Posted by: bigtalksingapore | June 2, 2011

CPF Revision damn funny

The above article was taken from My Paper, 1 Jun 2011, Page A2

  • It was announced in August 2003, that the minimum sum would be raised gradually to reach S$120,000 (in 2003 dollars) in 2013.

The above was extracted from http://www.channelnewsasia.com/stories/singaporelocalnews/view/1132239/1/.html

If you read the statement, does it sound funny to you ? Minimum sum being revised to $131k while the announcement in Aug 2003 was to reach $120k in 2013. Is it over revised ?

They are damn smart, they put in clause that said “(in 2003 dollars)”.

So if we take into consideration of inflation (Assume minimum 3%), they want to revise it up to $161k or more  (Refer below) in 2013, so be very prepared.

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Responses

  1. The inflation-adjusted increment aka “in 2003 dollars” is NOT new or sneaky. This was ALREADY stated and announced back in 2003 when govt wanted to jack up the minimum sum from $80K to $120K. And to apply inflation adjustments every year to maintain purchasing power for retirement. It’s just that most people don’t understand what they were hearing on TV news or from reading newspapers.

    Of course govt cannot jack this up at one shot in 2003, so they give 10-year timeframe to do this increase. That is a nominal $4K increase per year. In addition to this yearly increase of $4K, CPF will also calculate any extra amount required due to past 12 months inflation, and the total becomes that year’s increase to the minimum sum.

    E.g. Based on the nominal increase of $4K per year, by 2011 the minimum sum was supposed to be a nominal amount of only $112K. But because of inflation over the past 8 years, the inflation adjusted amount works out to be $131K (according to govt). Using basic finance formula for time value of money, this works out to average inflation of 1.978% per year over the last 8 years. Inflation was very low from 2003 to about 2006. It started ramping up from 2007 and especially from 2009 due to massive govt money printing.

    Once the MS reaches $120K (in 2003 dollars) by July 2013, the govt will then increase the yearly amount based on inflation only, and won’t add in the $4K to the yearly increase. At least that was the original plan in 2003.

  2. If you do not have a 30 year mortgage to pay off, what else can they do to avoid paying you?
    Raise Medisave contributions?
    Count yourself lucky that they did not raise the employees’ contribution and just when you think that they were so generous in giving back some of your money with the gro&share!


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