Straits times article 9 december 1983: The dollars and cents of cpf

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STRAITS TIMES ARTICLE 9 DECEMBER 1983: THE DOLLARS AND CENTS OF CPF



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Post date:
28 Jun 2014 - 2:41pm












CPF series Article 1: The Dollars and Cents of CPF
9 December 1983, The Straits Times

Source: http://eresources.nlb.gov.sg/newspapers/Digitised/Article/straitstimes19...

This article appeared in the Straits Times in 1983 when interest rates on Singaporeans' CPF contributions was 6.5% (the highest ever) compared to the 2.5% today, and higher than the 5.25% members received in 1965.

In an easy to understand question and answer format, the article lays out the fundamental objectives of the CPF and why CPF contribution amounts for employers and employees increased from 10% in 1955 to 46% in 1983 (Part of the answer - to provide "a cheap source of finance for the government. The CPF purchases government stock and the government loans the money cheaply to the HDB."). The article goes on to observe how CPF interest rates were fixed then and why interest rates were not fixed to prevailing commercial rates. Finally, it also addresses the relationship between CPF interest rates and inflation. While we speak about how CPF rates today ought to adjusted for inflation, the mantra then went like this - "Between 1966 and 1981, the CPF interest rate was higher than the Consumer Price Index in 12 out of 16 years. For six of these years, the CPF interest rate was higher than the commercial interest rate."

The answer that followed in case CPF members did not have enough money to support themselves in their old age? Rent out a room in your HDB flat. Just like today, there was a concern of Singaporeans frittering away their CPF monies upon total withdrawal at the age of 55 - "One of the suggestions made was to allow members to withdraw their savings as an annuity payment, on retirement. If this scheme is introduced, it will be optional, as some retirees may have plans for their own savings." It would appear as if greater choice to members was the prevailing wisdom, even if the latter suggestion represented the birth pangs of CPF Life.

Readers may find some information in this article useful to understand how the CPF scheme operated in the past, and how it has evolved over the years. One of the themes with regard to these articles pertaining to the CPF all of us can start thinking about is the interest rate paid on CPF monies, and separately, how the government uses CPF monies, both today and in the past. We will return to this theme in future articles. In the meantime, please feel free to share this article, talk about it among your friends and better understand the CPF system and to see how it should be strengthened. We cannot be talking about trade-offs, implications of suggestions etc. of our choices without being adequately informed. Do not hesitate to share your own CPF-related articles here too.

Pritam Singh
*Article first appeared on https://www.facebook.com/Pritam.Eunos?fref=nf


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