Korean Pension Fund +20%! CPF returns are so low at only 2.5% / 4 %! Jialat!

Ladies and gentlemen, I saw an article that shows that the South Korean pension fund which is our CPF equivalent is returning 20% return this year. Wow.

Then our CPF return is only 2.5% and 4%.

How come? How can Wow. So I think a lot of people uh will share my sentiment today. uh I did a thorough research um

today. uh I did a thorough research um and this is what I discovered across many countries and let me unfold this whole uh disparity for you. Let's just

watch on shall we? So why is our CPF return so bad and so unimpressive when compared to other count's pension funds

return and this is where I will give you a report of an analysis that I've done with other countries pension funds and

what this number tells us across uh different places and so on. So, the

whole spark of how I start this research is because I saw this article today that the South Korean pension fund is likely

to post a record 20% gain in 2025. Wow,

that's even higher than uh the S&P the S&P 500. So, I certainly have a shock uh

S&P 500. So, I certainly have a shock uh surprise when I take a look at this. If

my CPF would have a 20% return, wow, you know, that that would really uh give me an additional

uh easily, right? Uh five more years of wonderful retirement life. So, so I think it is unbelievable that a national pension fund can give such high returns

and of course that sparked off the question of our CPF. So the obvious question I have which if you are in my

shoe is if Korea can make 20% why CPF is only paying 2.5 to 4%. So the question must have crossed your mind as much as

it crossed my mind. So I did what other investor do I check the data and well you know the the data source is true. Uh

but I think there are a lot of reasons behind. Let's just watch on shall we? So

behind. Let's just watch on shall we? So

I didn't just do Korea, I also did Canada, Australia, uh the Californian system as well, the Norwe Norwegian system and I reook again at the

Malaysian system as well with EPF. So

Malaysian, please watch on uh because I also want to give you my frank analysis of the EPF system as well. Well, the

shocking uh returns of many countries over the last 10 years are as follow. So

uh Canada is about 9% really over the last 10% annualized is 9%. Australian

funds is 8% annualized. Norwegian fund

is 7% and Korean fund is 7 to 8%. Even

the Malaysian fund is returning about 6%. And our Singapore CPF is returning a

6%. And our Singapore CPF is returning a miserable 2.5 to 4%. So at a first glance our CPF returns look terrible,

right? uh the number seems to tell us an

right? uh the number seems to tell us an un ambiguous and categorically clear uh story of underperformance. Uh but when I

dive in the details, I saw the reason why. So uh it's very easy to conclude

why. So uh it's very easy to conclude that our CPF system is very bad in terms of returns and certainly Singapore has fallen behind. uh but the conclusion uh

fallen behind. uh but the conclusion uh is actually wrong because you know they we're actually comparing different system because the underlying system are different.

So so what I did was I went deep into the numbers and look at the yearby-year

returns and take a look at patterns. Uh

so instead of just looking at average over 10 years I look at year-on-year returns and suddenly everything became very clear and I'll show you and you understand why. So with very interesting

understand why. So with very interesting uh yearly data breakdowns uh is a very simple thing to see why there are good years and bad years in other system. So

let me take a look at the the US system.

This is a California system. It's called

a California public employee retirement system. It's not quite the same as our

system. It's not quite the same as our CPA but it's a good benchmark to tell you. So some years is 2.4. Some years is

you. So some years is 2.4. Some years is 6 in 2016 and then it went to 11% 6% 8% and some years 2022 that was a great inflation

crash was minus 6 right 2021 is 21%. Of

course the average is better than uh CPF1 but it has got ups and downs which the question is can you accept it right so the next one is a Canadian system uh

uh some years is 18% some years negative -2 then went to 11 118 negative.1

208 6 and 9.9 so it went up and down up and down up and down question is can you accept this kind of returns right so the

annualiz is 9.3 much higher than Singapore returns you know then ask yourself whether you can accept this the Australian system something similar 2015

15 then you drop to 1 then 10 then 8 then 7.5 then two 23 -3.7 8 and 6.7 some

years high some years low clearly the average is better is at 8% but you know this clearly is uh investment returns no Norwegian system uh I think the world

pride the take pride in the Norwegian system and the Norwegian system same thing 2.7% 6.93

-6 20% 10% 14 -4%.

