“With all due respect to the earnest Manpower Minister... no other modern pension fund in the world could get away with this discrepancy... Yet another poorly designed and defended policy for the ordinary citizen badly in need of reform imho.” — Lam Keo...
Former GIC chief economist Lam Keong Yeoh voiced his disagreement in a Facebook post to an Aug 2 speech in Parliament by Manpower Minister Tan See Leng regarding Central Provident Fund interest rates.
He wrote that “CPF interest rates should be returns on very long term compulsory defined contribution pension contributions. They are effectively invested globally by GIC in long term assets yielding over 4% in real terms over global inflation or over 6% in nominal terms over 20 plus years. This is a fairly normal long term return for most decent big superannuation or pension funds. Well done GIC for building this valuable capability over the decades.
Mr Chua also asked if CPF Board would review its interest rate formula, which is pegged to the interest rates of DBS, OCBC and United Overseas Bank. These top three banks in the country recently increased their interest rates. “With all due respect to the earnest Manpower Minister… no other modern pension fund in the world could get away with this discrepancy which means that pension savings over a 40 year working life compound at effectively several percentage points less than what pension funds are actually returning.”