Lucky Tan has a  pretty good critque on BG (NS) Tan Chuan Jin’s take on CPF (full link here, exerpts below):

This is one of the significant responsibilities in MOM. DPM and myself spend a fair bit of time on this, and rightfully so. Sometimes, I wonder if my job would be easier if we just let people withdraw their CPF totally.

It would make things easier…for awhile. But it would be wrong.

Life expectancy is going up to 82 and beyond. One is likely to live for a good 20 years after retirement. There is a strong likelihood that many may not have saved enough. CPF pay outs would help to ensure some form of regular income stream for individuals. With an ageing population, this becomes more critical because the burden on our children’s generation will be significant if older Singaporeans are not providing for themselves.

As a citizen, I did not really bother too much trying to understand the CPF construct. Like many, I wondered if the returns made sense, especially a number of years ago (seems like a long time ago actually!) when bank interest rates were high. Why can’t I withdraw my OWN money when I retire?

Things look quite different now that I am on the other side of the fence. CPF is an important part of retirement provision for our people. For an almost risk free profile, the returns are reasonable. This is worth reading to understand how your CPF returns have fared given inflation rates over the recent years.

Higher returns would always be nice but it would entail greater risks. The challenge of any portfolio that includes equities is volatility. At point of withdrawal, you may be right in the throes of a downturn. To provide for some balance, we had opened up the space for individuals to invest part of their CPF monies via the CPF Investment Scheme should they wish to do so. Hence, one should therefore treat the ‘untouchable’ part of the CPF monies as the very stable and low risk component of your portfolio.

The problem with Tan Chuan Jin’s whole post is that it’s like every other motherhood reply that comes from the government. It tells you their point of view without apologising where they could have done better and with CPF, there’s plenty of areas they could have done better.

For starters,

– if CPF was for retirement purposes, then why on earth is it being used for property investments?

– Why does CPF not deliver returns that are pegged to inflation?

I agree with CPF’s use for medical insurance.

Singaporeans are by and large not a financially literate lot. It’s not acceptable to force people to save for their retirement but yet not deliver returns that can, at minimum beat inflation and also reap some of the upside when things are performed.

Tan Chuan Jin can argue that with greater reward comes greater risk but that’s precisely why professionals are paid so much! They’re there to do their job to ensure that there is sufficient for yearly withdrawals. Unless, gasp, the good BG is saying that GIC and Temasek can’t do better than 5% after fees on a CAGR basis. If so, someone ought to be fired since whoever is managing CPF funds have the added advantage of managing funds that are locked in till the withdrawal age, these do not face the kind of redemption risk that mutual funds or hedge funds face.

Oh, and the best bit from Tan Chuan Jin’s post?

As a citizen, I did not really bother too much trying to understand the CPF construct.

Me thinks paper generals earn way too much if they do not have to be bothered about whether they have enough monies in their CPF for retirement.

PS: Tan Kin Lian weighs in on CPF too. (link here)