Call to Ease New CPFIS Restriction Under Study

Call to Ease New CPFIS Restriction Under Study
- The Straits Times, 08 November 2007

Please refer to the letter "New CPF Rules Fair But Ease Investment Rules" (ST, 31 Oct) by Mr Tan Kok Kiam.

2.   The CPF reforms package announced in September 2007 will give members an extra 1% on the first $60,000 of their CPF monies from 1 January 2008. Because of the extra interest, the first $20,000 in both the Ordinary (OA) and Special Accounts (SA) will not be allowed to be used for investment under the CPF Investment Scheme (CPFIS) from 1 April 2008.

3.   Mr Tan suggested that the new CPFIS restriction should be placed on the first $60,000 in each member's CPF, regardless of the account. Mr Tan also suggested removing the 35% limit on stocks, in view of the new restriction on OA and SA monies. We thank him for these suggestions and are studying these proposals.

New CPF Rules Fair But Ease Investment Rules
- The Straits Times, 31 October 2007

The new CPF interest rates are fair. However, for people with higher risk appetites and feel they can do better than the CPF Board, it is unfair to rob them of the opportunity to make more by imposing illogical rules for investment. Here are a couple of rules that I hope the Government will re-look:

The new requirement to set aside $60,000 before any investment can be made is a very prudent move. But the need for $20,000 in the Ordinary Account and a similar amount in the Special Account is unnecessary. It should not matter where the $60,000 is. If a CPF member already has more than $60,000 in the Special Account, why force him to have an additional $20,000 in the Ordinary Account that will earn only 2.5 per cent (not 3.5 per cent) a year?

The stock limit is currently set at 35 per cent of Investible Savings. I propose that this limit be removed as there is currently no limit set on investment in unit trusts, including those that invest in equities. It is a misconception that unit trusts are safer than stocks. A prudent stock investor usually makes more or loses less than a prudent unit-trust investor by virtue of the sales charges and expense fees imposed on the latter.

Investors who switch to unit trusts because of the stock limit are forced to contribute to the earnings of fund managers and distributors. Anyway, once the Minimum Sum is set aside, the CPF member should be given the freedom to take responsibility and bear his own risks for the rest of the money. If the Government insists on controlling the way CPF members allocate their investments, the stock limit should at least be increased to a higher percentage of Investible Savings, in view of the new requirement to set aside $60,000.