Suggestion: CPF to provide investment funds

COMMENT POSTED IN MY BLOG

It would supplement the compulsory annuity if we can some control of the use of CPF fund. Currently, the control isn't good, it still gives almost free rein to the members. The capping of the usage for various purposes needs further tweaking. Example, for housing. The 120% limit is not good enough because people are buying houses bigger than they need and over stretch their fund. This leaves little or nothing for other areas like accumulation for retirement.

Members still need to grow their fund because the minimum sum for annuity just provides subsistence living.

Another area needs tweaking is using the fund for investment. As you have noticed from all reports of CPF investment very few members made profit and if they did it was just above 2.5%. If this is so, members may as well leave their fund in the CPF to grow at 2.5% without the unnecessary risk they have been taking.

I propose that CPF make it compulsory for members who wish to invest to invest directly into some life cycle funds run by CPF or approved by CPF, otherwise leave it in CPF. This is to prevent abuses, mismanagement and losses in the hands of insurance sales agents who have no idea about investing but sales. With this in place, I believe members can earn as high as 6% to 8% rate of return, easily.

Cut out all intermediaries (agents, advisers, stock brokers etc) and go direct. The saving of cost will add to the return. It has proven again and again the intermediaries have done nothing but damages.

REPLY:

I agree with this proposal, to a large extent. They are similar to my suggestion that was published in the Business Times. Read here