Wow -14 you know whatever the gain in previous year all got wipe out and then return 16 this year I think is so 2024 I think it's about approximately 15 we

don't know the latest I think it'll be positive as well so you know you see up down this one got even bigger volatility the Japanese system let's take a look

the Japanese system annualized over last is about 6% even the Japanese system 35

5 6 1 5 suddenly shoot to 23 then drop to 5 1 21 w this one huge

volatility right 20% drop to zero to one and up down up down up down uh that's their government pension system the Malaysian system uh is quite interesting

they have a return about 5.9% but interestingly if you take a look at the non sharia funds uh they are generally

well above 5% consistently.

Yes, their fluctuation but their fluctuation are not so severe if you take a look at the last 10 years. So for

all the countries I've looked at including Singapore actually if you take uh you take account of volatility actually the Malaysian EPF system is the best system. Okay, I know the Malaysian

best system. Okay, I know the Malaysian have a have a lot of trust issue in uh your own government system, but the truth of matter is that your system is returning five over%. Singaporeans will

be drooling to have this kind of uh returns that are so stable and that's despite it having risk, right? So, it's

too good to be true. So, I prop it uh to find uh the historical numbers all the way back and this is what I found. So

from 1995 uh onwards it was a high of 9.5% and it slowly dropped drop dropped sometimes to six six five even the comb

bus of 2001 it still return 5%. That's

amazing. I don't know how you do that, right? And then you have a 44. I suspect

right? And then you have a 44. I suspect

that quite a lot of funds are in Petronas or something like that. I don't

know where oil money just simply uh can't lose money, right? Uh I don't know what's behind the EPF, but the EPF is amazing, right? So for Malaysian, they

amazing, right? So for Malaysian, they are sitting on a gold mine without appreciating this. I think there's a lot

appreciating this. I think there's a lot of Singaporeans would love to be able to put money into EPF uh to to yield this

kind of return. And uh since uh 2005 you have pretty stable at five six% all the way 2014 and the returns are

consistently high at 5 to 6%. I have a chance I recall to meet the EPF head rather the retire hit I can't remember this T series name or D series name but

when I spoke to him clearly he knows how to manage funds without a doubt. So wow

this is a insane return. So Malaysian

please have respect of your own EPF system. Think about it. The EPF system

system. Think about it. The EPF system survived Asia financial crisis, global financial crisis, a ch so many change of

of prime ministers plus 1MDB saga and it still return all this consistent return.

Right? So it is a it is a pension system that stood the test of fire and time. So

um I don't I don't know I don't receive any marketing dollar from uh from the EPF system. I just want to say that uh

EPF system. I just want to say that uh your EPF system is really really very good. Uh I think you should uh pay more

good. Uh I think you should uh pay more respect to the EPF system. Back to

taking a step back and look at the whole thing. Oh it's very simple to understand

thing. Oh it's very simple to understand why other countries system uh can give such great returns because they are essentially investment returns. Okay.

and where where the Singapore system is quite different. So uh the uh the other

quite different. So uh the uh the other country system basically it is linked to investment return. So there could be big

investment return. So there could be big swings towards negative during crisis period and deep losses during inflation period. Can you accept that as

period. Can you accept that as Singaporeans? Right. Uh from what I know

Singaporeans? Right. Uh from what I know of Singaporeans, most Singaporeans are very reluctant to take losses. So taking

a look at CPF system there is almost no volatility okay the 2.5% is enshrined in the constitution of Singapore law so it

will be fixed there right very stable no risk okay and uh and if you take a look at the 4% uh there is some changes okay more to the up more towards the upside

you know recent years there's some minor up uh up increase not a lot you know but it just show that uh that that is very stable. So never a loss regarding uh

stable. So never a loss regarding uh regardless of the market condition and the return stood strong in the crash of

uh 2001 the docom bubble burst 2008 global financial crisis 2020 COVID crash 2022 the grid inflation nothing happened

to our returns. Okay in fact I think in 2022 23 the the special account actually went up by a little bit. So more or less

they are guaranteed flaw. He has got the Singapore government backing right. So I

actually think that we are actually looking at two different types of asset class right more or less one is guaranteed bond like return and one of it is investment return. So in a

nutshell if you step back is actually comparing apples and oranges. So other

countries are investment return marketdriven outcomes and I suspect that they all run by professional funds global asset uh allocation and most of

the people are tuned to volatility uh and the returns will vary yearbyear where the CPF system is a guaranteed system governmentbacked stable outcome

is predictable the the retirees have no fear uh of the outcome in the sense that you know you you know that uh if you put this s of money

inside the the special account uh the ordering account you will always get this return. So uh it's predictable. So

this return. So uh it's predictable. So

uh so the trade-off really is every country system have to make a fundamental choice. There's no free

fundamental choice. There's no free lunch in finance. Do you want higher returns and it must come with higher risk? You want lower risk? It must come

risk? You want lower risk? It must come with lower returns. So you know which is the choice that you want. So many

countries in the world chose uh higher returns in exchange for higher risk. But

in the case of Singapore, we decide to choose uh a more stable return uh in exchange for no risk. Right? So this is a design outcome not a failure. Of

course you can always uh argue that can you give 1% more, half a percent more, maybe 2% more. Of course, right? We can

always ask the government to give more.

