COS 2022: Enhancing CPF Returns

MP Louis Chua

Mr Chua Kheng Wee Louis (Sengkang): Chairman, while CPF has maintained its interest rates at a point where it preserves purchasing power and guards against long-run inflation, the longer time horizons that retirement presents mean that expected increases in longevity and higher retirement income needs should give additional motivation to empower CPF members to enhance their returns when able. And it is indeed true that generally, long-term investments with some risk should provide higher expected returns than the CPF interest rates.

We know that 75% of CPF Investment Scheme (CPFIS) OA members have earned some form of profits as of FY2020, but only 645,000 members are part of the CPFIS. This is a mere 16% of the over 4 million total CPF members as of 2021. There could be many who may wish to see their CPF returns do better than the interest rates offered by CPF, but are not confident enough or knowledgeable in the financial markets to buy into the CPFIS.

Moreover, while the world has been moving toward ETFs as an investment product, the available number of ETFs available under the CPFIS is a grand total of six. Many of the global ETFs such as those listed in the US have total expense ratios which are lower than ETFs and Unit Trusts here in Singapore. As a start, can more passively managed ETFs be made available for Singaporeans?

I note from my cut last year, then-Minister for Manpower shared that the Ministry had still been studying if a CPF Lifetime Retirement Investment Scheme (LRIS) can be introduced to help such members who have the risk appetite and investment horizon but not enough investment knowledge. However, the Ministry is updating planning assumptions to strike the right balance between risk and return. I will like to seek an update if the Ministry has finished work on this front, as it has been close to six years since August 2016 when the plans were first announced. Is there a more concrete timetable that can be shared?

Finally, I would like to make an observation that GIC’s 20-year returns have been consistently above the 2.5% interest rate offered to CPF-OA. Should the average Singaporean get access to the diversified investment portfolio of GIC, CPF members could reach retirement adequacy in a way that minimises the risk of short-term market volatility and protect their purchasing power against not just local inflation, but global inflation as well.

4 March 2022
Ministry of Manpower

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