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$2.8bil surplus a year, and can’t afford $300 a month for some destitute 85 year olds?

Posted by theonlinecitizen on November 8, 2007

By Leong Sze Hian & Yeo Toon Joo

We have been told by the Government the Budget has been in surplus most years – and “$2.8 billion a year of investment income” had not been spent.

Where did that sum go? Did it end up as “cheap” funds for Temasek and GIC to invest?

Why not use a negligible fraction of that surplus from year 2042 to help Singaporeans who live beyond 85 instead of enforcing the unpopular Longevity insurance scheme?

If our country has $2.8 billion a year in spare cash why can’t our Government pay just $300 a month from 2042 to a small number of poor Singaporeans endowed with longevity?

$2.8 billion is only one per cent of the annual return on Singapore’s reserves which, if returned to CPF members by way of higher interest, is about a one per cent increase in the current CPF interest rate for contributors.

The compounding effect of this one more per cent could translate into tens, if not hundreds, of thousands more in returns for every Singaporean when he or she retires.

For example, $60,000 now plus $500 monthly CPF contributions from age 30 to 65, at 5 and 6 per cent will grow to $914,436 and $1.2 million, respectively. So, a one per cent rise in CPF return (for a worker earning $1,450 monthly at the current CPF contribution rate of 34.5 per cent) translates to $288,894 more when he retires.

Isn’t this far better than giving a one-time housing grant that may be consumed by the risks of servicing a 30-year HDB flat mortgage, or giving a few hundred dollars of occasional top-ups to our CPF account? And are such so-called grants really subsidies when prices of HDB flats rise faster than the so-called housing grants?

“We are not stingy”, Govt rebuts its own rebuttal on CPF funds and changes!

In the following news articles, “Should you invest your CPF savings elsewhere?” (Sunday Times, Sep 30), “Govt spent $2.8b over last 5 years to fund grants, subsidies” (ST, Sep 29), “CPF changes needed to tackle future problems: PM” (ST, Sep 24), and the Ministry of Finance’s reply “Govt investments de-linked from CPF funds” (ST, Sep 29), (link), it was reported that:


“The Government has spelt out just how much it spends on grants and subsidies that go into people’s retirement savings in a rebuttal to criticisms that it is tight-fisted. Over the last five years, it ploughed back an average of $2.8 billion a year of investment income into the Budget.”


The main thrust of the Government’s rebuttal could be the best “self-rebuttal” against its own rationale for the CPF changes.

The Government has also said it does not depend on CPF funds which, it claims, are not cheap but “expensive” money, and, if it needed to borrow, it could do so more cheaply by issuing government bonds.

On the contrary, if not for the large CPF funds supplied by the people, tapping the market may increase the cost of its borrowing due to its much higher volume of borrowing.

The people’s funds in CPF, in a way, paradoxically enables the current official practice of selling subsidised HDB flats to Singaporeans – at ever increasing prices!

If you look at recent HDB property launches over the last two years you will note the tremendous rises in prices, e.g. the hike in the last three launches of new 4-room HDB flats at Fernvale was more than the increase in the CPF Housing Grant (HG) or the Additional CPF Housing Grant (AHG).

The average price increase over the last 2 years was $62,500, which was more than the entire maximum CPF Housing Grants!

On 25 October, just one month after the Fernvale launch, the HDB launched Telok Blangah Towers – with $402,000 the highest price for a 4-room flat, a whopping 60 per cent rise over the highest priced $252,000 at Fernvale. This, I believe, is a record high for new 4-room subsidised public housing! (CNA)

What kind of housing grant is this if your flat prices rise more than the grant? How can the HDB housing loan subsidy be called a subsidy when it takes in CPF from Singaporeans at 2.5%, then lends it back to them at 2.6%?

Why build so many high-priced flats when many can afford only cheaper smaller ones?

In the articles “HDB glut shrinks in rising market” and “More 2-room, rental flats soon” (ST, Oct 18), it was said that “It (HDB) resumed offering two-room flats for sale last year and has launched 539… “

In the next six months, it will offer 4,500 new flats under the build-to-order (BTO) system, which places flats on the market only if there is sufficient demand.

So far, in the first nine months of the year, HDB has offered 2,700 new flats under BTO. It will also release another three new Design, Build and Sell Scheme sites, which will yield about 1,500 flats.

There are, I understand, about 200,000 households with monthly income of $2,000 (the income ceiling for two-room flats) or less. Why then is the HDB building so few two-room flats (539 since last year, and only after not building any for many years)?

And, why is it building many times more flats that are bigger and at rapidly increasing prices (as much as 40% higher than 2 years ago for new 4-room flats at Fernvale)? (link)

Funding Singaporeans’ retirement savings through ad-hoc and piece-meal housing grants and subsidies, goes against the core principle of self-reliance that has been the bedrock of our pensions system.

Instead it should grant higher CPF returns, as it will reinforce the need and desire of Singaporeans to plan and save for their retirement.

