Set Up Separate CPF Plan For Risk-Takers

Source : The Business Times, October 11, 2007

TAN Keng Tat (BT, Oct 10) makes a good case for giving CPF a freer hand to generate more wealth for CPF members. His well-balanced letter also pointed out that the government's stand is that the CPF rate is low because CPF investment is risk-free and members' CPF money is guaranteed by government.

The gist of the issue is that unless one is prepared to take some risk, one cannot expect a higher return on investment. But there must be quite a number of CPF members who may be prepared to take a higher risk in return for an anticipated higher return.

Perhaps one solution is for CPF to separate members into two groups: those who are prepared to take no risk and those who are prepared to take some risk.

The present scheme can apply to the contributions of those who are prepared to take no risk.

Those who are prepared to take some risk would have to opt to be in this scheme. Their contributions can be pooled and managed by CPF with a freer hand. These members would expect a higher return each year but accept that they can suffer losses if the CPF investments turn out bad.

CPF board would probably argue that these members can already invest on their own under the CPF investment schemes. But the reality is that many of these members may not have the financial skills or the time to do so themselves.

Also, when their contributions are pulled together by CPF, there would be a bigger fund to make it viable for CPF to get professionals to manage this fund for its members.

Goh Khee Kuan
Singapore