CPF tightens criteria for investment
This amendment passed in mid-Feb but somehow I was unaware of it. Note: CPFIS is the CPF Investment Scheme, a scheme which allows you to invest some of your CPF deposits in a limited range of investments.
FROM May 1, the threshold of the CPF Special Account (SA) will be raised from $20,000 to $30,000. This means members can only invest amounts in the SA in excess of $30,000. Existing investments will not be affected and the restriction on the first $20,000 in the Ordinary Account remains unchanged.
It’s bad enough that CPF gives a return that is lower than a safer investment in U.S. Treasury bonds. It’s even worse when CPF doesn’t allow* (it’s not on the list of allowed instruments) you to invest your own money directly in US Treasury bonds. It’s even much more worse when CPF decides to restrict your freedom to invest your own money even further by setting a rather arbitrary requirement of $30,000 in your Special Account before you can invest the balance. And it’s not like they’re compensating for this by increasing the CPF interest rate. It stands at 2.5% for the OA and 4% for SMRA account for the first 2 years, the same as it was the last few quarters.
More importantly what reason did they give this time for restricting Singaporeans’ financial freedom?
“Given the higher interest rate on the SA and the uncertainty of CPFIS returns, it is better to be more conservative,” said Acting Minister for Manpower Gan Kim Yong in Parliament on Friday.
Much has been said about Singapore being a nanny state, where the state custodians (nannies) who pay themselves exorbitant salaries every year dictate the limits of how much we should spend, how we should invest and what we should be allowed to do in entertainment outlets like pubs. And judging by the state of the economy, it’s not like they’re doing a heck of a job either.
Leong Sze Hian couldn’t have said it better:
Mr Leong Sze Hian, president of the Society of Financial Service Professionals, said the new limit would make it harder for people to invest. “As it is, quite a number of people don’t even have, or will have trouble fulfilling, the required Minimum Sum in the CPF accounts.
“Yet, there is a greater need for people to grow their money for their old age, but this new ceiling might delay their ability to invest slightly longer,” Mr Leong said.
Yeah, what greater need could there be apart from the menace of rising inflation which could easily wipe out the real value of CPF deposits? If MAS is doing a poor job of fighting inflation, the government shouldn’t presume that ordinary Singaporeans or “lesser mortals”couldn’t possibly do better than them.
* US Treasury bonds are not in the list of bonds approved for CPFIS. They don’t satisfy the criteria for inclusion. And lest anyone be quick to point out that the value of the US$ currently appears shaky, I should hasten to add that the secondary bond market for US Treasury bonds are highly liquid, unlike HDB flats and other stuff which you can use CPF to purchase.