CENTRAL PROVIDENT FUND

Mr Steve Chia Kiah Hong asked the Minister for Manpower (a) if he will provide a breakdown of how the total funds kept with the Central Provident Fund (CPF) Board are invested and what are their investment returns; (b) what is the amount of interest the CPF Board is getting from the Housing and Development Board and what is the amount of interest the CPF Board is paying on the members' accounts; and (c) what is the proportion of Singaporeans who have a CPF balance greater than their property loan and vice versa.

Dr Lee Boon Yang: At the end of financial year 2002, the total CPF savings kept with the CPF Board was $96.4 billion. Of these, $94.4 billion (or 97.9%) were invested in Government Bonds and $2 billion (or 2.1%) in Advance Deposits*. * These are unaudited figures.

The returns on the funds invested in Government Bonds and Advance Deposits are pegged to the same interest rates that the Board pays its CPF members.

The interest rate that the CPF Board pays on balances in the Ordinary Account (OA) is pegged to the 12-month fixed deposit rates (80% weightage) and the savings rates of banks (20% weightage). The minimum guaranteed rate for OA is 2.5% per annum. For balances in the Special and Medisave Accounts, the CPF Board pays an interest rate that is 1.5% above the prevailing CPF interest rate, i.e. at 4.00% per annum currently.

The CPF Board does not receive any interest from the Housing and Development Board (HDB), as the CPF Board does not place any funds with the HDB. As highlighted earlier, all CPF savings were invested in only Government Bonds and Advance Deposits. The Government, however, does provide the HDB with mortgage financing loans at an interest rate that is pegged to the CPF interest rate to enable the HDB to finance its concessionary mortgage loans.

The CPF Board does not track the proportion of Singaporeans with CPF OA balances greater or lower than their property loans. It is unclear why Mr Chia wants to compare a member's CPF balance with his property loan. If the concern is that the member has used too much CPF for housing, there are checks against that, such as the withdrawal limit, which at present is equal to 150% of the lower of the valuation or the purchase price of the property and would be gradually reduced to 120% over the next 5 years. If the concern is about the member's ability to finance his housing loan, his current CPF balance is a poor measure of that, because he could have withdrawn his CPF savings under other schemes, such as for investment under the CPFIS. Also, he could use his monthly OA contributions to finance his loan; that is not reflected in his current CPF balance. Hence, it is not meaningful to compare CPF balances with housing loans.