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Shaun Goh

17 Feb 2021

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Why does CPF have contribution caps?

Asked from another perspective: what would happen if CPF removed all the contribution caps (voluntary or deducted)?

Assuming the tax benefit limits, allocations & bonuses remained the same, is it a case of there being more money channelled into CPF than the Board would want to handle?

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Yixiong Chang

17 Feb 2021

The knowledgable and rich will put most of their money into CPF. 4% guaranteed interest rate is just too good. 30 years yield on the the SGS is not even 2%. It is a disadvantage to the less well-off who can take advantage of this.

Another way to look is Imagine our Government could issue 30yrs bond for under 2%, and invest the moneys. Rather than having to pay 4% to CPF, and invest the moneys for longterm. CPF doesnt manage the CPF moneys, CPF receives special bonds from the government that guarantees the return, the government then inturn pass the money to other institutions to manage.

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