By Leong Sze Hian
The Ministry of Finance has posted an appendix to the 2010 Budget Debate round-up speech entitled “Transfers to an illustrative lower-income (bottom 20%) family over a lifetime”. This appendix purportedly illustrates how a lower income family may receive up to $460,000 in government benefits over 60 years.
The document considers a typical family within the bottom 20% of incomes in which the husband and wife are aged 29 and 26 respectively, and are expected to live up to 80 years of age, They are assumed to purchase a 3-room resale HDB flat that costs about $200,000 near their parents, have a combined income of $1,500 per month, and the husband experiences four spells of unemployment over the course of his working life and undergoes retraining twice. The couple is also expected to have two children, and the family of four occasionally seeks medical treatment, including bouts of hospitalisation. When they retire, the parents enrol in the Lease Buyback Scheme to obtain a stream of retirement income from their HDB flat.
The document then claims that:
“Over the couple’s lifetime, the family can expect to receive transfers (through cash, subsidies, top-ups to CPF accounts etc) totalling about $460,000 in real terms (2010 prices). This is more than half of the couple’s expected lifetime income (in 2010 prices).
About 60% of this would comprise Government grants and subsidies for their education and skills, and to help them build up their assets. The remaining 40% would comprise support to help them meet immediate needs.”
In a nutshell, nowhere in the article is there any detailed breakdown of how the $460,000 of government benefits is derived.
Let us attempt to analyse whether some of the assumptions made on the couple and the “transfers” listed in the appendix make sense.
The article assumes that the husband will be unemployed four times, each for a period two months. Isn’t it a bit stretched to assume that the main income provider of a “typical” lower-income family will become unemployed not just once, but four times?
Moreover, this must be a rather “unusual” lower-income worker, because for two of his four unemployment stints, he goes for 50 hours of retraining each. How is the worker supposed to be able to know that he wouldn’t be able to find a job for exactly two months, and so have the luxury to go for retraining? How does he feed his family during the retraining? How realistic is such a scenario?
How can a lower-income family of this profile afford a 3-room resale flat with the current typical Cash-over-valuation (COV)?
After paying $480 a month for their 30-year HDB Concessional Loan of $120,000, how do they survive with having two children on what’s left from their combined income of only $1,500?
By any stretch of one’s imagination, such a family should only be able to afford to buy a new Build-to-order (BTO) HDB flat, for which the CPF Housing Grant Scheme for resale flats (including higher-tier Family Grant) is not applicable.
I think the statement in the article
“For the purposes of estimating lifetime benefits, we consider an illustrative young family within the bottom 20% of incomes”
is not “illustrative” at all, but belonging to the realm of fantasy!
Since the bulk of the family’s Workfare Income Supplement (WIS) payouts is to their CPF Medisave accounts, it is not cash that can be used for daily needs. The money can only be used to pay for increasing healthcare costs if they fall ill.
Under the Lease Buyback Scheme, the family is giving up the remaining equity in their HDB flat in exchange for a 30-year lease. So, the $10,000 subsidy is not a benefit, but an exchange for their flat’s equity.
The family may stand to lose $498,732 of their flat’s balance net equity after 30 years. (See “Uniquely Singaore: F1 or F9 HDB lease buy-back?“, Mar 10, 2008.)
The above table belongs to the category “Cash and Support for Immediate Needs“.
Medical subsidies are given to all Singaporeans who do not fail means-testing ($3,200 individual patient’s monthly income). So, how can medical subsidies be regarded as “Cash and Support for Immediate Needs”?
How often are the family members assumed to be sick? How long are they hospitalised each time? How is the grand total of $460,000 of benefits derived?
How do we arrive at the assumption that they (one or both of them) will be in a Nursing Home for 4 years?
Are we saying that the statistics show that the majority of lower-income elderly persons stay in a nursing home for 4 years?
Since Medifund subsidies are generally only applicable when all family members have nothing in their Medisave accounts and hardly any cash assets, are we assuming that this will be the case for typical low-income families in the future?
How is “financial distress” defined? How often does it occur, and for how long?
There are also a long list of exclusions:
- Discretionary special transfers In the last ten years, for example, the discretionary special transfers that this bottom 20% household would have received would have more than offset the total taxes that they would have paid (even if the GST rate had been 7% throughout the decade). (Examples of such discretionary transfers over the last ten years include Utilities-Save rebates, Service &Conservancy Charges rebates, Growth Dividends, Workfare special payments, CPF Medisave and Post-Secondary Education Account top-ups, Opportunity Fund top-ups and GST Credits. The regular WIS payments and other ongoing subsidy and grant schemes are not discretionary transfers.)
- Government spending on subsidised education in schools and post-secondary educational institutions, which all students (regardless of income) benefit from.
- Polyclinic subsidies, which all patients (regardless of income) benefit from.
- All benefits received by the two children in the family themselves once they complete their post-secondary education. Only the benefits received by the parents, including benefits when the children are still undergoing education, are included.
