House Prices could drop by a Quarter?

[JR8]

2. Find me any other AAA rated government anywhere in the world paying over 4%, inflation adjusted

Given that risk correlates with reward, how do you think SG manages to be the only AAA-gahment that can offer such a return?

[BBCWatcher]

It's not about the returns. It's whether you trust govt/central banks/banks etc to return your money.

It's about both.

So what other AAA rated government is paying above 4%, and with inflation adjustment? Find us another one! That'd be lovely.

Nobody is suggesting to put every bit of your savings in CPF. You can't anyway even if you wanted to. (Well, many people cannot.) But CPF SA funds are damn safe.

This is what happened with a bank in Austria.

That's nice, but that's not a AAA rated government's obligation.

We also know what happened with Cyprus and Greece.

Yes, two countries that are not and never have been AAA rated.

It may not happen with Singapore, but the point is why to risk it, keep your money with another country's govt when you are not even planning to stay there.

You address remaining risk through diversification. But there is nothing rated higher in terms of safety than Singapore government obligations. There is nothing higher than AAA. So if something AAA can't be part of your portfolio because it's too "dangerous," what can? German government bonds paying negative real (and sometimes nominal) rates of return?

[BBCWatcher]

Given that risk correlates with reward, how do you think SG manages to be the only AAA-gahment that can offer such a return?

In fact it's not. There are some AAA governments managing to deliver >4% returns. The only difference is they do it for their employees, i.e. for government workers. Singapore has a large sovereign wealth fund and is quite unusual in extending a government worker-like defined contribution pension system (and yields) to a much broader segment of its population.

But AAA governments don't have to pay ~2% real after-tax returns on even long maturity general debt obligations. Investors, both local and foreign, don't need to be so well rewarded. CPF is a different creation, and there's an annual cap on contributions. So you can get a great deal, but that deal isn't unlimited.

[JR8]

2. Find me any other AAA rated government anywhere in the world paying over 4%, inflation adjusted

Given that risk correlates with reward, how do you think SG manages to be the only AAA-gahment that can offer such a return?

In fact it's not. There are some AAA governments managing to deliver >4% returns.

That was quite some U-turn

[Wd40]

Lehman Brothers and AIG were rated as AA and AAA just minutes before their collapse.

Also read another article in which Temasek had refute S&Ps new rules of credit rating that would put it along with Greece and Jamaica.

http://www.bloomberg.com/news/articles/ ... ean-credit

Also ratings only talk about the ability or capacity of the obligor to fulfill its financial commitments. It tells nothing about its track record of making new rules overnight to put restrictions on withdrawal. Currently PRs can withdraw their CPF when they give up their PR, but then Malaysians are not allowed to withdraw until 60, unless they don't got back to Malaysia. What if this rule is changed to include all PRs or some other rules which we cannot even think of at this time.

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[Wd40]

Lehman Brothers and AIG were rated as AA and AAA just minutes before their collapse.

Also read another article in which Temasek had refute S&Ps new rules of credit rating that would put it along with Greece and Jamaica.

http://www.bloomberg.com/news/articles/ ... ean-credit

Also ratings only talk about the ability or capacity of the obligor to fulfill its financial commitments. It tells nothing about its track record of making new rules overnight to put restrictions on withdrawal. Currently PRs can withdraw their CPF when they give up their PR, but then Malaysians are not allowed to withdraw until 60, unless they don't got back to Malaysia. What if this rule is changed to include all PRs or some other rules which we cannot even think of at this time.

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[ecureilx]

, but then Malaysians are not allowed to withdraw until 60, unless they don't got back to Malaysia. What if this rule is changed to include all PRs or some other rules which we cannot even think of at this time.

Malaysians from West Malaysia can withdraw by the age of 50. There are exemption clauses for that.

And that CPF will be held back for others, a-la Malaysians, is a long standing rumour among Sub cons, and is used to discourage other aspiring PR applicants. And is used to promote the 20% be invested back home, I think.

Singapore has more than enough reserves to pay back all Indians' CPF, if they all leave tomorrow, said a banker here.

[Wd40]

, but then Malaysians are not allowed to withdraw until 60, unless they don't got back to Malaysia. What if this rule is changed to include all PRs or some other rules which we cannot even think of at this time.

Malaysians from West Malaysia can withdraw by the age of 50. There are exemption clauses for that.

And that CPF will be held back for others, a-la Malaysians, is a long standing rumour among Sub cons, and is used to discourage other aspiring PR applicants. And is used to promote the 20% be invested back home, I think.

