CPF SA Shielding hack - RIP (Obsolete)

[RedsYWNA]

I believe the main challenge of LRIS would be educating the masses that it is OK to have certain down period to have mark to market losses.

As u know even Temasek post losses or some failed investments on the media, already got people make noises even tho that is not their monies whahahhaha

I believe the main challenge of implementing LRIS is that the govt can no longer earn the spread between the CPF rates and the LT returns of GIC.

ie by implementing LRIS, we are letting citizens raid our 'much treasured' reserves.......... LOL

 

[RedsYWNA]

OA at 2.5% is cheap financing today but not SA/RA lah.

also past decade ultra low interest rate how? Cpfb still provide 2.5% despite sgs bonds at 1-2%

2.5% locked up for over 20 years, and invested in the markets over the corresponding period. GIC huat big time while members are left with accruing 2.5%. That's why it really make sense for members to quickly use CPF OA for properties.

 

[BBCWatcher]

I believe the main challenge of implementing LRIS is that the govt can no longer earn the spread between the CPF rates and the LT returns of GIC.

2.5% locked up for over 20 years, and invested in the markets over the corresponding period. GIC huat big time while members are left with accruing 2.5%. That's why it really make sense for members to quickly use CPF OA for properties.

The CPF Investment Scheme is available, and Endowus (as a notable example) exists. Those offerings could be better (LRIS), but there are some offerings.

I think you raise an interesting point about properties (residential real estate). I suppose it's possible some CPF members will be more highly motivated to use more OA dollars more quickly to chase (more/larger) real estate given these Budget 2024 CPF rule changes. It would be for two reasons I think: slightly lower expected future CPF yields (meaning they feel they want higher returns in the run-up to retirement — never mind that real estate probably isn't the answer), and greater perceived uncertainties about CPF rule changes ("Use OA while you still can!") To the extent CPF members react this way, if they do, it could add some upward pressure on home prices. And that wouldn't be helpful in terms of public policy. That said, it's unclear whether CPF members will react this way, how big the effects will be if they do, and whether there will be other factors offsetting these effects.

 

[DevilPlate]

The CPF Investment Scheme is available, and Endowus (as a notable example) exists. Those offerings could be better (LRIS), but there are some offerings.

I think you raise an interesting point about properties (residential real estate). I suppose it's possible some CPF members will be more highly motivated to use more OA dollars more quickly to chase (more/larger) real estate given these Budget 2024 CPF rule changes. It would be for two reasons I think: slightly lower expected future CPF yields (meaning they feel they want higher returns in the run-up to retirement — never mind that real estate probably isn't the answer), and greater perceived uncertainties about CPF rule changes ("Use OA while you still can!") To the extent CPF members react this way, if they do, it could add some upward pressure on home prices. And that wouldn't be helpful in terms of public policy. That said, it's unclear whether CPF members will react this way, how big the effects will be if they do, and whether there will be other factors offsetting these effects.

More likely use excess Sa (upon closure) and/or Oa to clear down mortgage debts first.

Those without any debts to clear, will withdraw and put in banks FD and then swayed to buy banking products once Fd rates drop to 2% or lesser. Hahahaha

Greatest beneficiaries is our 3 local banks imo.

 

[DevilPlate]

2.5% locked up for over 20 years, and invested in the markets over the corresponding period. GIC huat big time while members are left with accruing 2.5%. That's why it really make sense for members to quickly use CPF OA for properties.

In any case, i always fail to phantom the mindset of those 1M65 followers especially those younger crowd whahaha.

I always try my best to empty my OA for properties and installment whahaha
Only near retirement, then i start using CPF as part of my retirement plan.

 

[BBCWatcher]

More likely use excess Sa (upon closure) and/or Oa to clear down mortgage debts first.

Only if it's genuinely high interest rate debt and you wouldn't be dipping below an adequate liquidity level. In the current interest rate environment, or similar, I certainly wouldn't pay off a 2.6% HDB loan any faster than required, for example.

Those without any debts to clear, will withdraw and put in banks FD and then swayed to buy banking products once Fd rates drop to 2% or lesser. Hahahaha
Greatest beneficiaries is our 3 local banks imo.

There are many other options. If they're long-term dollars pick one or a couple long-term vehicles for them.

 

[BBCWatcher]

Given the Budget 2024 CPF rule changes it could be a good idea to take certain actions now, within this calendar month. See this post for general suggestions.

 

[DevilPlate]

Only if it's genuinely high interest rate debt and you wouldn't be dipping below an adequate liquidity level. In the current interest rate environment, or similar, I certainly wouldn't pay off a 2.6% HDB loan any faster than required, for example.

There are many other options. If they're long-term dollars pick one or a couple long-term vehicles for them.

Think what the majority will do and not the minority will do

*Anyway we can only air our views since there will be no stats to back it up at least in the near future.

