The CPF And How To Pronounce Roy Ngerng’s Surname

No I’m not going to teach you how to pro­nounce Roy’s sur­name. The title is just writ­ten in the style of Roy Ngerng’s attention-seeking blog post titles.

Now that Roy has ‘been Davin­dered’ and taken down the alleged offend­ing blog post, applied to be an NMP, and raised ques­tions from dozens of my friends who are none the wiser about what hap­pens to our CPF money, I thought it might be timely to address some of the questions.

In 2011, some of my friends and I had a web­site called ‘You Say I Say Who Con­firm’, and we wrote about stuff that were slightly con­tentious, but we never got Davin­dered. Take for exam­ple, this post I wrote about the CPF. It basi­cally says the same thing Roy said, and you can get all this infor­ma­tion from var­i­ous Gov­ern­ment websites.

But, you can­not and should not impli­cate the PM or the Gov­ern­ment and accuse them of steal­ing from the pop­u­la­tion. You’re not doing the rest of us a favor by doing so, although the “hard truths” should be made bet­ter known to us — and like I said, most of these ‘truths’ are — you just have to scour the Gov­ern­ment, GIC and Temasek sites.

The only real area of con­tention is where Temasek Hold­ings says out­right that it “does not man­age CPF money”. That’s not a lie, but only because by the time the monies in our Fund is in Temasek’s hands, it is no longer in the form of CPF Funds.

The bot­tom line is this. Although it is in the inter­est of national secu­rity that cer­tain aspects of our mon­e­tary reserves are not divulged, there should still be more trans­parency regard­ing how our sav­ings are invested.

Mean­time, if you’re not sure what Roy said, here’s what I wrote in 2011:

What Do They Do To Make Our CPF Grow?

I imag­ine the top ques­tion at the top 10 fre­quently asked ques­tions page of the CPF Board would be “What the heck does the CPF Board do to my money to be able to earn 2.5% — 5% inter­est in an age where banks seem to want you to pay them to keep your money”?

But it is not. It isn’t even an FAQ accord­ing to the Board. Does every­one know some­thing I don’t?

So where does the money go? How does the Gov­ern­ment guar­an­tee us what they call “risk free inter­est” of 2.5%? What is risk-free interest?

We’re told that it doesn’t go into GIC for them to invest in UBS and then get annoyed about a rogue trader los­ing $2bn. (And you never hear about rogue traders mak­ing bil­lions, as you can imag­ine they would, had their coins landed the right side up).

We’ve also been told (Temasek Hold­ings FAQ No. 8) that it doesn’t go into Temasek Hold­ings for them to post a 10-year net profit and then spend the last three years fight­ing off alle­ga­tions of bad invest­ment deci­sions because they lost 31% of its hold­ings in the 2008 finan­cial crisis.

So where does the Board put the money? Under a col­lec­tive prover­bial pil­low wait­ing for the CPF Fairy to pay out 2.5%? Or do they put our money in local banks, sav­ing us the trou­ble of doing that our­selves and earn­ing a pit­tance in inter­est on our own?

Or does our CPF Board, by strength in sheer num­bers, get a fab­u­lous deal from our friendly local finan­cial banks that allows them to guar­an­tee us this “risk free” return of 2.5%?

Accord­ing to the Accountant-General’s Depart­ment, there are these things called Spe­cial Sin­ga­pore Gov­ern­ment Secu­ri­ties, which are bonds issued only to the CPF Board to, in the Accountant-General’s Department’s own words, “meet the invest­ment needs of the Cen­tral Prov­i­dent Fund”. The AG-D also states that “The invest­ment of CPF funds by the Gov­ern­ment relieves the CPF Board from tak­ing on the invest­ment risk of a fund man­ager to con­cen­trate on its pri­mary role as a national social secu­rity institution”.

In other words, our Gov­ern­ment bor­rows our CPF money, guar­an­tee­ing the Board at least 2.5%, and in exchange, takes on the risks of a fund man­ager, and log­i­cally, the ben­e­fits as well.

In addi­tion, the money that the CPF Board lends to the Gov­ern­ment is put into this thing called the Gov­ern­ment Secu­ri­ties Fund, where they are blended on high set­ting for one minute together with pro­ceeds from invest­ment returns, other secu­ri­ties issuances and sea­soned to taste. Once that’s done, voila! You can no longer call it CPF money per se, and can there­fore con­fi­dently tell every­one who asks, that 1) CPF money is not invested in Temasek Hold­ings, 2) CPF money is not invested in the GIC.

The other stuff I gleaned from the AG-D’s doc­u­ment was that the Sin­ga­pore Gov­ern­ment doesn’t have any exter­nal debt. The only peo­ple they owe money to are the peo­ple they gov­ern. The Gov­ern­ment also owes every other nation on this planet zilch, noth­ing, or as the aunty who runs the kopi­tiam across the street would say, jilo. And that prob­a­bly has some­thing to do with the fact that we have AAA rat­ings across the board from Fitch, Moody’s and Stan­dard & Poors, although log­i­cally, even if we dropped an A or two, it wouldn’t mat­ter to the Gov­ern­ment because they can tech­ni­cally still bor­row money from the CPF at 2.5%.

So, how do we answer the burn­ing ques­tion that is also not on the CPF Board’s Top 10 FAQ list, “How safe is our CPF money?”

As good as gold? As safe as houses? Solid as a rock?

We’d need a whole lot more infor­ma­tion to be able to get some­thing defin­i­tive. But still, on a hunch and some good old fash­ioned agak-ration, I think it is.

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