- The extra 1% interest on the first $60,000 of each parent’s CPF balance. All CPF members benefit from this extra 1% interest on the first $60,000 (on top of the interest rate on Special, Medisave and Retirement accounts of 10-year SGS plus 1%). Lower-income families, who have smaller balances, benefit more”.
- The contribution of government grants (HDB housing grants, WIS and other CPF top-ups) to the future value of the couple’s assets (as their HDB flat value and CPF savings appreciate). For example, HDB prices have appreciated by 3.1% per annum, or 1.4% per annum in real terms, over the last decade. Even a modest rate of price appreciation of their HDB flat over the next four decades will lead to a significantly higher value, by the time they eventually take advantage of the Lease Buyback Scheme. Built into this higher value would be the contribution of the initial $80,000 in housing grants that the Government gives this lower-income family. The appreciation in the value of this $80,000 contribution is however not included in the estimated transfers above.
The sentence in the last paragraph regarding “HDB price appreciation over the next four decades” as a form of government benefit wins my vote for the “most creative” benefit award!
So, why not also give us a grand total of these excluded benefits and add them to the original $460,000 of benefits?
By the way, most of these “excluded” benefits are given to all Singaporeans regardless of income, such as the Government spending on subsidised education, Polyclinic subsidies, benefits received by the two children in the family once they complete their post-secondary education, the extra 1% interest on the first $60,000 of each parent’s CPF balance, etc.
If almost everything that is given to Singaporeans is considered as benefits that can be “calculated”, then we may indeed be a “Unique” country, that no other can beat!
Uniquely Singapore!
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only the pigs now believe that they can invent some numbers and have us believe it is true.
Think by having all this schemes and stuff they are just trying to confuse the hell out of us into thinking that it’s all goodies.
Btw, STB has changed “Uniquely Singapore” to “Your Singapore”.
Ya I think the STB branded it correctly…It really feels like Your Singapore and not My Singapore anymore.
Believe at your peril!
Seow,
I agree with you.In reality,it feels more like Your Singapore and not My Singapore anymore.SDP should patent or register at trademark office of the word YOUR to avoid others use it especially the running out of ideas PIGS in promoting their agenda and propaganda.
These pertinent questions coming from a Financial Guru only indicates 1 thing to me :
Audit. Transparency.
” I know that, being a citizen of Singapore, you all are very
curious to know how I derived at this ‘fantastic’ figuare. I also know that by looking at the drawing of a cake, it will not fill up your stomachs. But these are not VALID reasons for me to reveal the answers!! You all have to TRUST me, all along, I know what I’m talking about. It has been like this, and it will be the same in the future”
Sounds familiar??
One must not forget. The industry mostly offer contract job. These assumptions does not reflect what is happening. Somemore, foreign talent enjoy a full time permanent employment. How about Singaporeans? Too expensive to hold a permanent job? All the permanent jobs go to the foreign talent (from managers to cleaners) as they are cheaper to employ? Please answer my question without wondering round the bush…
Very typical of PAP to use very very vague figures in an attempt to justify their point!!
ST is an accomplice.
wah..i didn’t even know the government give me $460,000..i also believed the same government give mr yusof the same amount before he migrated to johore then relocake to sembawang openair country park…
mr yusof my friend..where did you hid the $460,000 ringgits/dollars/rupiahs…
don’t tell me you spent in bataam with your 2nd wife har?
i truly believe!much more than that,But it’s for member only, you know what i mean…
wow that works out to be $1/day
The best thing is they actually make monies out of telling you this lie…
I dun believe because its not true.
tats how the politicians deceive themselves into thinking that they are doing a great service to the people, and want us to believe in their lies.
Another wayang show from the PAP trying to convince people that they are helping the poor.
We all know that this is a silly joke.
When they give you $1 they will take back $10 in GST, taxes, increased fees to town councils charges, ERP, varsity tuition fees, among others.
Rather than criticising and complaining as is our culture, I prefer constructive efforts which the citizens can help our own? identify those needy ones who have not been helped, and organise fund raising to really help them have a shelter, free education, etc??
vince 4 April 2010
Rather than criticising and complaining as is our culture, I prefer constructive efforts which the citizens can help our own?
what? and deprived the eatricewasteseeds overpaid/overfed ministers a pat in their backs like a lost mongrol puppy…
last but not least..would this make all the useless mcys crews redundant and unemployed as well?
What do we pay taxes for? If we pay taxes only to have to help the poorer ourselves, then the government is not doing its job.
Using these sensible arguments to debunk our Minister’s S$460K subsidy , it seems that our Ministry of Finance have concocted one big blatant lie to con Singaporeans into believing that our PAP govt has been that generous.
If our Govt had indeed been that generous, then doesn’t it make our Minister Vivian look like an IDIOT ie, for defending his Ministry whether those on Public Assistance schemes can expect to have their meals at the hawker centre, foodcourt or restaurant.
If that Minister is proven to be not an IDIOT afterall, then it will mean that this particular Minister is then a LIAR.
Come on PAP Idiot or Liar, which is which that you want ? You can’t have both the cake and eat it as well !
notice Goh CT is coming out to talk a lot more.
