CPF SAVINGS (Maintenance of purchasing power)

Mr Yeo Toon Chia asked the Acting Minister for Labour (a) what steps are being taken by the Central Provident Fund Board to ensure that savings of contributors will, on their retirement, be worth their current purchasing power; and (b) what are the investments the Board has made and what steps are being taken to ensure that they yield a better interest rate so that CPF members may get a better return on their savings.

Prof. S. Jayakumar: Mr Speaker, Sir, the rate of return on any investment is commensurate with its level of risks.

Since CPF moneys are meant for members' old age, it must be invested conservatively and prudently. For this reason, the bulk of CPF funds are invested in long-term Singapore Government bonds.

The returns from these bonds enable the Board to pay interest of 6 1/2% per annum to its members. This interest rate compares favourably with those paid by banks on savings and fixed deposits after adjustments for taxes which are generally payable for interest earned on bank deposits.

From the table (Cols. 1381 - 1382) which will be distributed, the Member will see that the CPF interest rate was higher than the tax-adjusted bank's savings deposit rates for 17 out of the 18 years from 1966 to 1983 and higher than the tax-adjusted bank's 12-month fixed deposit rate for 15 years in the same period. table - Comparative Interest rates of CPF and the tax-adjusted 12-month and savings deposit rates of commercial banks for the years 1966-1982 (Cols. 1381 - 1382)

Furthermore, in 14 out of the 18 years, during the same period the CPF interest rate was higher than the Consumer Price Index, which means that the real purchasing power of members' moneys has been maintained.