Is it any wonder then that no amount of top-ups or lucky draws has succeeded in persuading the self-employed to contribute to CPF accounts! Could it be that returns are just too low?


9 Responses to “$2.8bil surplus a year, and can’t afford $300 a month for some destitute 85 year olds?”

  1. Robert HO said

    No free lunch, remember? So, when they do give you a pittance, you are expected to grovel in gratitude. Also, this arbitrary giving can be withdrawn any time which will not be the case if it becomes an entitlement or our dues.

    Excellent work, TOC, for this piece of research. You have become the default news website for thinking Singaporeans. Readers interested in my works can click on my name above.

    *Comments edited by moderator.

  2. Zactie said

    I agree with your point.

    However, seen the upcoming energy tapping technology research and the investment in other countries? I know it feels like, “for what? investing without a sense of care for our citizens?”. But with growth in economics will bring in more revenue for the needy citizens. Also, I appeal to your point of providing $300 a month for some destitute 85 year olds. Let the government calculate alright? Cause in the coming 10 years, there will be 700,000 or more elderly around in Singapore. Which means 700,000 x $300.. you can calculate yourself, why government does want to implement this scheme now, or in the future it will be like the health care service that happened in British few decades back.

    Anyway, you can consult the government in this case. I personaly think that it is not wrong to do so.

    Building high rise building is to cater the richer ones, the richer ones will move to these big and expensive houses while the lower income will take the house they left. That is why Singapore’s government trying to build less two-room flats – because there are already plenty around. Unless that the lower income wants to buy a new one, that will be a problem. Actually in my opinion, government has a point in this building more ‘4 room or more flats’.

  3. CDT said

    the richer ones will move to these big and expensive houses while the lower income will take the house they left. That is why Singapore’s government trying to build less two-room flats – because there are already plenty around.

    Have you actually checked the prices of resale HDB flats in the past year or so? The valuation of these flats have sky-rocketed causing the rise in the re-sale prices of the houses the “richer ones” have left behind.

    I shifted from my previous 4-room in Clementi – a 20 plus year old flat that had gone through the IUP when I shifted in – a year and a half ago. The valuation of that flat when I sold it was the same as when I first bought the place (and I’ve stayed there for the government requisite 5 years before I sold it).

    My parents recently enquired the resale price of a flat in the same block and the valuation alone had risen by some 40K!!!! And mind you, no upgrading of any sorts had taken place in the estate in the past 1 1/2years. Where is the reason / logic to increase the valuation by this much? How objective / valid are the valuations that are undertaken by the agents of HDB??

    Tell me. How are the lower income folks going to afford these flats that’ve been “left behind”??

  4. Zactie said

    “No free lunch, remember? So, when they do give you a pittance, you are expected to grovel in gratitude. Also, this arbitrary giving can be withdrawn any time which will not be the case if it becomes an entitlement or our dues.”

    I think they should go retraining, i know that NTUC pays 80% of subsidy for the lower incomes to retrain so they can get a job more easily. But for those handicapped, i need to think first yea? I hope that the RC’s do something, such as promoting events and fairs to raise funds, as well to create awareness.

  5. familyman said

    Thank you Mr Leong and Mr Yeo.
    Keep pushing the envelope so that our Ministers will grow a better heart. Personally I am tired reading all these posts which glaringly shows the problems with the aged poor and structural problems within- and the govt giving stock answers that makes no sense to me – if they choose to answer at all. I pray that PAP will give a better budget skewed towards helping its citizens, and make working adults – those above 70 -collecting cardboards – a crime like Child Labour laws. I agree we are not poor like our neighbouring countries, but I know we can do so much more, without invoking the oft mentioned – ‘depleting the reserves’. Thanks again to both of you!

  6. Robert HO said

    1. Excellent observation, FamilyMan, that FORCING THE OLD TO COLLECT USED CARDBOARD FOR A LIVING IS AS ‘CRIMINAL’ AS FORCING CHILD LABOUR. Thanks for this Observation of the Day.

  7. James L said

    To Zactie.

    The government defines ‘Destitute’ as those that cannot work and have no relatives to help them out. The number of such people are very small and certainly not the 700,000 you project in the future. It was calculated and brought up in parliament that to increase the $300 so that it can provide 3 meals a day to these ‘Destitute’ would cost less in total than the salary increase of one Minister.

    To which, our honorable V. Balakrishnan replied ‘You want them to eat in food court, hawker center, or restaurant’

    Of course this being Singapore, no rebuttal was allowed to be aired on V.Bala’s nonsensical and immature statement.

  8. AFC said

    gahmen just waiting for them to die lar.
    now just take some pple complaining, give some replies, eventually in 10 yrs or so, these old pple die liao, no problem liao wad.
    then the communist theories will take full action.

  9. LPPL said

    money want to take .public’s problem push it back to them.kiasi and kiasu. self proclaim elite of the nation. want to play god. hypocrite.wolf in sheep skin. guess who?

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