He is trying to save PAP because LHL cannot do the job.
As usual, their strategy is talk. cheap talk.
Nothing that will help you solve your problems.
DO nothing that solve the real problems.
We have paid millions and gotten actors in parliament.
IS this what you want?
government has carefully removed pension scheme from everyone except themselves.
i think we should aim to get rid of ministers’ pension since they are already paid millions.
dont you agree?
Really?
I only believe if the gov gives me 460k immediately. Then i would say housing is also affordable. The interest rate i have to pay every month is so crazy, these blood sucking mosquitoes…!
$460,000/-. What a big joke. Such stupid attempt.
It would be miracle enough if they let us have our own CPF money back when we reach retirement time.
I don’t doubt that the MIW are rare talents. They can act, spin fairy tales and lie with such conviction that 66% of Singaporeans believe they are God’s gift to Singapore. But these talented actors, spinners of fairy tales and liars are destroying Singapore for their own monetary gains. We need to kick them out before they ruin our country.
Such largesse from the government begs the question: why are there still people in need of three square meals delivered to their doorstep.
Eh, Vivian?
Thank you Mr. Leong, a great article!
I was pretty speechless when I read the link, too unbelievable to the assumptions and “creative accounting” they used to make their point about the $460K over the 60 years to poor assertion.
Unfortunately, I was busy with HDB’s Myth. Thanks for filling the gap on Minister Tharman’s funny assertion.
Goh Meng Seng
Next you will find the Department of Finance coming up with a case study showing that Singapore made money from the collapse of Lehman Brothers. They obviously do not have anything better to do!!
alamak,
still looking for that $460000;
so that can use them when needed.
by the way, is this $460000 can take out & use (when in need)?
alamak
the pigs thought we cannot see that their assumptions are correlated.
460K my ass.
http://www.petitiononline.com/Employed/petition.html
Dear Fellow Singaporeans,
With your kind support, the online petition “Employ Singaporeans First!” has collected 450 signatures after about three weeks of publicity. Our target is 1000 signatures by mid April. There is only 10 days to go!
You can ask your whole family to sign up and that includes your spouses and children.
We are also thankful for the many Singaporeans who sign hoping for a change in the employment scene. Many Singaporeans continue to be displaced by foreigners at the work places despite the much improved economy as they are cheaper and younger.
This petition urges employers to first provide an opportunity and a decent salary to our older local SIngaporeans before they consider employing foreigners.
We also ask the government to reconsider the idea of rejuvenating the economy by merely importing cheaper foreigner workers. This not only dampen productivity but also creates an unfair playing field for Singaporeans seeking employment.
We urge Singaporeans to firstly sign this petition and secondly to forward it to as many people as possible so that we can hit our target of 1000 signatures before we forward them to the Prime Minister Office.
We can do it if we all unite together and forward to at least ten of our friends on our email list. Do it for yourself, your children and fellow Singaporeans.
Singapore for Singaporeans! Cheers.
Regds
Gilbert Goh
Online Petition organiser
Aiyi, I give you all $460,000 you all still make so much noise! How much do you all want?? 1 $million, 5 $million?? how can, I am just drawing only about 2 $million a year!! Where you all want to stay?? a tent by the sea, HDB flat, condo or private bungalow??
let us assume as is stated, that $200000 HDB flat appreciates for 3.1% p.a. annually rated for 30 years as the loan is paid off.
let us also assume that the loan has a fixed interest rate of 2.5% p.a. daily rated. and also that the downpayment – whether it came from cash or CPF – comes at an opportunity cost of 2.5% p.a. daily rated. i.e. if the home was not bought, the money could have been kept in CPF for 2.5% p.a. or invested somewhere for 2.5% p.a.
(small things like HDB loan = CPF rate + 0.1% shall be ignored, it doesn’t affect the final picture)
Final value of home after 30 years = $499,792.75 after appreciating 3.1% for 30 years.
Final opportunity cost + cost of interest of money sunk in for 30 years = $423,389.13
Gain = $76,403.62 after 30 years
This value is 18% more than your final opportunity cost of $423,389.13. You get 18% more after 30 years. That amounts to 0.55% p.a. real gains above opportunity cost over 30 years.
0.55% p.a. over 30 years.
You gain this, after sinking in the proverbial 30% of your income into loan repayments.
Is this fiction?
Quick. Somebody refute my argument. I’m not the government, I’m not afraid to be proven wrong.
My opinion is to vote the PM, DPM out from this coming election. I seen too many Foreign Thrash employed in the IHLs and Research Institutes. Worst, they are not up to grade. Some are even sleeping on job and playing games. I wonder how the gahmen justify these highly paid thrash.
In the private sector, if the employers continue to have preferences to employ foreigners over the local, we will have problems in years to come.
The cost of living is so high that after paying for your mortgages, and daily necessities, u will have less than 30% of your monthly income left. Wake up Singaporeans, dun expect the Government to help u because they dun have a solution. Time to cut costs and delay that upgrade to a 5 room flat becos u will not have enough money when u retire. Only the wise will know what to do and save for the future.