, which excludes a S$1.1 billion contribution to the Consolidated Fund, is lower than last year’s record net profit of S$24.3 billion as negative currency translation effects partially offset interest income and investment gains.”

As to “For the year that ended Mar 31, 2018, MAS made a gain of S$8.5 billion from the investments of its official foreign reserves (OFR).

At the end of Mar 2018, MAS held S$376.5 billion of OFR on its balance sheet” – does it mean that the annualised return for the last year was about 2.3% per anuum ($8.5 divided by $368 billion ($376.5 – $8.5 billion))?

Does this also mean that the CPF interest rates at 2.5% (Ordinary Account), 4% (Medisave, Special and Retirement Accounts), 5% (on the first $60,000) and 6% (on the first $30,000 from age 55), are very good and fair, compared to the 2.3%?

“While the OFR recorded “strong” gains of S$22.3 billion as global markets continued to rally, S$13.8 billion of negative currency translation effects was incurred as the Singapore dollar strengthened against the US dollar and the Japanese yen.

This compared with the investment gain of S$30.1 billion made during FY2016/17, helped by higher investment returns and the depreciation of the Sing dollar against some major currencies.

“The best way to interpret the number is to look at the 10-year average (which is a) good judgment of the kinds of investment gains that MAS is making over a long-term period. Year to year, there will be fluctuations.”

Over the last 10 financial years, investment gains, derived after stripping out currency translation effects, averaged S$12.1 billion per annum, according to the annual report.

This is invested in a well-diversified portfolio, comprising different asset classes across various geographies, for good long-term returns and resilience across market conditions.

About three-quarters of the MAS’ portfolio are denominated in the US dollar, euro, yen and British pound, with the greenback forming the bulk. Investment-grade bonds in the advanced economies form the largest allocation in the portfolio, said the central bank.”

Leong Sze Hian

 

 

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8 Responses to “The interest rates on our CPF accounts are very good and fair?”

  • Mr Leong, Mr Leong:

    Sometimes, you ask funny questions.
    Is the CPF return of 2.5% very good and fair, compared to MAS returns?

    Why do you compare CPF pension fund return with MAS returns? Crazy.

    You should compare pension fund return with other good pension fund returns in other countries (which is 2.5% compared to 10% or more).

    MAS fund is managed for other reasons, e.g., to stabilize or to direct the Sing dollar exchange rates.

    Compare like with like, please.

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  • Is our cpf really there?:

    Is the money, our cpf money loaned to GIC and Temasek really there?
    Some companies reported huge and increasing profit and NTA year after year, and can become bankrupt overnight!
    Midas in Singapore Exchange is a classic example. Its hundred of millions of cash deposited in banks is actually just a fraction of the bogus account, less than $1 million. Its accounts are audited by external auditors.
    Noble reported its NTA over $10 billion and defended its accounting despite allegations, and then it began to write off asset, within a year, its NTA becomes negative.
    SMRT, a darling of investor, was making huge profit and giving out envious dividends, boosting investment returns of its major shareholder PM wife’s controlled Temasek.
    Then, SMRT was delisted and reported it made huge losses!
    PM recently the GST would increase to 9%!

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  • No regret in your vote:

    Look at Malaysia, continuously governed by BN for 60 years. After BN was ousted by popular vote, the new government reports huge losses at 1MDB and huge public debts!
    Is Singapore in the same shape as BN’s Malaysia. The people do not know where our cpf, our reserves are! Even the late Executive President Ong Teng Cheong did not know despite his relentless effort to find out.
    To sustain the ponzi scheme, PAP has to import more foreign workers and investors to grow the economy, property market, and cpf contributions. Otherwise, cpf withdrawal will exceed contribution, and the ponzi will collapse. Withdrawal is already curtailed by the the ever increasing withrawal age and increasing minimum retirement amount.
    PAP property cooling measures are a wayang. MND Minister Wong, PM’s spy in 38 Oxley’s, and MAS Menon said huge supply coming.
    This is what former MND Minister Mah, a multi-millionaire, said in 2009 when property prices rebounced after a plunge of more than 10-20% during the global financial crisis (the defaulting mini-bonds period). He continued to stop land sale and relax the property rules. Property developers did not have to complete building and selling their units in 5-7 years as stipulated by law.
    Why are property prices rise so sharply in the past year?
    Why are developers bidding record prices for enbloc and government land?
    Why are people rushing to buy condo at higher prices?
    The supply is much lower as Wong and Menon said as developers have sold a lot and their stock is much lower due to reduced land sale in the past few years.
    Demand is much higher than supply, property companies and the rich are hoarding controlling supply just like PAP reducing land sale, people are anxious to buy, be it for status symbol, singles buying, or ineligibility of higher-income families to buy HDB.
    The rich can avoid rules, like QC, stamp duties easily.
    Everyone knows of PAP asset enhancement policy, PAP will stop land sale, waive rules to re-boot the market if prices drop too rapidly like in 2008. PAP is re-booting HDB enbloc because of unhappiness over low resale price of older flats vis-a-vis newer one.
    PAP must be seen to be doing something in order to win votes, GE2011 and GE2015 are good examples.
    Just hope Singaporeans see the importance of check and balance. At least we dont wake up to a rude shock like Malaysians.
    Hope Malaysians-converted-to Singporeans do not have a second awakening.

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  • N.Jungne:

    I used CPF to pay for my HDB flat, the interest rates was then at 5.25%. I can still save 0.25% until itt was at 2.5% from then die lah. No matter how much you saved, the interest earned is finished before you can even smell.

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  • oxygen:

    IF CAN’T EVEN ACHIEVE 6% p.a.long-term on any investment, better close shop, la.

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  • oxygen:

    THIS ARTICLE HAVE ONE BIG FLAW – the $12 billion per average return over a decade is NOT SUSTAINABLE. Bond yields of long-dated investment grade will be redeemed by issuers, they will be displaced by lower yield bond as interest rate hit bottom in 2016. If yield rise, there will be erosion of bond capital values – capital loss will result hidden in the books.

    Coupled with exchange rate losses, the real return of MAS could be far lower forward.

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  • oxygen:

    @ No regret in your vote

    NOT QUITE CORRECT THERE. En bloc create its own demand and a BIGGER SUPPLY of its own. No developer hoard its own completed development property – impossible because of balance sheet pressure. Need to reduce gearing to fund new land acquisition.

    No regret in your vote: Why are property prices rise so sharply in the past year?
    Why are developers bidding record prices for enbloc and government land?
    Why are people rushing to buy condo at higher prices?
    The supply is much lower as Wong and Menon said as developers have sold a lot and their stock is much lower due to reduced land sale in the past few years.
    Demand is much higher than supply, property companies and the rich are hoarding controlling supply just like PAP reducing land sale, people are anxious to buy, be it for status symbol, singl

    Price bubble is because developers bid land too high, attempts to pass on to buyers. This is dangerous to economy. Demand driven running ahead of fundamental forcing Lawrence Wong to respond. Remember this is cooling measure on top of existing cooling measure. It is wild fire that must be extinguished. City Dev share dropped 15% on Friday.

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  • oxygen:

    @ No regret in your vote

    YOU FORGOT BOND MARKET HAS TURNED SINCE BOTTOMING IN 2016, picked up speed since September 2017. Lawrence Wong and Ravi Menon have to worry about stress and risks to banks in a property market crash when global economy is so wobbly unstable.

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