Social security
Singaporean workers have to make mandatory contributions of up to 34.5 per cent of their wages to their own individual pension accounts (the Central Provident Fund accounts).
The government issues non-marketable government bonds at 2.5 and 4 per cent to take over CPF funds, by matching the interest rates of 2.5 and 4 per cent paid by the CPF Board to the various types of CPF accounts.
There is no transparency as to how the government uses CPF funds. Presumably, most of these funds end up in the coffers of the Government Investment Corporation (GIC) and Temasek Holdings (TH).
We know that GIC and TH have indicated historical shareholder returns of 6 and 18 per cent per annum respectively. Yet the CPF Board pays only 2.5 per cent on Ordinary Accounts (generally about two-thirds of CPF contributions) and about 4 per cent (about one-third of CPF contributions) on Special and Medisave accounts. This discrepancy undermines Singaporeans’ access to adequate social security.
This access is regarded as a component of people’s economic and social rights by the United Nations, as provided under Article 9 of the International Covenant on Economic, Social and Cultural Rights (ICESCR).
In November 2007, the Committee on Economic, Social and Cultural Rights clarified its interpretation of what constituted the State’s obligations with regards to ICESCR’s Article 9. It said in paragraph 45 of its General Comments 19: “The obligation to protect requires that State parties prevent third parties from interfering in any way with the enjoyment of the right to social security. Third parties include individuals, groups, corporations and other entities, as well as agents acting under their authority.”
“The obligation includes…adopting the necessary and effective legislative and other measures, for example, to restrain third parties from denying equal access to social security schemes operated by them or by others…arbitrarily or unreasonably interfering with self-help or customary or traditional arrangements for social security that are consistent with the right to social security…”
GIC and TH, being sovereign wealth funds, are third parties under the government’s authority. Their apparent access to CPF monies for the purposes of investment could result in interferences to the disbursement of returns on CPF accounts. Indeed, the discrepancy in the returns enjoyed by GIC and TH shareholders and the CPF members can be regarded as interference.
The Committee added on paragraph 46: “To prevent such abuses an effective regulatory system must be established which includes framework legislation, independent monitoring, genuine public participation and imposition of penalties for non-compliance.”
The absence of transparency on the access enjoyed by the GIC and TH to CPF monies is arguably in contravention to these obligations.
The ICESCR was first adopted by the UN General Assembly in December 1966 and came into force in January 1976. To date, there are 160 parties and 69 signatories to the treaty. Singapore is neither.
Public housing
The Government has consistently refused to provide the break-down of the costs of building public housing (HDB flats), despite questions being posed in Parliament and newspaper forums almost every year.
By pricing new HDB flats under a “Market Subsidy Pricing” policy, which pegs prices of new flats to a purported discount to resale market prices, the affordability of public housing has increasingly become an issue.
Singapore has arguably one of the highest public housing loan delinquency rates in the world, with about 7 per cent of public housing loans being in delinquency of over three months, as well as one of the highest public housing prices in terms of the ratio of prices to median wages.
The lack of transparency over the pricing of public housing and the amount of profit made by the government has undermined Singaporeans’ access to affordable public housing. It is also a failure with regards to the accountability and transparency of the national housing policy.
The access to affordable public housing is regarded as a component of people’s economic and social rights by the United Nations, as provided under Article 11 of the ICESCR.
In December 1991, the Committee on Economic, Social and Cultural Rights clarified its interpretation of what constituted the State’s obligations with regards to ICESCR’s Article 11. It said in paragraph 8 of its General Comments 4: “Steps should be taken by States parties to ensure that the percentage of housing-related costs is, in general, commensurate with income levels.”
The UN’s definition of the right to adequate housing is further explained in its fact sheet, produced by the Office of the UN High Commissioner for Human Rights.
The following are some of the key definitions and clarifications on the right to adequate housing as stated in the fact sheet, and our clarification as to how Singapore’s public housing policy may be infringing on this right:
(from page 4 of the fact sheet)
I A – “Affordability: housing is not adequate if its cost threatens or compromises the occupants’ enjoyment of other human rights”
Rising public housing prices could in some cases force people to make choices between housing and other basic needs.
