SINGAPOREANS who wonder if their Central Provident Fund (CPF) monies are safe can rest assured, because their CPF savings are backed by a government that has substantial assets in excess of its liabilities, Deputy Prime Minister Tharman Shanmugaratnam said yesterday.
The evidence of these net assets is in the Net Investment Returns Contribution (NIRC) to the Budget each year, which amounts to some $8 billion.
The NIRC comprises up to 50 per cent of net investment returns on the net assets managed by the GIC and the Monetary Authority of Singapore (MAS), and also up to 50 per cent of the investment income of Temasek Holdings.
Mr Tharman, who is also Finance Minister, was responding to a question from Mr Alan Ng.
The NTUC Income executive asked if CPF monies are safe, and said that if the safety of CPF savings was premised on the Government's triple-A rating and its funds being properly managed, "one wrong move" from fund manager GIC could "bring the downfall of the country".
To this, Mr Tharman said the Government's triple-A rating "doesn't come out of the blue", and had been given as a result of credit agencies evaluating that it has substantial net assets, among other things.
These assets, which had come about as a result of prudent fiscal planning since the 1960s, also explain the Government's ability to meet CPF commitments with "absolute confidence", he added.
Blogger Roy Ngerng, who is facing a defamation suit for alleging that Prime Minister Lee Hsien Loong had misappropriated CPF funds, also asked about the GIC's role in managing CPF funds at yesterday's forum.
He said that last month, the GIC had said on its website that it did not know if it was managing CPF monies. But earlier this month, he noted, Mr Tharman had said in Parliament that the GIC does manage CPF monies as part of a pool of the Government's assets.
In response, Mr Tharman said: "GIC knows it is managing government assets, that is the Government's mandate for the GIC. The mandate is irrespective of the sources of funds it manages... and the GIC (hence) pays no regard to what the source of funds is."
That the GIC is able to manage the Government's assets as a pool - including the proceeds from the Special Singapore Government Securities issued to the CPF Board - has allowed it to invest in the long term and take bigger risks in the hope of better returns that are significantly higher than global inflation, he added.
Mr Ngerng also asked how CPF monies were invested before the GIC was set up in 1981.
Mr Tharman explained that CPF funds were invested by the MAS. Then the late deputy prime minister Goh Keng Swee had changed the system as the Government's longer-term assets should be invested for the longer term. After that, a "significant chunk" of the reserves managed by the MAS was passed back to the Government which then passed it to its fund manager GIC to manage, said Mr Tharman. He said government investment firm Temasek has never invested CPF funds.
In the past, CPF monies invested in government securities could be used by the Government to finance infrastructure.
That changed in 1992 when the Constitution was amended and the new Government Securities Act, which disallowed the Government from using borrowings for spending, was introduced, he added.
This article was first published on July 23, 2014.
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