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Central Provident Fund in Singapore

In: Social Issues

Submitted By roobanana
Words 1521
Pages 7
Ten years after the end of the Second World War, Singapore was a developing nation and life expectancy was on the rise. People were struggling to get by. Consequently, the British introduced in 1955, the Central Provident Fund (CPF), a social security savings scheme as an alternative to a state pension scheme. The CPF has evolved significantly since its humble beginnings more than half a century ago. With multiple modifications over the years, citizens now can use their CPF savings to purchase public and private housing, pay for medical expenses, education, investment options and even insurance protection plans. However, with changes come a myriad of benefits as well as flaws. General public discontent lies in a few main issues. Firstly, the fact that interest accrued by CPF savings is too low. Secondly, much of the government approved investments of CPF monies were lost due incorrect timing of the investments and high transactions costs. Thirdly, the minimum-sum scheme introduced in 1987, disallowed full withdrawal of one’s CPF savings at age 55.
CPF savings are invested in Special Singapore Government Securities (SSGS). These bonds have consistently achieved a triple-A (AAA) rating, the highest possible credit rating by the three main credit rating agencies worldwide. Standard & Poor’s, Moody’s and Fitch Group. The income from the issuance of these bonds are then combined together with other government funds which are then placed with the Monetary Authority of Singapore (MAS), the central bank. Before the establishment of the Government Investment Corporation (GIC), a sovereign wealth fund, MAS managed the CPF savings through an outdated, central-banking investment system whereby it invested in low-risk investments. The government could use part of the borrowings (SSGS and SGS) to finance infrastructure. Which I consider a valid move as sound social and...

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