(from page 33 of the fact sheet)
III B – The obligation to fulfil – “The obligation to fulfil requires States to adopt appropriate legislative, administrative, budgetary, judicial, promotional and other measures to fully realize the right to adequate housing. States must, for instance, adopt a national housing policy or a national housing plan that: defines the objectives for the development of the housing sector, with a focus on disadvantaged and marginalized groups; identifies the resources available to meet these goals; specifies the most cost-effective way of using them…”
(from page 37 of the fact sheet)
IV A. National accountability and monitoring – “Accountability compels a State to explain what it is doing and why and how it is moving towards the realization of the right to adequate housing for all as expeditiously and effectively as possible. International human rights law does not prescribe an exact formula for domestic mechanisms of accountability and redress. At a minimum, all accountability mechanisms must be accessible, transparent and effective.”
The government’s lack of transparency in terms of pricing policy fails to meet this obligation to be accountable.
(from page 38 of the fact sheet)
Administrative, policy and political mechanisms
“Administrative and political mechanisms are complementary or a parallel means to judicial mechanisms of accountability. For instance, the development of a national housing policy or strategy, linked to work plans and participatory budgets, plays an important role in ensuring Government accountability. Human rights-based indicators support the effective monitoring of key housing outcomes and some of the processes to achieve them. Furthermore, assessments of various kinds, such as human rights impact assessments, offer a way for policymakers to anticipate the likely impact of a projected policy and later to review its actual impact on the enjoyment of the right to adequate housing.”
“Political mechanisms, such as democratic processes, and monitoring and advocacy by independent actors also contribute to accountability. Civil society organizations and others are increasingly using monitoring methods based on indicators, benchmarks, impact assessments and budgetary analysis to hold Governments accountable in relation to the right to adequate housing.”
The government’s lack of transparency in terms of detailed housing data – such as detailed figures on COV levels, costs of constructing public housing – fails to meet this obligation to allow democratic processes and independent actors to participate in policy monitoring. The result is a lack of accountability.
By: Leong Sze Hian
HELP keep the voice of TOC alive!
If you like this article, please consider a small donation to help theonlinecitizen.com stay alive. Please note that we can only accept donations from Singaporeans. Thank you for your assistance.Do you have a flair for writing? Volunteer with us. Email us your full name and contact details to theonlinecitizen@gmail.com
“Political mechanism,such as democratic processes and monitoring and advocacy by independent actors also contribute to accountability”…… well said by Leong Sze Hian.
Our sovereign wealth fund are all tax-payers money.
GIC and TH under the guise of investment managed by the daughter-in-law, Ho ching lost over 40 Billions in ventures but was never transparent and accountable.
What democratic processes and independent advocate and monitoring ??? All the the PAP’s own manipulation of the funds.
Hence, our CPF indirectly are being held back due to the huge lost by TH. No want knows how our monies are squandered.
So our rights to social security and public housing come with a heavy price to the benefit of the very government we voted in and we are left in the lurch.
PAP and their cronies enjoyed the success of failed investment by not being transparent and S’poreans have to lick the wounds inflicted on by the very government.
Our CPF monies may be bankrupted by PAP one day. Just think, billions are being hold back in the name of minimum sum for old age. There was never such rule when we started saving in CPF years before.
authorities: we’ll keep repeating the mantra – it’s affordable when it’s 30% of your household income
people: why do you use household income, why don’t you use individual or couple’s income, or income of the people whose names are used to buy the unit?
authorities: we’ll just repeat the mantra, are you bored yet?
people: not really. because your mantra has failed. almost 50% of the people who recently bought HDB flats have exceeded this 30% limit, according to statistics.
authorities: they chose to buy something too expensive, it’s beyond our control.
people: you engineered the whole system such that they feel they have no choice but to commit 31%, 33%, 35% of their income to the flat they want, because if they don’t do that, it becomes more expensive according to your principles of having persistently rising prices and persistently increasing immigration/population for the next 10-20 years.
authorities: who ask them buy so expensive. they can buy one room less.
people: and you compare 30% with the 30% used overseas. but are these 30% monies used to buy a similar product? do the overseas product come with 99-year lease? or 30% of their income overseas buys them something they can keep forever? and is the 30% of income overseas based on the figure AFTER they have paid their 40% income tax to get social welfare?
i.e. 40% income tax – leaving 60% income. use 30% to pay house, leaving 42% for home use.
