Josephine Teo: Comparing CPF Investment Scheme to investing pension funds in other countries ‘not meaningful’

Singapore— In Parliament on Monday, August 5, Josephine Teo, the country’s Manpower Minister explained that comparing the CPF Investment Scheme to pension funds in other countries would not be “meaningful.”

Ms Teo gave this answer to Member of Parliament for West Coast GRC Foo Mee Har , who had asked a question concerning how the rates of return from CPF members' self-directed investments made via the CPF Investment Scheme fare in comparison with investments made by professionals in other countries such as the United States and Australian from pension funds.

The MP’s additional question to Ms Teo involved the average return over three, five and 10 years, and how these investments made via the CPF Investment Scheme compare with industry benchmarks.

Ms Teo answered in a five-point written reply.

First, she clarified what exactly the CPF Investment Scheme (CPFIS) is for, and who it is aimed toward. It provides an option for members to put savings from their CPF into a varied range of investment products designed to “enhance their retirement savings.”

The scheme is not for everyone, especially those unwilling to take risks and who are unfamiliar with the in and outs of investments.

“CPFIS is targeted at CPF members who have the knowledge and time to invest, and are prepared to take investment risk. CPF members who are not prepared to take risk, or have neither the knowledge nor time to invest, should consider growing their CPF savings through the risk-free CPF interest rates,” Ms Teo wrote.

She then went on to explain that how well the investment performance for each CPFIS depends on the kind of decisions made for the investment—the types of products chosen, the duration of the investment, etc. She added, “For similar reasons, the performance of any investment fund may not reflect the returns of its individual investors.”

In evaluating the performance of CPFIS-OA investors, she said that their returns are compared with CPF Ordinary Account (OA) interest rates, which would show “whether CPFIS-OA investors make better returns than the alternative of leaving their CPF monies in the OA to earn the risk-free interest rates.”

Additionally, market conditions also cause the investment performance of CPFIS-OA investors to fluctuate year on year. She gave the example from last year, when only 38 percent of CPFIS-OA members registered total profits above the OA interest rate of 2.5 percent yearly. In the previous year, however, 74 percent had registered total profits above 2.5 percent yearly.

But she cautioned, “Their realised returns may however differ from what was registered depending on the timing of specific investments.”

To summarize, Ms Teo said that comparing the investment performance of CPFIS investors to pension funds in other countries “is not meaningful” since the funds in other nations could have dissimilar objectives and investment strategies from what is used in Singapore.

Ms Teo also recently answered questions regarding professional conversion programmes for pre-school teachers, as well as what the Ministry of Manpower (MOM) is doing to ensure that workers are keeping their job in a time of economic difficulty. Ms Teo told MP Desmond Choo, "MOM, together with MTI and other government agencies, is monitoring the economy and labour market closely. We are ready to step up support for companies and workers under the Adapt and Grow initiative. Workers can tap on employment assistance and programmes offered by Workforce Singapore (WSG) and NTUC’s Employment and Employability Institute (e2i). "These include the Career Support Programme, Career Trial and Professional Conversion Programmes (PCPs) that provide wage and training support to help workers access new jobs or re-skill for new opportunities. "Jobseekers can also consider taking up Attach-and-Train PCPs, which train workers ahead of hiring demand. These are available in selected sectors with strong growth potential. In addition, WSG’s Careers Connect and NTUC’s e2i career centres offer employment facilitation services such as career coaching, employability workshops, job fairs and job matching."  -/TISG Read related: SDP promises to oppose retention of CPF, GST hike, and 10 million population target if elected into Parliament