In parliament today, Deputy Prime Minister Shanmugaratnam sought to explain how the CPF funds of Singaporeans are invested. This is his explanation.
“The CPF Board (CPFB) invests CPF members’ monies in Special Singapore Government Securities (SSGS). These are issued specially by the Government to CPFB. The payout from the SSGS is pegged to the interest rates that the CPFB is committed to pay its members.”
“The Government guarantees these SSGS bonds, so that CPFB faces no risk of being unable to meet its obligations to its members. This is a solid guarantee, from a triple-A credit-rated government.”
“What does the Government do with the proceeds from SSGS issuance? It pools them with the rest of the Government’s funds, such as proceeds from the tradable Singapore Government Securities (SGS), any government surpluses as well as the proceeds from land sales which under our Constitutional rules have to be accounted for as Past Reserves.”
“The comingled funds are first deposited with MAS as Government deposits. MAS converts these funds into foreign assets through the foreign exchange market. A major portion of these assets are however of a longer term nature, and are hence transferred over to be managed by GIC.”
“The SSGS proceeds are not passed to Temasek for management. Temasek manages its own assets, and does not manage any CPF monies.”
“What these investment arrangements mean is that CPF members bear no investment risk at all in their CPF balances. Their monies are safe, and the returns they have been promised are guaranteed. Neither does the CPF Board bear any risk, regardless of whether GIC’s investments earn or lose money in any particular year. The risk is wholly borne by the Government, on its own balance sheet.”
“ The Government pools the proceeds from SSGS with its other assets, and invests long-term funds through the GIC. The GIC does not in fact manage SSGS monies on their own, separate from the Government’s other assets. GIC is fund manager for the Government, not owner of the assets and liabilities.”
“ Our CPF system is hence sustainable, so long as the Government continues to run prudent budgets, and invest the reserves wisely. Then the Government’s balance sheet will remain strong and investment returns over the long term can continue to meet our debt costs.”
