Returns on CPF Funds

There is much discussion on CPF recently after the Singapore President’s Address to the 12th Parliament.

One question raised by some people was whether CPF money is safe? For this, the official response is in the following MOF’s web-page:

http://app.mof.gov.sg/reserves_sectionthree.aspx

Having dealt with the question above, the next question is whether CPF money (in the ordinary account) can be paid higher returns than the current minimum 2.5% per annum? This question is best answered by the government as to whether it wants to use part of Net Investment Returns Contribution (NIRC) to increase the 2.5% minimum returns rate. If that is affirmative, then other social spending may be reduced since money is limited.

If this is not possible, then the next question is how can CPF contributors themselves improve on the returns on CPF money (in the ordinary account)?

We then look at investment returns of various financial instruments and assets (including real estate). On 24 January 2011, I wrote a blog post titled: “Achieving Investment Returns”. In it, I said that every investment type has risk-return correlation. The higher the return, expect higher risk of losing all or part of the investment sum.

In the current low interest rate environment, superior investment return is hard to come by without associated risk. Just to give an example. NTUC Income’s returns on their participating fund was just 1.63% for 2013. Can we as retail investors hope to do better than the professional outfit like NTUC Income? Perhaps, the government can look at ways to improve investment returns for CPF contributors. This could alleviate the concerns of CPF members not being able to keep up with inflation rates as they set aside money for retirement.

Copyright © 2014, limkimtong for Living Investment

The material presented is intended to be general and written in layman’s language as much as it is possible. The author shall not be liable for any direct or consequential loss arising from any use of material written. Please seek professional advice from your financial advisor or financial institutions on material written covering financial matters.

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One Response to Returns on CPF Funds

  1. Pingback: Daily SG: 28 May 2014 | The Singapore Daily

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