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Calvin Cheng attacks MARUAH on CPF ideas




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Here’s a letter from former to The Independent Singapore on MARUAH’s ideas on

Dear Sir

I refer to your article regarding MARUAH’s statement on CPF.

MARUAH’s statement is based on some basic conceptual errors.

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Firstly, CPF is not a form of social security contribution. Social security contributions all over the world are taxes. These contributions go into a common pool and  citizens get a pension from the government when they retire.

CPF is a compulsory personal savings scheme. The sum one contributes to one’s CPF  account is one’s own money. The money in the individual’s account is also his and his only. This kind of savings is not a tax and contributions are not shared with all other citizens.

It is thus a basic error to compare CPF contributions to social security contributions. Using this comparison to call for greater pension payouts is thus conceptually wrong at best, and intellectually dishonest at worse.

Because CPF is a savings account, the interest rate CPF pays out should be compared to savings accounts in the private sector, rather than investment accounts. The rates that CPF pays (2.5 per cent for the Ordinary Account and 4 per cent for the Special

Account) is much higher than anything private financial institutions pay for risk-free deposits. Comparing CPF interest rates to investment returns is thus again intellectually dishonest.

It is however true that as cost of living rises, people will need more and more when they retire. In Singapore however, the discussion is not about how much state pensions need to be, but rather how much one manages to save up before retirement, including the compulsory savings in CPF. This may have to be supplemented by state grants and subsidies paid for by taxpayers.

Presenting the issues falsely only causes confusion in this important debate.

Calvin Cheng


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