Hi fellow Singaporeans, I am angry at the recent compulsory
annuities scheme that was proposed. To me, it is nothing more than
sheer robbery. This was a letter that I have sent to the major
newspaper TODAY, but it is understandable why they would not want
to publish it. I present it as an open letter to all of you, so
that we may question what the Government is really trying to do
here.
The Bare Facts of Compulsory Annuities
I am writing in response to the recent compulsory annuity scheme
that was announced by Prime Minister Lee Hsien Loong in his
National Day Rally Speech. I am disappointed by the metaphysical
for your own good and Singaporeans dont know how to manage
their money arguments put forward by the schemes proponents. I
wish to point out to all readers the simple bare facts, and let
them pass judgement for themselves.
* The life expectancy of the average Singaporean as of 2006 is 81.8
years. (Male 79.21, Female 84.59)1
* A small portion will be set aside from the CPF minimum sum for
compulsory annuities. This has been reported to be
$4000-$7000
* Annuity payouts will be $250-$300. What this means is in the best
case scenario, it takes 4000/300 = 13.3 months to recoup the
principal. This effectively means, discounting inflation, annuities
will start paying out from 86 years and 1 month of age. The worst
case scenario is 7000/250 = 28 months added to the 85 years of age.
This means 87 years and 4 months of age before annuities pay
out.
* The average Singaporean will die long before recouping the
principal sum tied up in compulsory annuities. So what happens to
the money if he dies? Will it be repaid to his estate? The
Government so far has been silent on this issue. I think we all
know what that means.
What are Singaporeans supposed to make of headlines such as MAS
ready to inject cash into market if needed2 ? Liquidity is merely
a euphemism for paper money. It is clear that if MAS injects
cash, this will eventually result in a rise in prices, an increase
in the price level. With the constant inflation wrought by these
injections, fixed incomes from schemes like annuities will fall in
their purchasing power. It is no coincidence the US dollar is worth
less than one-twentieth of what it was worth in 1933,
post-gold-standard. Inflation diminishes the value of payouts in
fixed denominations like the governments annuity scheme,
benefiting the debtor at the expense of the creditor. The
Government is taking expensive Singapore Dollars from
Singaporeans, and repaying them cheap Singapore Dollars. If
Singaporeans die before collecting their (inflation-diminished)
principal, the Government keeps the money. And the Government sets
the payout bar so high, a healthy majority of us would have kicked
the bucket before we even smell 85.
What puts it all in context, is the list of private annuity schemes
currently available under the CPF scheme, put on the official CPF
website.
http://mycpf.cpf.gov.sg/NR/rdonlyres/883DD6D3-D1EC-48DD-8B09-811C0D24ECE8/0/AnnuityComparison.pdf
One notices that with the investment of a minimum sum of $99,600,
annuity payouts start at 62. Even at the lowest payout rates (GE
Life, Female - $440.73/month), by age 85 the investor has received
$121,000. The investor has recouped the principal, and is earning a
much higher rate than government annuities. Mind you, this is the
lowest. In addition, all private firms listed there repay the
original principal in full upon death.
In PM Lees speech3, he mentions that few Singaporeans take up
annuities due to their unattractive returns, but that Singaporeans
still need them. It is hard to take such ex cathedra statements
seriously. If Singaporeans wont take up private annuities schemes
due to their low rates of return, what makes PM Lee say that
Singaporeans need compulsory annuity schemes due to their even
lower rates of return? This is supposed to be the brilliant
retirement scheme from Mr Lee and his gang? There is a very good
reason the whole thing is compulsory no Singaporean in his right
mind would opt for this punitive scheme.
With big government schemes like the Biopolis and a fourth
university, the Government has to get the money from somewhere.
With this compulsory annuities scheme and the various CPF re-jigs,
it looks as if the Singapore Government has discovered that the
taxpayer has more than one pocket.
Footnotes
1Singapore, CIA World Factbook -
https://www.cia.gov/library/publications/the-world-factbook/geos/sn.html
2 MAS ready to inject cash into market if needed,
Channelnewsasia.com -
http://www.channelnewsasia.com/stories/singaporebusinessnews/view/293230/1/.html
3 http://app.sprinter.gov.sg/data/pr/20070819990.htm
_______________________________________________________
If you have any comments, spotted any mistakes, or disagree with my
take on the issue, please leave a message on my blog here (all
intelligent comments welcome!):
http://freedom-for-man.blogspot.com/2007/09/letter-to-today.html