 

[BBCWatcher]

Think what the majority will do and not the minority will do

I know, some people will do very strange things like make themselves poorer. Like paying off 2.6% HDB loans when even ~3.6% 6 month T-bills exist. But it's worth pointing out how bad this financial decision would be, and similar decisions. (Unless the individual is going to do something even worse, like head to the casino at Sentosa and play roulette.)

*Anyway we can only air our views since there will be no stats to back it up at least in the near future.

It sure would be nice to get more and better data.

 

[V_for_Vanilla]

In any case, i always fail to phantom the mindset of those 1M65 followers especially those younger crowd whahaha.

I always try my best to empty my OA for properties and installment whahaha
Only near retirement, then i start using CPF as part of my retirement plan.

There are people who are simply not interested in property or even fearful of purchasing. A relative recently made purchase of their matrimonial home after many years of procrastinating. Even after signing on the dotted line they agonise over the decision despite ample financial buffer. Some people just don't handle these things well. Imho a bit of financial stress is sometimes not a bad thing though.

 

[DevilPlate]

There are people who are simply not interested in property or even fearful of purchasing. A relative recently made purchase of their matrimonial home after many years of procrastinating. Even after signing on the dotted line they agonise over the decision despite ample financial buffer. Some people just don't handle these things well. Imho a bit of financial stress is sometimes not a bad thing though.

Yeah, if their quality of life improved significantly by following 1M65….then y not so that they can focus their time and energy into their active income and family relationships.

 

[RedsYWNA]

I think you raise an interesting point about properties (residential real estate). I suppose it's possible some CPF members will be more highly motivated to use more OA dollars more quickly to chase (more/larger) real estate given these Budget 2024 CPF rule changes. It would be for two reasons I think: slightly lower expected future CPF yields (meaning they feel they want higher returns in the run-up to retirement — never mind that real estate probably isn't the answer), and greater perceived uncertainties about CPF rule changes ("Use OA while you still can!") To the extent CPF members react this way, if they do, it could add some upward pressure on home prices. And that wouldn't be helpful in terms of public policy. That said, it's unclear whether CPF members will react this way, how big the effects will be if they do, and whether there will be other factors offsetting these effects.

It's clear the net impact of closing SA will be much more OA dollars available for housing. Assuming 35 years old with 30 year loan, at 55, he suddenly has a lot of excess OA to channel into debt reduction compared to before the SA changes.

The gd thing is it helps with debt servicing when you are older at 55, but the bad thing (some say is gd thing) is property prices may shoot higher.

 

[BBCWatcher]

It's clear the net impact of closing SA will be much more OA dollars available for housing. Assuming 35 years old with 30 year loan, at 55, he suddenly has a lot of excess OA to channel into debt reduction compared to before the SA changes.

Well, yes and no. This prototypical 55 year old will need to clear the Full Retirement Sum, and that's probably a 4 in 10 proposition (happens about 40% of the time at 55). Below the FRS there's really no change. Everything works about the same with or without SAs. It's only really when you get at or above the FRS that the script flips. Also, this 55+ year old will still need to see the value in repaying mortgage debt faster than required compared to all other options. And it really is ALL other options because any amount of OA, or all of it, can be withdrawn. One of the factors that kept OA as OA in the accounts of 55+ year olds is that they couldn't withdraw it before SA. So they really did have an incentive to use those OA dollars for housing specifically, or least to reserve them as a mortgage payment buffer. Starting in early 2025 these individuals won't have any SA dollars "blocking" their OA. So they'll have more OA dollars, but they won't have any specific incentive to use those dollars for housing.

How these competing cross currents net out will be interesting. It's hard to predict, although I'm sure the government has a forecast (and much more data available).

The gd thing is it helps with debt servicing when you are older at 55, but the bad thing (some say is gd thing) is property prices may shoot higher.

It doesn't help with debt servicing. This cohort (made the FRS, have SA dollars) always had the option to withdraw CPF SA+OA dollars for any purpose, including debt repayment. And the OA dollars below their SA could be withdrawn first to pay housing debt specifically. Now they're just earning less interest (SA goes away), and that means fewer dollars over time for all purposes, including debt servicing. (Other things being equal.)

Will people take what would've been SA dollars (but will be OA dollars) and pay down more housing debt specifically? Or will they do other things? Or will they keep them in OA? Or some of all of the above? Who knows.

 

[s0crates]

Actually CPF provides cheap financing to GIC and also the common narrative that CPFB wants to lock up all our monies are a myth.

Why do CPF have so many various caps like income ceiling caps, VC3A caps, RA caps and so on since CPFB wants our monies soooo much so they introduced caps to limit the amt they can have? Whahahhaa

You assume that they only care about the financing.

They have other agenda also. They still need to help IRAS out and not give out too much tax relief. They need to make cpf interest seem attractive by limiting it.

If you look objectively at your CPF balance, it is a huge balance.

