The primary purpose of CPF is not a pension scheme. It is structured as a massive forced bond purchase scheme by citizens. Financially what happens is the 37% of citizen income buys a long term bond (till retirement age, on average decades) at rock bottom interest rates (it's pegged to the overnight rate or a minimum of 2.6%). The returns are specifically decoupled from the real long term returns. This has historical roots in the government needing vast capital financing. They make enormous amounts of the delta between the short term interest rate and long term capital gains. Singapore has no oil or natural resources, but it's sovereign wealth fund has AUM in the regions of countries like Norway which do for this reason. It is not a shock absorber like the article suggests. The withdrawal terms are strict - housing, a significant medical expense and retirement are the only real ways to get money out of it.
"Trying to keep people employed" is a goal, not a policy. In fact the Singapore government maintains a large worker supply through immigration. The foreign worker population, ~30%. The main goal of the government is to maximize the absolute number of people working.
The reason it raising the retirement age is effective in workforce participation is because most people have no choice. Retirement only pays out after the age. The working life of an average Singaporean has seen 37% gone to CPF, maybe another 10% to income taxes, another 5% to GST, road tax, property tax, etc. After all this there's the astronomical cost of living. This is also intentional, to raise the number of employees.
So they are functionally productive and net positive to any scheme about post work funding for the community.
I have lived there and can rattle off plenty of criticisms about the country but complaining about migrant workers who clamour to work in SG is not one of them.
The vast majority of Singapore migrant workforce are Malaysian citizens who live over the border in JB, you can rent a 2 bed apartment there for $300 a month and eat out in a restaurant for $2 while commuting each day to a developed country and earn those level of wages.
To pretend these people have a rough deal compared to back home is absurd and I'd challenge anyone to actually talk to them first before getting on your high horse. Ask them if they would prefer to work in their home country.
It's essentially a forced loan to the government at subpar rates. The "tax" is the delta between what the government pays out for the bonds vs what a bond of equivalent risk in the free market would have paid.
The magnitude of the investment also probably makes it impractical for anyone but the very wealthy to retire before that starts paying out. Most other countries have lower rates on their retirement schemes, which makes it feasible for more people to live on their savings for a few years before the government retirement scheme kicks in. E.g. in the US it's pretty feasible for the upper middle/lower upper classes to retire a few years before Social Security kicks in, especially if they're willing to live frugally.
Edit: in fact interest delta is how banks make their huge profits except the government here does it by force.
In times of economic distress the government lowers the employer contribution part of CPF. That effectively gives everyone a wage cut to help employment, but without people complaining too much about it. The government is disciplined enough to raise the rate again later.
It is a tax, but with extra steps.
The reason it makes the government money is because they’re collecting the extra interest that citizens would have earned if they were free to invest it on their own.
Forced savings programs aren't actually "savings" for the people on whom the programs are forced!! "Forced savings" is a euphemism for "we're taking your money and calling it savings based on the idea that we're going to invest it well, though you won't see much of any gains, and there might not be any gains to speak of".
The only question is whether the fund is running at a surplus or not.
The US has raided its fund to finance other government programs, and then will have to pay it back via tax revenues.
Forced saving makes it a tax. It's essentially no different than payroll taxes in the U.S. that fund Social Security. Buying government bonds is still marginally better accounting than a complete Ponzi scam like Social Security in the U.S., but even that ultimately amounts to the same thing - the government is paying itself, so it's a wash.
How is being a serf win win?
Tangentially, I've had a similar gripe around how some US folks discuss Singapore's similar old-rival Hong Kong. They'll advocate "Hong Kong shows policy X works, we should do X here too", while ignoring the other half of the system required to make it work, policies the same advocates would never want to adopt.
In particular, celebrating HK's "tax freedom" while glossing over how the government does fund expenditures. It's the ultimate landlord, deliberately constraining supply (with high subsidies to the poor to prevent revolt), and draws from its huge [0] sovereign-wealth fund.
[0] Huge by any US standards, even if far smaller than Singapore or Norway. To put the per-capita amounts in context, if the US is 1x, then HK=80x, Singapore=356x, Norway=379x.
