Investments under The CPF Investment Scheme (CPFIS)

Mrs Lina Chiam asked the Deputy Prime Minister and Minister for Manpower for the last five years (a) what is the percentage and number of CPF account holders investing under the CPF Investment Scheme (CPFIS); (b) how many CPFIS investors made losses; and (c) how many of these losses were due to investments in high risk assets.

Mr Tharman Shanmugaratnam: As at the end of last year, about 900,000 CPF members, or 27% of all CPF members, maintained investments that were purchased using their CPF Ordinary Account (OA) savings. About 470,000 CPF members, or 14% of all CPF members, maintain investments that were purchased using their CPF savings from their Special Account (SA). The two numbers cannot be added up however, as many of those who invested using their SA savings may also have invested using their OA savings. These proportions have remained roughly constant over the past five years.

Through CPFIS, members are able to invest in wide variety of asset classes, including Government bonds, insurance policies, unit trusts, shares, and others. CPF Board does not track realised returns on the different asset classes. However, funds must meet stringent admission criteria to ensure that they are properly and efficiently run.

The most recent period for which the realised investment performance of those participating under the CPFIS-OA Scheme is available is the period of 1 October 2010 to 30 September 2011. About 45% of members participating in the CPFIS-OA Scheme who realised their investments during that period made losses. These figures are based on members' realised returns, and do not account for the performance of the unrealised portions of members' CPFIS portfolios.

Members' realised investment performance over this period could have been adversely influenced by the volatility and overall decline of equity markets during this period. For reference, the MSCI Singapore Index experienced an increase in value of 3% from October 2010 to May 2011, then declined by 18% from May 2011 to October 2011, resulting in an overall decline of 15% over the period. The value of the MSCI World Index rose by 18% from October 2010 to May 2011, then subsequently declined by 20% from May 2011 to October 2011, resulting in a 6% decline in value over the whole period.

Page: 209

The CPFIS provides members who are prepared to accept higher investment risks with the option of investing in potentially higher yielding returns. The risks lie in the performance of the funds or investment instruments that they choose, or in the broader investment climate. The timing of members' transactions can accentuate this risk. We therefore advise members to exercise care and prudence when investing under the CPFIS. Members who participate in the CPFIS should ensure they are equipped with the necessary investment knowledge, and be prepared to accept the risk of their investment choices.

If members are not confident of investing on their own or do not wish to risk capital losses on their CPF savings, they can continue keeping their money in their CPF accounts and earn the risk-free interest. The Special, Medisave and Retirement Account (SMRA) interest rates, in particular, are equal to the yield of the 10-year Singapore Government Securities (SGS) plus 1%, which proxies for the yield of a long-term, 30-year SGS bond. Members will also earn 1% extra interest on the first $60,000 of CPF balances.