The Central Provident Fund (CPF) scheme prepares Singaporeans well for the future by providing guaranteed, fair returns on their retirement savings and shielding them from risk as few other pension funds do today, Deputy Prime Minister Tharman Shanmugaratnam made clear on June 8 in a strong defence of the fund's performance to date.
And as the Government moves to enhance it, "we must retain its basic strengths and avoid the huge problems seen elsewhere", he added, referring to pension systems that are going bankrupt or passing risk back to pensioners.
Mr Tharman, who is also Finance Minister, also revealed how the Government shielded CPF members from financial risk by pooling CPF monies with its other assets to be managed by GIC.
In eight out of 20 years, GIC's returns were lower than the rate promised to CPF members, but the Government absorbed the losses.
He was responding to questions from four MPs who asked about CPF returns, reflecting public concerns about retirement adequacy in the face of rising costs.
Said Mr Tharman: "While the CPF doesn't provide the highest returns, it provides one of the safest in the world. And these are fair returns."
Turning to how the funds are invested, he said that CPF funds are used to buy special bonds that offer a guaranteed payout.
The money that is invested in these bonds is then deposited with the Monetary Authority of Singapore, and managed by fund manager GIC, as part of a larger pool of the Government's funds.
"This allows the GIC to invest for the long term, including investing in riskier assets such as equities, real estate and private equity," said Mr Tharman.
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