The CPF And How To Pronounce Roy Ngerng’s Surname

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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.