Social Security is effectively the same thing. Payroll taxes are collected and placed in the social security trust fund, which invests them in federal bonds.
For those who know how to manage their money, this is absolutely a hit on potential returns. But for many who may not, this is net more than what they would have otherwise
In fact, this had become a hot button issue in the elections. All this while, and even today the government claims that the people are the owner considering they can sell the units and book profits. On the other hand, they justify the 99-year limit, as a step to being fair towards future generations in a land scarce country.
There have been many policy and public discussions around this topic. But, as of date, there is no firm or permanent solution to this conundrum.
how does that work?
the UK effectively does the same thing with DB schemes forced to buy Gilts
Offering a DB scheme however is an employer's choice, a choice most choose not to make today.
Why? What? You know, they have to win elections?
They recently tightened migrant worker visas quite a lot.
[0] https://www.singstat.gov.sg/publications/reference/singapore...
Amazing what the people and government have achieved since the end of WW2. 100% respect for them.
A side comment: I enjoy listening to English language news from many countries around the world to get different viewpoints. News media from Singapore is very interesting, indeed!
The country effectively runs on a slave class. You must drive a new vehicle under 5 years old, and the license just to buy a car was $90,000 or so. This means an entire class of people that will be taking the bus to do your laundry and clean your house for the rest of their lives and likely their kids lives.
The guy took me around to construction sites. The Indonesian and Malaysian workers were some of the most brave or stupid workers I’ve ever seen. I saw a guy install a window in a three story building by effectively free climbing from the outside half a flight up starting on the third floor, from the outside of the building. No harness, no ropes, just him out there hanging and pushing against a nook with his work boots. The SG contractor had helmet, hi-vis, steel toed, carhart, radio, clipboards etc.
Singapore is an amazing place. It’s like, a rorschach test kind of. Like everyone sees something different there.
I noticed things that trip. However… I was able to enjoy the botanical gardens and Marina Bay Sands rooftop like the other tourists… fond memories, but they have a backdrop that reality is only thinly hidden there.
The country's progress and management is extremely good, however it's enabled mostly by exploitation of migrant workers and various kind of white collar crimes (ie, facilitating business for illegal or sanctionned entities - cf Nvidia chips for China for example)
I really wish people would not throw this word around so casually, it is disrespectful to the many millions of people over the course of human history (and today!) who were forced under threat of violence or death to labour without remuneration.
Of course Singapore's migrant worker system is open to criticism, but every single one of those workers can resign tomorrow and get a free plane ticket home, and the same applies to domestic helpers as well.
Migrant workers work in Singapore because it's their most rational economic choice. They pay no income tax, room and board is provided and the wages are sufficient to house, feed and educate their family back home, almost certainly to a better standard than would otherwise be possible had they remained in their home country.
tl;dr migrant workers have agency!
The comment about cars is unintentionally hilarious. “A developed country is not a place where the poor have cars. It's where the rich use public transportation.” and the public transportation in Singapore is very good indeed.
> You must drive a new vehicle under 5 years old, [..]
No? And no one is forced to drive anything. I don't own a car.
I don't understand this. At all. Are people forced to buy cars every 5 years?
Can you expand on this? Which ethnicity/culture is in which class?
One party has been ruling continuously since its formation and you can't go against its ideas.
There is no real competition for ideas like we have in the US.
So, yeah, the "discussion/debates" will be high quality when it is one sided. Just like North Korea is free from low quality debates, Singapore too is free from that.
https://www.amnesty.org/en/location/asia-and-the-pacific/sou...
> In June, university students and alumni delivered letters opposing a new racial harmony bill to the Ministry of Home Affairs, arguing that it provided the government with further powers to clampdown on dissent. The authors were later investigated by the police. In the same month, police charged three activists – Annamalai Kokila Parvathi, Siti Amirah Mohamed Asrori and Mossammad Sobikun Nahar – with organizing a procession in a prohibited area under the Public Order Act. These charges came after they led a march to the Presidential Palace to deliver a letter of concern about the Gaza conflict. If found guilty, they could be fined up to SDG 10,000 (USD 7,360) or face six months’ imprisonment.
https://freedomhouse.org/country/singapore/freedom-world/202...
