Central Provident Fund Why CPF failed in its mission
Singaporeans save a large part of their earnings in the Central Provident Fund, including the contribution from their employer.

But they do not have adequate savings for their retirement needs. 

What happened? What cause this leakage? 

Here are my perspective.

a) A large part of the savings is put aside in the Medisave account and used wastefully for medical treatment and insurance. They make the medical providers and the insurers rich, but make the workers poor. 

b) A large part of the savings is used to buy an expensive leasehold property that will start to depreciate in value after 40 years and will eventually have no value at the end of the lease.

c) The interest rate payable by CPF is quite low, at 2.5% for some of the savings and 4% for others. These rates are below what can be earned on long term investments.

d) The approved investment schemes have high charges and poor investment performance. They do not give a good return to the workers, but make a good profit for the financial institutions. 

If the CPF is operated purely as savings for retirement, similar to the superannuation funds in Australia, the workers would have get a much better return for their savings. 

Sad. But the CPF is now a broken down scheme.

What can be done to correct the flaws? Here are my suggestions:

a) Stop Medisave and the insurance schemes. Introduce a single payer health care system that is done by many countries.

b) Let workers pay for their housing outside of CPF. They can use the money to buy a flat or to rent a flat, according to their needs. 

c) Change CPF to be savings for retirement, similar to the superannuation schemes in Australia.

In other words, roll back CPF to what it was before 1968.

Tan Kin Lian

Vote - do you agree that the CPF scheme is now a broken down scheme?


 

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