 

[BBCWatcher]

Are you, or do you know, a CPF member who's age 55, has room in your/his/her Retirement Account below the current Enhanced Retirement Sum, and has both Special Account and Ordinary Account balances? If so, you/he/she might consider transferring Special Account dollars to your/his/her Retirement Account now. Now? Yes, really. In some circumstances it can make perfect financial sense given how these new Budget 2024 CPF rules operate. Read this post for details.

 

[RedsYWNA]

Those without any debts to clear, will withdraw and put in banks FD and then swayed to buy banking products once Fd rates drop to 2% or lesser. Hahahaha

Greatest beneficiaries is our 3 local banks imo.

The bank RM servicing my company brought up a great point. He said why isnt MAS issuing 3 months T-bills anymore? Why are MAS bills only open to selected institutional investors only?

Because if MAS does that, a flood of liquidity will exit the 3 local banks and chiong MAS 4 weeks and 12 weeks bills. Hence Govt needs to protect the 3 local banks lah.......

 

[s0crates]

I don't know about that. I assume the government has safeguards.

I am not confident of that, given the close relationship the civil service has with the ruling party, and how the decision makers all end up being the same few people.

It is hard to guess true intent of policies, as someone that is more defensive. But there are decisions that they make that cast doubts on their priorities.

In fairness some people are concerned because Temasek's and GIC's "headline" total returns aren't (for example) U.S. Ivy League university endowment-like. I happen to think Temasek's and GIC's performance figures are defensible, but it's very fair to question their results and to push for more transparency.

Yes, the returns are poor, and GIC chooses to report 20 year real return.

https://www.businesstimes.com.sg/co...year-annualised-return-46-highest-eight-years

We do not know their returns against a more reasonable benchmark, before their overheads/management fees and AFTER their overheads/management fees.

Imo its quite a stretch to say CPF LIFE is "free of fees", when cpf needs staff (substantiated by the budget, partially funded by GIC!) to run the program, and the CPF LIFE is dependent on GIC returns to sustain it.

I very much rather be charged a cleaner, more transparent fees, and have CPF run more like other pension funds. But hey, I am empowered to make good decisions for myself, I invested all possible cpf balance, I shouldn't be the one complaining.

I believe the main challenge of implementing LRIS is that the govt can no longer earn the spread between the CPF rates and the LT returns of GIC.

ie by implementing LRIS, we are letting citizens raid our 'much treasured' reserves.......... LOL

One possible reason. Hopefully more market observers, and opposition MPs question and ask for a progress update on LRIS.

The CPF Investment Scheme is available, and Endowus (as a notable example) exists. Those offerings could be better (LRIS), but there are some offerings.

One Singaporean way of solving this issue is for Temasek/GIC to substantially invest/buy over endowus I guess. So that there is this indirect endorsement without telling cpf members this is a government endorsed solution.

 

[BBCWatcher]

Imo its quite a stretch to say CPF LIFE is "free of fees", when cpf needs staff (substantiated by the budget, partially funded by GIC!) to run the program, and the CPF LIFE is dependent on GIC returns to sustain it.

I don't think I've used that language, have I? I do say that CPF involves "low overheads." Isn't that characterization factual and fair?

One Singaporean way of solving this issue is for Temasek/GIC to substantially invest/buy over endowus I guess. So that there is this indirect endorsement without telling cpf members this is a government endorsed solution.

Well, Endowus already has funding from EDB Investments (the Singapore Economic Development Board's corporate venture capital arm) and Singtel's Innov8 (their corporate venture capital arm). Temasek owns nearly 52% of Singtel's stock. But you shouldn't read anything into these VCs' investments when making your own investment decisions.

 

[s0crates]

I don't think I've used that language, have I? I do say that CPF involves "low overheads." Isn't that characterization factual and fair?

Well, Endowus already has funding from EDB Investments (the Singapore Economic Development Board's corporate venture capital arm) and Singtel's Innov8 (their corporate venture capital arm). Temasek owns nearly 52% of Singtel's stock. But you shouldn't read anything into these VCs' investments when making your own investment decisions.

Yea, the "no fees" angle is not mentioned by you, but an argument I seen thrown around a fair bit.

That slight affiliation with Singapore companies helps, but ultimately, more important to do DD on how these platforms operate and their products. Regardless, imo, CPF is not doing enough to empower people totake things into their own hands, especially the investing side of things.

 

[fr33d0m]

I somewhat agree. CPF members and a lot of mainstream media still don't understand that there is a strong inherent conflict of interest between CPF, GIC and the government.

CPF provides cheap financing for GIC, which in turns funds the budget for the government. The closure of SA/RA increment can be seen as a way for GIC /government to attract more money to be kept within the CPF system and/or make the CPF withdrawals more easily projected.

This conflict of interest is structural and we just have to take care of ourselves, ESPECIALLY if our financial goals are not aligned to what most Singaporeans are aiming for.

Doesn’t removing SA give the members more options to take care of themselves instead of letting government take it?

everyone should rejoice.