Better markets give CPF investors a lift

CPF members returns on CPF investment as follows:

14% : > 2.5% OA interest
37%: < 2.5% OA interest
49%: realised losses

The above statistics is telling us that it is not easy to beat CPF OA 2.5 interest rate.

-------------------------------------------
14% of CPFIS-OA investors realise net profit above OA interest rate, compared with last year's 13%


By EMILYN YAP

(SINGAPORE) More investors under the Central Provident Fund Investment Scheme (CPFIS) came out ahead for the year ended Sept 30 as markets performed well, compared with a year ago. But the number of investors that realised losses was also significant.

Gold and property funds were some of the new darlings as investors poured more money into them. In contrast, certain assets such as shares and insurance products lost their lustre.

Gold and property funds were some of the new darlings as investors poured more money into them. In contrast, certain assets such as shares and insurance products lost their lustre.

According to a report from CPF Board yesterday, some 124,800 members who sold their Ordinary Account (OA) investments in the year became better off than if they had left their savings in the OA. Their net realised profits exceeded the 2.5 per cent OA interest they would have earned.

This group made up 14 per cent of all CPFIS-OA investors in the year, and is larger than last year's 13 per cent or 112,600 members.

Another 332,400 members, representing 37 per cent of all CPFIS-OA investors, realised profits which were equal to or less than the OA rate. Again, this is an improvement from last year's 314,900 members, or 35 per cent.

Some 437,100 members (49 per cent of all CPFIS-OA investors) realised losses. The group is smaller than a year ago, when 465,700 members (52 per cent) were in the red.

'During the year, markets have been oscillating between optimism arising from improving economic data and concerns on the fiscal crisis in the eurozone,' CPF Board said.

'Nevertheless, the markets ended on a high note for FY ended 30 September 2010, recovering some of the losses in the earlier part of the year.'

As at Sept 30, members invested $25.4 billion of their OA funds under CPFIS. This is $1 billion or 3.8 per cent less than a year ago. Around $7.3 billion of Special Account (SA) savings also went into CPFIS, down $0.2 billion or 2.7 per cent.

Property funds (also known as real estate investment trusts), gold, annuities and Singapore government bonds were the only products which attracted more monies in the year.

The amount of OA savings invested in property funds went up by 3.6 per cent or $4.9 million from a year ago. As for gold, the increase was 12.9 per cent or $1.8 million.

There was an outflow of funds from other types of investment, such as endowment policies, investment-linked insurance products (ILPs), shares and unit trusts.

Most notably, the amount invested in insurance products fell by some $593.7 million and $180.2 million under CPFIS-OA and CPFIS-SA respectively. There was also a net decrease of around 15,100 members and 12,300 members invested in those products under CPFIS-OA and CPFIS-SA respectively.

Asked why the number of investors in insurance products fell, CPF Board said: 'The drop may be due to the maturity of some of the policies.'

Prudential Assurance Company Singapore CEO Philip Seah suggested that market conditions and new regulations could have affected participation in insurance products under CPFIS.

'However, contrary to the market, over 2009-10, Prudential Singapore has maintained a healthy and consistent trend of ILP investments from CPF funds,' he said.