CPF is good leh, if I can put all my savings in CPF and get 2.5% i’ll be happy. Now fixed deposit rates not even 1%!!
i understand the drastic change in pricing policy and nature of public housing is to transform a lower-asset-value residence into a higher-asset-value residence.
this is because most of the retiring population in singapore have not enough retirement funds because the social security structure of our country in the form of CPF funds etc have been insufficient in cushioning retirement, and there was not enough public education and action to increase retirement funds.
therefore we need to produce the funds through asset inflation of flat pricing. when the current flat owner sells the flat, it magically produces a few more hundred thousand dollars when it previously didn’t.
that way, the owner can retire. this method of funding retirement is interesting because it is not obvious. the one funding the retirement of this flat owner is the next person who is forced to consume these residences at an inflated price – simply because there is no other supply for him to choose from. there is no lower-priced supply, no alternative. that part of the free market has been throttled, strangulated. the pricing of the lowest-tier has been formulated to always be within a small percentage of the main bulk of housing – and this small percentage comes with a 3-4 year lag before it’s available for use.
this method successfully captures the market and the new buyers. either this devil, or the deep blue sea which is to continue living in the same residence with other members of the family, hence increasing household income. this effect leads to nice statistics for the authorities – because household income will look as if it increased over the years.
i cannot think of a better scheme than all this. it was indeed the work of A Scholar. or maybe 2.
For countries that have a high taxation or social security, 30% 40% tax, that means take-home pay is 60-70%.and their retirement is taken care of?
they further spend the affordability limit of 30% of this take-home pay on housing – so 30% of takehome 60-70% is about 21% of their total pay.
remaining enjoyment money = 39-49% of total income.
39-49% spare cash
21% housing
30-40% tax to pay for social security
how does that compare with singapore?
10% income tax
30% housing
about 5% for social security (medisave, special account)
20% more to retirement because we dont have compulsory tax-based social security
leaving 35% spare cash
so we end up with less spare cash, more into housing.
interestingly, the 30% affordability in most other countries translates to only 21% of their income in housing – because this 30% is taken from their post-tax post-social security income.
the way singaporeans are supposed to count 30% is from our total income pre-tax pre-social security.
so while they keep harping on 30% as the “magic number” they don’t tell you that our country calculates 30% in a different manner (post-tax rather than pre-tax).
and we end up with a different product (99-year lease rather than free-hold)
insidious.
in http://en.wikipedia.org/wiki/Affordable_housing
In the United States and Canada, a commonly accepted guideline for housing affordability is a housing cost that does not exceed 30% of a household’s gross income. Housing costs considered in this guideline generally include taxes and insurance for owners, and usually include utility costs.
you never hear hdb adding taxes, insurance and utility costs to their calculations, because they hope you don’t realise this is part of the “commonly accepted” notion of affordable housing.
until you wikipedia and realise otherwise …
thanks, hdb, you teach me to wikipedia frequently to verify the “truths” you wish to teach us.
The whole CPF life scheme is just a scam to holdback as much of the cheap source of funds as possible for PAP govt to manipulate to its greatest advantage.
We all know for a fact that any life assurance plans will bring the most benefits to any insured party when they are activated while the insured is still young, not when they are approaching their sunset years at 55 to 65.
If our PAP govt is really sincere about adequate retirement funds for each contributor, it would have make a world of difference if they allow every new contributor to start contributing to a life assurance plan which can then be converted later to an annuity plan when they reach 55.
But why are they not doing this ? For the simple fact that they want to take full advantage of the returns generated from the cheap source of funds instead of benefitting each contributors should the monies be channelled to some sort of life assurance plans.
Very cunning, isn’t it ?
Thank you Mr. Leong, we need more analytical thinkers and writers like you to expose the flawed policies of the govt. so it does not get away with pulling wool over the people’s eyes and milking them dry.
@affordability & @social security
Thank you for good posts. Now we know the HDB has been hoodwinking Singaporeans about affordability of public housing.
hdb is such a public housing for the people that 85% of them are paying one of the highest prices for a roof over their heads.
only the rich are not affected. to them, no where in the world is too expensive.
Dummies guide on how CPF monies can make way to GIC, Temasek
http://atans1.wordpress.com/2009/12/26/where-gic-and-temasek-gets-their/
And gd pts posters about post and pre tax.
An excellent article on the two biggest issues for Singaporeans’ financial and general welfare!!