European languages have a future tense, which means people have different ideas of themselves in the present and future. You can even hear this in phrases like "that's a problem for future me."
While Chinese lacks the European styled future tense, ignoring time phrases, auxiliary verbs, etc. So people more clearly conceptualize their present and future selves as the same. Leading to things like increased saving.
This of course is rooted in linguist psychology, a very soft science. But still an interesting idea.
What makes this story (scientifically) great is that Chen himself co-authored a follow-up study just two years later [1] to rigorously test his own theory. When they re-analyzed the data using mixed-effects models to control for cultural phylogeny and relatedness, the correlation between grammar and savings pretty much disappeared.
They concluded the original finding was likely a spurious correlation.
It turns out that cultural history drives both the language we speak and our saving habits, rather than the grammar causing the behavior.
[1] https://journals.plos.org/plosone/article?id=10.1371/journal...
We are talking about material impacts, not culture
You need to have some emergency savings. You should save for retirement somehow. If you can structure the above as insurance - and you can trust the insurance - (I know a few cases where the insurance type system went bankrupt and those with a "policy got nothing") that is best.
Once the above is taken care of though, you can't take it with you (at least in most religions) so spend it. Save enough, but not too much.
You’re looking for people who didn’t want to save but begrudgingly saved at the expense of their pre-retirement life and then died before they could enjoy retirement. That’s a much smaller group.
Now, I realize that this is a privileged position. I have a yuppie software job that pays well, and as such I can afford to have savings and still afford to do fun things. I don’t go on luxury cruises or super fancy restaurants, but I do try and travel fairly often with my wife, and as long as we’re a little frugal about it we can go on a “big trip” once or twice a year without it being something that hurts us much financially.
But in general you have three things to spend in your life: time, money, and effort.
You don't want to spend all your time saving money because you'll run out of time eventually, but you also don't want to spend all your money saving time because you'll run out of money.
It's all about balance and thoughtfully understanding what you actually want and how to get it.
I don't understand this PoV at all.
I can't take it with me, sure, but I'm happy anyway if I leave it behind to my kids.
This PoV that you need to spend, spend, spend to get the most value for your money is very primitive - my kids will do better if I die before touching my nest egg, and if I don't at least I'll have a longer runway to live without working.
There is no downside here, other than the artificial one that dictates you spend it all and leave nothing behind.
This is one of those things where generalized advice often makes little sense because circumstances are so different. If you make $500,000/year, you can save half of your take-home pay and still live very well, and have a ton of money when you retire. If you make $50,000/year, you might struggle to save at all if you're supporting a family, and there's going to be a lot of tension between saving for retirement and occasionally having some nice things before retirement. Living in poverty to save for retirement and then dying before you can enjoy any of it would be a sad outcome here. But if you're more towards the upper end of this spectrum, those cautionary tales sound a lot like "spend spend spend."
i get what you are saying, but leaving money to the kids isn't the answer. (Other than collage money)
You would be happiest if you could take it with you. Since you can't, you'll leave it to your kids, because it would even worse leaving it to somebody else.
I get it to a certain extent, don't live in poverty if you don't have too, but I am a major saver. I rarely buy new things if an old thing is working fine. If I die early at least my family will will be set.
Really the social safety nets in the US are basically non-existent so having a big savings buffer makes me feel a bit safer. Honestly dying early doesn't worry me too much, I'll be dead so doesn't bother me. What does worry me is the economy tanks and all my saving become worthless. Then I would have some regrets...
------ re: below due to throttling -------------
Vs say US, where immigrants and those funding public housing are generally better off than the people getting subsidized housing. Public housing is more a progressive than regressive tax in the US, so quite dissimilar. Immigrants in US are on average far better off than those on public housing. Asking "but how is this any different" (after I already answered it, lol) over and over doesn't negate this, nor the fact that immigrants are like half of workers in Singapore vs only 10% in the US so the funding dynamic and dependency is far different.
Singapore has about 1.5 million foreign workers[0] of the population of 6.1 million or just under 25%. Of that 1.5 million, 75% are WP holders who pay no tax and have housing provided as a condition of their employment. Why would you expect social housing to be provided for them?
