Investment Patterns in Singapore's Central Provident Fund System

Rising elderly life expectancies imply the need to accumulate sufficient savings for retirement. This paper investigates the role of recent changes in the investment menu of the Singaporean Central Provident Fund (CPF) system. Our research explores the investment patterns of CPF participants and art...

Full description

Saved in:
Bibliographic Details
Main Authors: KOH, Benedict S. K., Mitchell, Olivia S., Tanuwidjaja, Toto, Fong, Joelle
Format: text
Language:English
Published: Institutional Knowledge at Singapore Management University 2008
Subjects:
Online Access:https://ink.library.smu.edu.sg/lkcsb_research/1093
https://ink.library.smu.edu.sg/context/lkcsb_research/article/2092/viewcontent/SSRN_id933332.pdf
Tags: Add Tag
No Tags, Be the first to tag this record!
Institution: Singapore Management University
Language: English
id sg-smu-ink.lkcsb_research-2092
record_format dspace
spelling sg-smu-ink.lkcsb_research-20922021-08-18T08:47:16Z Investment Patterns in Singapore's Central Provident Fund System KOH, Benedict S. K. Mitchell, Olivia S. Tanuwidjaja, Toto Fong, Joelle Rising elderly life expectancies imply the need to accumulate sufficient savings for retirement. This paper investigates the role of recent changes in the investment menu of the Singaporean Central Provident Fund (CPF) system. Our research explores the investment patterns of CPF participants and articulates their implications for policymakers. We find that most investors use their money for housing purchase and default the remainder to the CPF investment pool. The bulk of non-housing saving sits in bank accounts paying a low return. A fraction of workers does elect outside investment products, with high-income earners and males taking more risk than low-income earners and females. Since workers who default their money to the CPF fund receive a guaranteed 2.5% return on the Ordinary Account and 4% on the Special Account, hurdle rates for money market and equity funds are substantial. These high hurdle rates help explain why few CPF account holders invest outside the default government investment pool, though inertia probably explains why many employees let their funds sit in bank accounts earning low interest rates. More attention could be devoted to lowering fund expenses and commissions, including the myriad of fees, expenses, loads, and wrap charges; it might also be beneficial to streamline and rationalize the investment menu offered to participants. [PUBLICATION ABSTRACT] 2008-03-01T08:00:00Z text application/pdf https://ink.library.smu.edu.sg/lkcsb_research/1093 info:doi/10.1017/s1474747207003253 https://ink.library.smu.edu.sg/context/lkcsb_research/article/2092/viewcontent/SSRN_id933332.pdf http://creativecommons.org/licenses/by-nc-nd/4.0/ Research Collection Lee Kong Chian School Of Business eng Institutional Knowledge at Singapore Management University Asian Studies Finance and Financial Management Portfolio and Security Analysis
institution Singapore Management University
building SMU Libraries
continent Asia
country Singapore
Singapore
content_provider SMU Libraries
collection InK@SMU
language English
topic Asian Studies
Finance and Financial Management
Portfolio and Security Analysis
spellingShingle Asian Studies
Finance and Financial Management
Portfolio and Security Analysis
KOH, Benedict S. K.
Mitchell, Olivia S.
Tanuwidjaja, Toto
Fong, Joelle
Investment Patterns in Singapore's Central Provident Fund System
description Rising elderly life expectancies imply the need to accumulate sufficient savings for retirement. This paper investigates the role of recent changes in the investment menu of the Singaporean Central Provident Fund (CPF) system. Our research explores the investment patterns of CPF participants and articulates their implications for policymakers. We find that most investors use their money for housing purchase and default the remainder to the CPF investment pool. The bulk of non-housing saving sits in bank accounts paying a low return. A fraction of workers does elect outside investment products, with high-income earners and males taking more risk than low-income earners and females. Since workers who default their money to the CPF fund receive a guaranteed 2.5% return on the Ordinary Account and 4% on the Special Account, hurdle rates for money market and equity funds are substantial. These high hurdle rates help explain why few CPF account holders invest outside the default government investment pool, though inertia probably explains why many employees let their funds sit in bank accounts earning low interest rates. More attention could be devoted to lowering fund expenses and commissions, including the myriad of fees, expenses, loads, and wrap charges; it might also be beneficial to streamline and rationalize the investment menu offered to participants. [PUBLICATION ABSTRACT]
format text
author KOH, Benedict S. K.
Mitchell, Olivia S.
Tanuwidjaja, Toto
Fong, Joelle
author_facet KOH, Benedict S. K.
Mitchell, Olivia S.
Tanuwidjaja, Toto
Fong, Joelle
author_sort KOH, Benedict S. K.
title Investment Patterns in Singapore's Central Provident Fund System
title_short Investment Patterns in Singapore's Central Provident Fund System
title_full Investment Patterns in Singapore's Central Provident Fund System
title_fullStr Investment Patterns in Singapore's Central Provident Fund System
title_full_unstemmed Investment Patterns in Singapore's Central Provident Fund System
title_sort investment patterns in singapore's central provident fund system
publisher Institutional Knowledge at Singapore Management University
publishDate 2008
url https://ink.library.smu.edu.sg/lkcsb_research/1093
https://ink.library.smu.edu.sg/context/lkcsb_research/article/2092/viewcontent/SSRN_id933332.pdf
_version_ 1770569797267881984