Short Notes from the Editor
18 January 2010

A Straits Times reader, Mr Manuel Nathan, recently wrote in to ask what are the lowest possible payouts for the CPF Life plans.

He was concerned that the Guide to CPF Life published by the CPF Board had stated in fine print that the payout range based on CPF interest rates of between 3.75per cent and 4.25per cent does not represent the lower and upper limits of the payout.

In its response, Mr Lo Tak Wah, Director (Retirement and Investment) of the CPF Board avoided answering the question altogether, preferring instead to stick to the propaganda that CPF Life is designed to have less volatile payouts and that inflation-indexed payouts are not feasible. (See: CPF Life designed to have less volatile payouts.)

The real reason why the CPF Board avoided answering Mr Nathan’s question is because the lowest possible payout is zero dollars.

As recent as July last year, it was revealed in Parliament that there was a provision allowing the CPF Board to stop payments in the event that the Lifelong Income Fund becomes insolvent.

Even Madam Halimah, chairman of the Government Parliamentary Committee for Manpower, had earlier noted that she found this clause “quite disturbing“.

In the article “STOP THE WAYANG, just return us our CPF!“, I said:

Mdm Halimah has a curious sense of humour and a vocabulary to match. This clause is not merely disturbing. It is monstrous because it allows the Government to completely shirk its responsibility and accountability to Singaporeans in the event that the Lifelong Income Fund becomes insolvent due to its mismanagement and incompetence.

Let me clarify my views of CPF Life again.

Without any transparency from the Government or from CPF Board, Singaporeans will never know the criteria by which payouts are decided. The CPF Board has the authority to modify payouts based on changes in life expectancy or changes in prevailing interest rates, but any decision can ultimately be made without any accountability to the public because the exact details are never disclosed.

There is no way to hold the Government accountable should the Lifelong Income Fund become insolvent due to mismanagement, nor is there any way of being assured of a fair and decent CPF Life payout since the CPF Board can arbitrarily change the payouts at its own discretion without any need to justify its decision to the electorate.

There is no evidence to suggest that the Government has designed CPF payouts to be less volatile. In fact, by their own admission, CPF payouts are expected to be low because the CPF funds are being invested in Government securities that currently yield a very low rate of return.

The refusal to index CPF Life payouts to inflation is also daylight robbery. If inflation persists at 3% per annum for the next 20 years, the value of CPF Life payouts would be halved. This means that the standard of living enjoyed by elderly Singaporeans would fall by half.

Compulsory annuity is nothing but asset confiscation disguised as retirement planning.

It is high time Singaporeans told the Government that it cannot rescue a pyramid scheme gone bad by merely adding another layer.


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  1. if the day comes when cpf life payout is zero, i am sure there will be mass protests.

    however, what i worry more is the slow and inobvious way of reducing real payout as opposed to nominal payout. ppl won’t protest over this.

  2. The real payout will definitely be reduced over time because the govt has said they will never revise it upwards in response to inflation.

    In fact, if you look at what the govt has said, they have only mentioned various conditions under which they will REDUCE the payout, like increased longevity.

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