Monday, July 09, 2007
Read an article in the papers today. The article was talking about the low rate our CPF Ordinary Account and Special Account is offering to Singaporeans. To the uninitiated, the rate stand at 2.5% and 4% for Ordinary and Special Account respectively. To be honest, the rate might be attractive as compared to the current pathetic rate that our banks are offering us but the catch is that we can withdraw our money in the bank anytime we want. Something that the CPF can't offer to us.
In my view, the optimum rate should be 4% and 6% minimum for the Ordinary and Special Account. I am no guru in investment but my CPFIS (buying of unit trusts through Ordinary Account) is definitely earning me more money than what it would earn if it was left to rot in the Ordinary Account. Skeptics might argue that it is because the stock market had been on a bull run since last year. Well, historical data had shown that for any investment in the stock market over a period of 25 years, the average return had been at a sterling rate of 8-12%.
Considering that our savings in our CPF will be lock in for a minimum of 25 years and more, I think the government can consider ways to make our money work harder for us.
Taking into consideration of inflation at an average of 1.5% (Should be more) per annum, our Ordinary Account ain't really beating it hands down. I think the benchmark of returns should be compared to the GIC(Government of Singapore Investment Corporation Pte Ltd) or Temasek. The combined sum of our savings in the CPF can't be much lower than these two government big wigs. The GIC had been posting an average return of 9% for the past 20 odd years. Deducting away inflation (It was set at 2.5%), the return was still an attractive 6.5%.
To help the poor break out of the poverty cycle, more help should be given to grow their savings and retirement nest. Giving them one off rebate of cash might be good for the short term but it is definitely not the long term solution that they are need. My heart goes out to those poor old folks who are either selling tissue or collecting used cans for a living. If only they had more help with their finances while they were still in their prime, would they have to slog for a living at their age?
My family was never well off since I was young(we still are). It is something that I never hide. I also know that the only way out of it is to be financially literate. Education and investing your savings are just two of the many ways to get out of it. While I applaud the efforts of the government to make education compulsory for all S'poreans, more can be done to improve our retirement nest through the increase in rate of the CPF.
You can take a picture of something you see. In the future where will I be?
10:50 PM
10:50 PM
