The big loser from the CPF changes: the stock market
The proposed CPF changes raising interest payments on funds less than S$60,000 by 1% would be welcomed by most Singaporeans. But unfortunately the loser out of this is the stock market. While nominated MP Siew Kum Hong went into bat for the man in the street in parliament yesterday by saying it wasn't enough, calls for the cap on stock market investments to be raised were absent.
Currently, CPF members can draw 35% of their account balance to buy shares. This is already a small percentage, particularly for the young people the Singapore Exchange is trying to attract, who have to finance a house with it. If they will now receive higher interest on their CPF savings (at least, the first S$20,000 in their ordinary accounts), there is even less encouragement to withdraw some money and invest it in higher-yielding listed securities. Remisiers, who have been calling for the longest time for the 35% cap to be lifted, might as well give up now.
Clearly, there is a case for protecting CPF members from themselves. Previously, they could draw 85% of their savings before the dotcom bubble burst, a whole bunch of them got burnt and are now calling on their MPs for food vouchers to help them out. Further, the government probably has bigger fish to fry than to help out the stock market. It's concerned people won't have enough retirement savings.
However, a commensurate increase in the stock market investible treshold would have been useful, so that at least the playing field remains as it was before.
While it's become more difficult to buy shares using money you have, it's becoming even easier to buy shares using money you don't have. Case in point: Standard Chartered's share financing scheme. Great idea in theory: let people borrow up to 10 times their monthly salary at 12% a year to buy shares. Only trouble is, who in their right mind believes any stock investment is going to throw off a 12% p.a. return in this day and age, having watched the way the market has moved since March 2003? The big sub-prime inspired shakeout perhaps gives us cause for optimism that the market is going to move higher from here. But what's the bet there'll be foreclosures on people who make losses on their share investments. How is that different from gambling your CPF retirement savings away? The bank wins, as usual.
Mark Laudi
Currently, CPF members can draw 35% of their account balance to buy shares. This is already a small percentage, particularly for the young people the Singapore Exchange is trying to attract, who have to finance a house with it. If they will now receive higher interest on their CPF savings (at least, the first S$20,000 in their ordinary accounts), there is even less encouragement to withdraw some money and invest it in higher-yielding listed securities. Remisiers, who have been calling for the longest time for the 35% cap to be lifted, might as well give up now.
Clearly, there is a case for protecting CPF members from themselves. Previously, they could draw 85% of their savings before the dotcom bubble burst, a whole bunch of them got burnt and are now calling on their MPs for food vouchers to help them out. Further, the government probably has bigger fish to fry than to help out the stock market. It's concerned people won't have enough retirement savings.
However, a commensurate increase in the stock market investible treshold would have been useful, so that at least the playing field remains as it was before.
While it's become more difficult to buy shares using money you have, it's becoming even easier to buy shares using money you don't have. Case in point: Standard Chartered's share financing scheme. Great idea in theory: let people borrow up to 10 times their monthly salary at 12% a year to buy shares. Only trouble is, who in their right mind believes any stock investment is going to throw off a 12% p.a. return in this day and age, having watched the way the market has moved since March 2003? The big sub-prime inspired shakeout perhaps gives us cause for optimism that the market is going to move higher from here. But what's the bet there'll be foreclosures on people who make losses on their share investments. How is that different from gambling your CPF retirement savings away? The bank wins, as usual.
Mark Laudi
Labels: CPF, CPFIS, Standard Chartered, Stock Market
The future of Singapore
Yesterday, the National Rally Speech was out. In the midst of Singapore's progress, the elderly are not left out of the picture.
The government is extending the retirement age. CPF is also being stretched to aid the elderly through their golden years; make retirement savings last longer. In today's Straits Times, it was also mentioned that there is a new HDB buy-back scheme for older owners, essentially, the Government buys the flats from the elderly but the elderly can still live in the same apartment for another 30 years.
Now the targeted topic here is about stretching the CPF, but here's the catch; one cannot use the extra savings fund for investments in the stock market. This is done to minimise any possible risk of losing money, especially at the old age.
Is it a good idea? Well, I think it works both ways.
Good idea: Well, it preps the older generation for their older age as in recent times, medication is much more advanced and that people are living longer hence the need for cash in the golden years is quite critical.
On top of that, it'll stop them from spending it in the stock market; allowing them to realise that risks should no longer or advisable not to be there, especially when it comes to money at that age.
Young working adults would then have more money in their CPF to allow them to afford a more luxurious choice of housing when the time comes.
Bad idea: The higher monthly cut from CPF would result lesser spending for the working adults. On top of that, there is no guarantee that they may live that long to enjoy the CPF savings.
From the time they work with the monthly CPF cut to the day they get their money, is a long way to go. For some people, CPF cut may be quite a burden for them.
In terms of savings, one can always start having his or her own, without having to depend solely on CPF. Every month, just set aside some cash as savings.
Well, at the end of it, it is still 'our' money and we can do whatever we want with it, be it even investing, but I guess the Government is looking at our end as well, the possibility of not having enough cash for the old age.
Well, this issue of stretching the CPF can really go both ways. What do you think?
Nurwidya Abdul
ArchivesThe government is extending the retirement age. CPF is also being stretched to aid the elderly through their golden years; make retirement savings last longer. In today's Straits Times, it was also mentioned that there is a new HDB buy-back scheme for older owners, essentially, the Government buys the flats from the elderly but the elderly can still live in the same apartment for another 30 years.
Now the targeted topic here is about stretching the CPF, but here's the catch; one cannot use the extra savings fund for investments in the stock market. This is done to minimise any possible risk of losing money, especially at the old age.
Is it a good idea? Well, I think it works both ways.
Good idea: Well, it preps the older generation for their older age as in recent times, medication is much more advanced and that people are living longer hence the need for cash in the golden years is quite critical.
On top of that, it'll stop them from spending it in the stock market; allowing them to realise that risks should no longer or advisable not to be there, especially when it comes to money at that age.
Young working adults would then have more money in their CPF to allow them to afford a more luxurious choice of housing when the time comes.
Bad idea: The higher monthly cut from CPF would result lesser spending for the working adults. On top of that, there is no guarantee that they may live that long to enjoy the CPF savings.
From the time they work with the monthly CPF cut to the day they get their money, is a long way to go. For some people, CPF cut may be quite a burden for them.
In terms of savings, one can always start having his or her own, without having to depend solely on CPF. Every month, just set aside some cash as savings.
Well, at the end of it, it is still 'our' money and we can do whatever we want with it, be it even investing, but I guess the Government is looking at our end as well, the possibility of not having enough cash for the old age.
Well, this issue of stretching the CPF can really go both ways. What do you think?
Nurwidya Abdul
Labels: CPF, generation, golden years, government, investment, luxurious, National Day rally, risk, savings
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