There is almost a total lack of transparency when it comes to the CPF and HDB.
Well done Mr Leong! Keep up the excellent work.
STOP STEALING MY CPF AND RETURN “ALL” BACK TO ME, THE RIGHTFUL OWNER!!!
i want my money back, not your bloody welfare, so “STOP STEALING MY CPF MONEY”
We have thieves and robbers in our gov and they are stealing from the people.
Difference between what Temasek and GIC make and the returns on CPF.
Two points — one is that at present time, the returns of SA (4%) and even OA (2.5%) are very gd compared to safe investments available outside. People may want to keep money in CPF even if can withdraw http://www.fisca.sg/financial_education?mode=PostView&bmi=320158
And protection is always expensive.
Sorry left out link to pt on previous post
Protection is always expensive. This piece shows how expensive it is in UK to get income protection
http://atans1.wordpress.com/2009/12/02/what-price-income-protection-or-the-cost-of-an-annuity/
Likewise the protection of principal in our CPF. The issue is whether the difference the govt “makes” is not profiteering.
When the ruling party has absolute power to do as they please,the resultant effect is on us poor common citizens.We have witness for decades their devilish orchestrating of the rules to benefit themselves and it’s time for a drastic change.No man can be on top forever and I sense something ominious is going to happen to them.So,together let’s pray the day to dawn soon on our peasant’s land.
social security can be funded by thingies like betting receipts organizations.
see, many singaporeans gamble on numbers regularly. The odds are against them and most do not win. The real winner is the organization.
With so much revenue and rather lucrative business, the revenue can be used to fund social security.
Where has the money gone? since it was established?
i assume put to good use if not put in the bank to collect unimaginable interests?
anyone out there knows where the money officially goes to?
I use CPF money to invest in properties and stocks/unit trusts and the return I got is far far better than 2.5%/4.0%. I have to retain $61000 in CPF-SA and $20000 in CPF-OA as mandated by gov. What is the amount after 20 years for say yearly 3.3% as compared to my yearly investment return of about 12% to 15%? What a waste!
Just to add one point. Malaysia gov is giving 5% to EPF holders. Why can’t Singapore gov match? As always, our gov is so stingy to the people (we have much less welfare than Malaysia, China, etc even we are much more richer than them).
would having many more opposition MPs change things a bit?
barlumjio15 May 2010
would having many more opposition MPs change things a bit?
in our current situation, if, say,you disagree with His ideas about immigration,or how many flats we should build based on how overcrowded they’ve made our existing island accomodations, and you wanted to finally rectify it by either building say 5000 more flats,
you couldn’t.
you just couldn’t.even if you convince that veto guy- the president, because he’s not placed there with isd sib background for no reason.
and your 2 opposition and 56 NMP NCMPs cant do anything about it.
but if your 56 NMPs NCMPs were from a different party who might listen to you, however… different story, right?
sorry, you can’t.you just closed the main door.. 56 NMPs NCMPs can’t change the law if the majority – 3 out of the entire 5 seats in parliament, are held by the father son and holy spirit – 3 still wins your 2 low thia kiang chiam see tong even if you have 56 NMP NCMP backing you.
TH and GIC, get 6% to 18% returns
CPF get 2.5%
Is it obvious, some group of people eating money.
these TH and GIC hire a lot of ang mohs because they are very talented. i don’t think they really tried to hire or train us singaporeans – they give a few scholarships out but that’s just about it.. they dont think much of us to even try to recruit us…
they give a few scholarships out but that’s just about it.. they dont think much of us to even try to recruit us…
…………….
and worst of all…most of this scholrships goes back to all the ministers’ childrens..
Too Bad. Gentlemens Cant standard joke dont joint
I wonder why they dont make DPS can be converted to wholelife policy, so by 60 years old you can get back your cpf money to boost your minimum sum assured.
Anybody actually ever claim DPS before i wonder lol.
Think singapore know very well their own very stupid mistake & cowardice to let P&P change the constitution of Singapore. BY increasing the number & changing the boundaries of the wards as they please and implementing the GRC system, the P&P know they would be forever secured with the majority or in other words confirmed victory . Therefore they can pay themselves and their dogs hundred of thousands and millions. They do not need to listen to the citizens anymore but calling the supporters dogs that only know how to whine and say even dogs know how to wag their tails to hte masters.