But the truth of the matter is that u the returns are what they are because we uh we have chose we have chosen for to have stable returns. Why Singapore chose

stability? Well, you know the government

stability? Well, you know the government is rich and able to protect the population, right? So in short, the

population, right? So in short, the government underwrites the risk and protects the population from volatility and as a result there are no panic

during crisis. Okay. uh as a result the

during crisis. Okay. uh as a result the retirees the the people who are receiving receiving a stream of CPF life payment you can be very rest assured and

stable uh stable and confidently uh have all these returns and as a result you can have social stability in exchange for uh in exchange for this uh financial

uh stability as well so I I think that there's no right or wrong there's no best system you know you you can't have in some sense the best of both worlds is either left or right. You can't be in

the middle on this. So, now that I've look looked into the details, so is a CPF having bad returns? Well, no lie.

It's not so bad. In fact, it's very good. Okay. I actually prefer a stable

good. Okay. I actually prefer a stable 4% return. I super like the the

4% return. I super like the the retirement account. I super like the

retirement account. I super like the idea that I can beef up my ERS and uh and in exchange for insanely high uh CPF live payments. So uh this is what the

live payments. So uh this is what the system is designed to do. So this is a retirement safety net right this is not a performance this is not a performance

fund this is not an investment. So this

is this is meant to serve its purpose.

So the it's a wrong question to ask why is CPF return so bad but the right question is should CPF be your only stability engine? Can there be other

stability engine? Can there be other areas of growth? The answer is of course. So uh I have got two ideas.

course. So uh I have got two ideas.

Number one is uh can the CPF break up our funds or create an option for a CPF uh run offspring fund? Uh not replacing

the current CPF but a voluntary CPF run investment fund that allow people to invest right. So uh so in in short there

invest right. So uh so in in short there is a there's a new account right not just O a SA MA and RA but maybe an IIA

investment account where the government underwrites uh certain uh certain certain features of this system right that the private sector cannot give.

what it is uh is is really something that you know uh closer to government uh government undertake a little bit of

risk but but allow people in a country to participate in market link returns.

Well, why does this make sense? Because

CPA port already has some trust. We have

got scale and Singaporeans are already saving compulsory and and I think a lot of the younger Singaporeans can tolerate some risk. So um this this new choice I

some risk. So um this this new choice I think might be an option to consider.

Now this is where I also want to say hey why do we need to count on the government? Why can't we invest OA

government? Why can't we invest OA ourselves right invest ourselves? Well

you can right I done that right? If you

take a look at my this is a screenshot from endow I think I show some of your before. This is my CPF statement. Yeah

before. This is my CPF statement. Yeah

it sounds like bragging but I just want to tell you that you can do it yourself.

I threw all into S&P 500 right and returns 87% right 87% it know it basically almost double over four four years plus and look at the annualized

real return uh 14.8% 8%. Not bad. Not

bad. Not as high as the Norwegian fund uh or the Korean fund, but uh this is pretty good as well. Uh so actually maybe the question is maybe we don't

need the government to run it for us.

Just just do it ourselves, right? Okay.

So would you want to do that? Right.

Food for thought. In closing, I think the CPF has done its job. Okay.

Yes, they could create a investment fund for us uh to put our money in or it's maybe up to you to expand your returns right yourself. Uh so whether risk or no

right yourself. Uh so whether risk or no risk already today we can uh under undertake that decision ourselves. So is

CPF um is CPF a good fund? I think it is for myself. Okay. I can't I'm sure

for myself. Okay. I can't I'm sure everybody wants high return. So do I. uh

but you know I higher returns simply means higher risk and uh we prepare to accept that okay food for thought let me hear your views okay and by the way I'm

doing a whole series on crash buying uh I'll be deleting the video soon yesterday was a very good video that I think everybody to watch should watch in the live stream I've recorded down

already I'll be taking out soon it's a mustwatch so please watch it okay with this thank you and I'll see you in a day or two bye-bye