Only about 5-6% of the population are on EPs and SPs. They are definitely vulnerable during a downturn, but they are professionals and they know the rules coming in. At least while they're here they enjoy low tax rates and don't have to contribute to CPF. If they fell into the expat trap of living the high life and didn't save, that's on them.
It's similar in Vienna where only native Viennese are immediately eligible for social housing, but outsiders will end up paying into the system without being eligible.
They still have to contribute though.
By definition, outsiders don't have to pay into the system since they already have a gov't somewhere else that is dedicated to them, just like the Viennese do.
Countries like Singapore and all of the Middle East meanwhile rely on a revolving door of cheap immigrant labor. In the extreme cases like Qatar 95% of the working population are on short term visas. Most of these countries don't have a pathway to citizenship at all for this worker class. You could live there, work and pay taxes for 10 or 20 or 50 years, but the day you "retire" you need to pack up and leave.
What I find interesting about Singapore is that it is a fairly small country: a bit over 6 million people. That's small compared to the USA (341 million). When you are such a small country or city-country, being prosperous requires intelligence and efficiency. And diplomatic skills too. Taiwan also showed this, though it is a bit larger than Singapore (23.4 million). It seems that this is a good success story - to have competent and intelligent workers and people. Education is one key factor of success here.
Considering that they also have to consider economic development in their investment decisions, the RRQ funds are well managed by the CDPQ.
People who score well on probability numeracy are likely better educated and better paid and have more in automatic savings plans. So if someone is maxing out their 401k they don’t feel they need to save more.
The article shows that in the US there is a 25 point gap between high and low income on savings regret, and a 14 point gap between high and low numeracy scores.
In Singapore where savings are more automatic numeracy is a more powerful predictor.
Well, America is rough. It turned on hardcore capitalism mode for itself because a significant portion of its population wants to try and solo socioeconomic hardships and hates any one who doesn't want the same challenge.
But not to just blame the voter, lots of money is spent for setting up systems to be amenable to acquiring more money. The very richest have correctly made a bet that uprisings to displace the wealthy and politicians just don't occur here these days, and therefore there is no real threat or need to change the way things have been going for the last 25 years or so.
Yes, the systems are amenable to acquiring more money, but I would claim that all that the richest need to do is to push the idea that "anyone can make it" - which was probably (more) true 50 years ago, but is probably an illusion today (some comments at: https://en.wikipedia.org/wiki/Socioeconomic_mobility_in_the_...).
Edit: I do not claim one model is better than the other; just that the culture influences the outcome more than other aspects.
No. Culture is downstream of institutions.
America is designed for rich people
This is a particularly funny one tbh. A nation's kids _are_ the retirement plan. It doesn't matter how many numbers you put in spreadsheets dated for 20-40 years into the future, if in said future, there isn't actually anyone to accept those numbers in exchange for labor.
That seems like what they should have been looking at re procrastination--conscientiousness.
I am not at all surprised that people who Take Care of Business lament not doing a better job (saving) and people who YOLO don't as much.
Did the study have to go as far as Singapore to find somewhere where the situation was reversed or was there another factor?
In other words, I suspect it's "we started with Singapore then compared to America" not the other way around.
Been there, done that.
Yes the jobloss impact caused the people to be unable to save and in turn they wished they have saved more.. but ignored is whether they could to begin with.
Of course external impact had little to do with internal procrastination.
It says that understanding risk (as operationalized by understanding probability) has a larger effect.
But it is also saying that the more external impact someone has, the more they regret saving more -- in the United States but not Singapore.
The study is explicitly saying that internal motivation does not seem to matter. And the article is arguing the reason why.
It’s basically just saying that the uninsured catastrophic event risk in America magnifies shock events.
E.g., if you have a major hospital visit in America you’re way more likely to regret not saving enough, but in Singapore there’s basically no effect since hospital stays don’t drain your savings account.
Not just healthcare stuff, but also apparently Singaporeans tend to have a lower unemployment rate, so they be able to recover from stuff faster
if it exists in abundance like the air that we breathe no amount of conspiracy will be able to monopolize it.
finance only works in a very narrow band of environmental conditions. we are very well past that.