Singapore has more than enough reserves to pay back all Indians' CPF, if they all leave tomorrow, said a banker here.

It has the reserves no doubt. But you know, it's not about money alone. Things are being made difficult for PRs and Foreigners just to appease the locals. What if there is a brilliant idea by someone. "If Singaporeans are not allowed to withdraw their PF early then why allow PRs" Make the ground equal.
And it's not a rumour that it will happen, it's just that Indians can think through these kind of possibilities.


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[ecureilx]

And it's not a rumour that it will happen, it's just that Indians can think through these kind of possibilities.

The government thinking to those leaving would be, good riddance, here, take your CPF so you don't have any excuse to come back

And I know, Indians will conjure up stuff to make motherland seem best

[Wd40]

And it's not a rumour that it will happen, it's just that Indians can think through these kind of possibilities.

The government thinking to those leaving would be, good riddance, here, take your CPF so you don't have any excuse to come back

And I know, Indians will conjure up stuff to make motherland seem best

Are you the govt? You have just spoken for them.

I am only talking about possibilities and you seem to be sure about what you are saying.

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[sundaymorningstaple]

I've lived here from 2.35 to the USD to 1.15 and back to 1.4 now over the 3.3 decades I've been here. It can go anywhere MAS wants it to go. Not necessarily where the rest of the world anticipates.

[BBCWatcher]

Lehman Brothers and AIG were rated as AA and AAA just minutes before their collapse.

Neither one of which is/was a government with the sovereign power to tax. AAA corporate is a completely different (profoundly lower) rating than AAA government. And nobody that I've ever met or read (who isn't paid to say otherwise) ever recommended putting more than a tiny fraction of your total savings in either of those two companies' stocks or bonds -- or in any company's stocks or bonds. Everybody recommends portfolio diversification, unless they're trying to sell something.

If you're trying to argue that CPF SA shouldn't be a part (not all!) of your total retirement savings if you are eligible (or required to) contribute to CPF, I think that's downright crazy.

[BBCWatcher]

That was quite some U-turn

No. "Find me." I am not a pension program participating employee of a AAA government with an excellent (but employee only) defined contribution pension program. I'd also love to get the special phone call inviting me to buy an IPO at the grossly undervalued private client price. That'd be nice, too. Unfortunately such offers are not available to me or to the general public.

I'm all in favor of better options if they exist, and I'm in favor of portfolio diversification always. So what's the better option for high safety retirement savings?

I'm not persuaded that a hypothetical rule change (can't withdraw at age 33!) would be a problem. CPF SA is not like a current/checking account fully insured by a highly rated government. It's primarily for retirement savings but at least for long duration savings. It's not an account designed to be raided next year to fund the next adventure in citizenship or permanent residence trophy gathering, for example. Never has been, never claimed to be, never will be.

[JR8]

AAA corporate is a completely different (profoundly lower) rating than AAA government.

Interesting way of looking at it. Corporate bonds are [invaiably] valued at yields over the same maturity government bond but the rating assigned already takes into account the issuer risk. So I see no logic in the suggestion that a gahmen AAA is 'completely/profoundly' better rated than a AAA corporate. The ratings are simply bands, and both fall inside it, ergo the risk isn't 'completely/profoundly' different.
Example; look at -> http://www.bondsonline.com/Todays_Marke ... preads.php The average US 5-year AAA corp is last indicated there as trading at 0.53% over the same maturity US Treasury. Hardly profound.

And nobody that I've ever met or read (who isn't paid to say otherwise) ever recommended putting more than a tiny fraction of your total savings in either of those two companies' stocks or bonds -- or in any company's stocks or bonds. Everybody recommends portfolio diversification, unless they're trying to sell something.

And people suggest not putting all your savings in one issuers account because of the risk of the issuer losing your money. Yet here you are celebrating how wonderful it is to have all your money c/o one government agency. Of course the implosion of UK pensions (National Insurance, a government agency) couldn't happen in Singapore so all is well, right?

p.s. I've no idea what 'No. "Find me."' means...

[Strong Eagle]

Singapore has a large sovereign wealth fund and is quite unusual in extending a government worker-like defined contribution pension system (and yields) to a much broader segment of its population.

It's actually a two step process. CPF is invested into "Special Singapore Government Securities" and the government guarantees these bonds. In turn the Singapore government takes the SSGS proceeds and invests in GIC and Temasek.