IN ‘CPF finances: Clarity needed to clear the cloud of confusion’ (ST, Sept 20), Ms Chua Mui Hoong questioned whether the CPF provides a cheap source of funds for the Government’s investments. Subsequent Forum letters also raised the matter of how the return on CPF funds is calculated, and what constitutes a fair return.
The interest members receive for their CPF money should reflect what they could earn by investing in the financial markets, in investments which have comparable risk and duration. All CPF balances are guaranteed by the Government and hence free of risk. Hence the Special, Medisave and Retirement Account (SMRA) interest rates will now be pegged to long-term government-bond yields. Furthermore, the first $60,000 of each person’s CPF balances, to be held for the long term, will attract an extra 1 percentage point in interest. This means that they will always earn at least 3.5 per cent interest.
No commercial bank or fund manager offers more generous terms on such investments. Members seeking higher returns can take out their funds to invest through the CPF Investment Scheme (CPFIS). However, 83 per cent of CPF members who invested their OA savings in the CPFIS from 2002 to 2006 realised less than 2.5 per cent returns – the base rate of the OA. Half of all members who invested experienced negative returns, losing some part of their capital sum.
The CPF Board invests members’ savings in special securities issued by the Government, which pay the CPF Board the same interest rates that its members receive. The Government pools the proceeds from issuing these securities with the rest of its funds, and invests them professionally for long-term returns. This is completely de-linked from the CPF Board and CPF members. Were this not so, CPF members would be exposed to the investment risks and could not receive guaranteed minimum interest rates.
Up to now, both GIC and Temasek Holdings have earned returns that exceeded CPF interest rates, on average over the years. But this does not mean that the Government is making use of the CPF as a ‘cheap source of funds’, or earning a ‘spread at people’s expense’.
First, the Government does not need more funds to invest. Even if it did, it could raise funds more cheaply by issuing treasury bills and government securities, instead of using CPF funds.
Second, Temasek and GIC achieve higher returns on average only by taking on more investment risks. Hence these returns are volatile – they can be low or even negative in some years. Furthermore, we cannot assume that GIC and Temasek will do as well in future. The past two decades have been an exceptional period for global financial markets. Looking ahead, we cannot rule out protracted market downturns, lasting several years. Most CPF members have small balances and will not welcome these risks. Neither will older members waiting to withdraw their retirement funds.
Third, Singaporeans benefit when GIC and Temasek investments do well. Every year, the Government draws part of these investment returns to fund the annual Budget. The revenue is spent on worthwhile investments and social needs, including subsidies for housing, education and health care. And from time to time, the Government distributes accumulated budget surpluses to citizens through CPF top-ups and other schemes.
The Government does not rule out the possibility of introducing private pension plans for those with balances above $60,000 and a higher capacity to take risk. However, it would be unwise for members with low balances to take excessive risks on their basic retirement savings.
The current arrangement thus enables all CPF members to earn fair and risk-free returns on their retirement savings, while benefiting from the good performance of GIC and Temasek through the annual Budget. This is the right way to help Singaporeans save for their old age, and enjoy peace of mind in their golden years.
Jacqueline Poh (Ms)
Director (Special Duties)
Ministry of Finance
Fix your posture
Align it with heaven and earth
You are a lightning rod between them
Let your past dissolve into the earth
Let your future dissolve into space
Let the present moment dissolve into your breath
Forget everything you just did
Stare directly into space and relax your mind
Whatever happens don’t be concerned
The absence of deliberate action is the real message
We make too big a deal of practice
If something occurs, fine
If nothing occurs, fine
The moment is empty
– Vajra Regent , Shambhala Meditation Center of Chicago
Operations and Projects
ARTICHOKE: Anti-interrogation project. Precursor to MKULTRA.
AQUATONE: Lockheed U-2 Spy Plane Project
BLUEBIRD: mind control program
CHALICE: Lockheed U-2 Spy Plane Project
CHERRY: Covert assassination / destabilization operation during Vietnam war, targeting Prince (later King) Norodom Sihanouk and the government of Cambodia. Disbanded.
CONDOR: 1970s CIA interference in Latin American governments, some allege in the coup and assassination of Salvador Allende in Chile
CORONA: Satellite photo system.
DBACHILLES: 1995 effort to support a military coup in Iraq. 
ECHELON: worldwide signals intelligence and analysis network run by the UKUSA Community.
GUSTO: Project to design a follow-on to the Lockheed U-2 Spy Plane
HTAUTOMAT: Photointerpretation center established for the Lockheed U-2 Spy Plane Project
HTLINGUAL: Mail interception operation.
IDIOM: Initial work by Convair on a follow-on to the Lockheed U-2 Spy Plane. Later moved into GUSTO.
IAFEATURE: Operation to support UNITA and FNLA during the Angolan civil war.
KEMPSTER: Project to reduce the radar cross section (RCS) of the inlets of the Lockheed A-12 Spy Plane
LINCOLN: Ongoing operation involving Basque separatist group ETA
LPMEDLEY: Surveillance of telegraphic information exiting or entering the United States
MHCHAOS: Surveillance of antiwar activists during the Vietnam War
MKDELTA: Stockpiling of lethal biological and chemical agents, subsequently became MKNAOMI
MKNAOMI: Stockpiling of lethal biological and chemical agents, successor to MKDELTA
MKULTRA: Mind control research. MKULTRA means MK (code for scientific projects) and ULTRA (top classification reference, re: ULTRA code breaking in WWII. Renamed MKSEARCH in 1964
MKSEARCH: MKULTRA after 1964, mind control research
MKOFTEN: Testing effects of biological and chemical agents, part of MKSEARCH
OAK: Operation to assassinate suspected South Vietnamese collaborators during Vietnam war
OXCART: Lockheed A-12 Spy Plane Project
PAPERCLIP: US recruiting of German scientists after the Second World War
PHOENIX: Vietnam covert intelligence/assassination operation.
PBFORTUNE: CIA project to supply forces opposed to Guatemala’s President Arbenz with weapons, supplies, and funding; predecessor to PBSUCCESS.
PBHISTORY: Central Intelligence Agency project to gather and analyze documents from the Arbenz government in Guatemala that would incriminate Arbenz as a Communist.
PBSUCCESS: (Also PBS) Central Intelligence Agency covert operation to overthrow the Arbenz government in Guatemala.
RAINBOW: Project to reduce the radar cross section (RCS) of the Lockheed U-2 Spy Plane
SHERWOOD: CIA radio broadcast program in Nicaragua begun on May 1, 1954.
THERMOS: Unclassified codeword used in lieu of RAINBOW
TPAJAX: Joint US/UK operation to overthrow Mohammed Mossadeq, Prime Minister of Iran
TSS: Technical Services Staff
WASHTUB: Operation to plant Soviet arms in Nicaragua
AE: Soviet Union
AM: Cuba (1960s)
CK: Soviet Union
DN: South Korea
GT: Soviet Union
HA: Indonesia (1958)
MH: Worldwide operation
MK: Projects sponsored by the CIA’s Technical Services Division (1950s/1960s)
OD: Other US Government Departments (1960s)
PB: Guatemala (1954)
SM: United Kingdom
TP: Iran (1953)
TU: South Vietnam
WI: Democratic Republic of the Congo (1960s)
ZR: Normally prefixes the cryptonym for an intelligence intercept program. E.g. ZR/RIFLE, for a Castro assassination plot which was buried. (1960s)
“It never was my thinking that made the big money for me. It always was my sitting. Got that? My sitting tight!”
– Jesse Livermore