Tharman: CPF Investment Scheme to be reviewed

By: Kheng-Liang Tan

At the Economic Society of Singapore’s dinner on Tuesday (13 Sep), Deputy Prime Minister Tharman Shanmugaratnam said that a review will be done on the CPF Investment Scheme (CPFIS).

He was referring to a proposed recommendation by a CPF advisory panel last month, which proposed a “Lifetime Retirement Investment Scheme” (LRIS) offering a choice of diversified funds which do not require active management on part of the investor.

Currently, the CPFIS allows members to invest their excess CPF monies – above $20,000 in the OA and $40,000 the SA – in a variety of financial products such as equities and investment-linked insurance products.

The DPM said that 45% of investors made losses while 85% of investors earned less than the 2.5% on their OA, thus calling the CPFIS “not fit for purpose”.

He said that the government will work to “tighten up on it [while moving] towards introducing a simple, aggregated, low-cost investment option.

SIM undergraduate Ong Liang Wei points out that the 2.5% interest is very low after taking into account inflation and “just because some 45 percent lose money doesn’t means the rest are losing money.”

He added that the government should not be so paternalistic in “thinking that most Singaporeans are bad with their financial management” and recommends “having more financial education instead”.

What do you think?