Who's the Real Free Rider? Singapore’s Government Reserve Racket

Who's the Real Free Rider? Singapore’s  Government Reserve Racket
Photo Credit: Reuters/ TPG Images
What you need to know

“You have to be able to spend what you are able to earn,” said Singapore's Prime Minister. Truly?

A dispute broke out yesterday in Singapore’s parliament over how Singapore’s reserves should be spent. 

Opposition Leader Pritam Singh said yesterday that more of Singapore’s reserves should be used for “healthcare, aging, the same Singaporeans who have worked hard, have toiled hard, and who are now in their retirement years.” 

Prime Minister Lee Hsien Loong swatted this idea aside. He said that his “fundamental mindset” is that “we do not depend on another little bit from the reserves,” because it will only lead to “getting a little bit more pregnant,” and “that is not the way we should think.”

Lee, ever eloquent, made his point most clear when he said, “You have to be able to spend what you are able to earn.”

Let’s take Lee at his word and examine how much the ruling People’s Action Party (PAP) “earns” through the reserves, and how much it is actually spent. 

Singapore’s reserves are accumulated from retirement funds, the Medisave healthcare contributions, and land sales revenue from the sale of public housing, among others. We will look at how these three schemes add up to an immense investment fund for the government, while doling out a pittance to Singaporeans. 

Central Provident Fund retirement scheme

First, we’ll look at Singapore’s public retirement scheme, the Central Provident Fund (CPF). In 2019, .the total amount withdrawn for retirement purposes was only S$6.5 billion.

By the end of 2019, the total CPF balance account holders had was a total of S$322 billion (US$236 billion). This does not include the CPF contributions paid as part of the Medisave healthcare scheme. 

This would mean that the total CPF funds withdrawn for retirement by Singaporeans only made up 2% of the total CPF balance allocated for retirement in 2019.

In other words, the total funds inside the CPF balance are enough to pay for the retirement payouts of elderly Singaporeans for 50 years, based on current withdrawals.

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Looking at it the other way, the total of S$331 billion (US$242 billion) amassed as of the first quarter of this year would be enough money for 1.1 million Singaporean families to pay for Housing Development Board (HDB) public flats costing S$300,000 (US$219,836). 

Last year, there were 16,608 new HDB flats sold, which means that the CPF accumulated for retirement would be enough to pay for all new HDB flats sold to Singaporean families for 66 years, if each is sold at S$300,000 (US$219,836) — that is 66 long years, mind you! 

Does the PAP government need to hoard all this money in the CPF when it is already making Singaporeans pay 37% of their wages every month into the CPF — already the highest in the world for any public social security scheme? 

Medisave 

Singapore uses a public medical savings accounts scheme called the Medisave. 

In 2019, the Medisave contributions Singaporeans have paid since the  plan started in 1984 have allowed the PAP government to accumulate S$102 billion (US$74.7 billion). 

Singapore's workers were only allowed to withdraw S$1 billion (US$732.7 million) from Medisave to pay for their direct medical expenses, which is only a miserable 1% of the total balance. 

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By the first quarter of this year, the Medisave balance has increased to S$104 billion (US$76.1 billion). 

The total monies inside Medisave would therefore be enough to pay for direct medical expenses for 95.5 years, according to how much the PAP is willing to allow Singaporeans to currently access. 

In other words, the Medisave balance would enable nearly 350,000 Singaporean families to pay for public flats costing S$300,000 (US$219,836) — or enough to pay for new flats sold for 20 years.  

Does the PAP government need to hoard all this money in Medisave when it is already making Singaporeans pay on a monthly basis into the Medisave? At 8% to 10.5%, it is already one of the highest share of wages citizens need to contribute into their national healthcare schemes in the world.

Land sales

Since 2005, the government has collected S$205 billion (US$150 billion) in land sales. (I could not locate figures prior to 2005).  

The PAP government admitted last year that land costs comprise about 60% of the total development cost of HDB flats in 2016 and 2017. Accordingly, the total land sales since 2005 would enable 1.14 million Singaporean families to pay for flats costing S$180,000 (US$131,863), or 40% of the price of a flat of S$300,000 (US$219,836) after deducting for land costs – or enough to pay for new flats for 69 years.

The excess money from the CPF, Medisave, and land sales are majority managed by Singapore’s Government Investment Corporation (GIC) which Singapore’s prime minister chairs, and which Temasek, headed by Prime Minister Lee’s wife Ho Ching, has access to. 

Prime Minister Lee said, “You have to be able to spend what you are able to earn.” Indeed. Is spending only 1% of the total CPF and Medisave balance for actual retirement and healthcare purposes really necessary, while leaving the rest of the 99% for investments managed by the government?

Is it right when the PAP is accumulating enough in the CPF and Medisave to pay for 100 years’ worth of the current spending of retirement and healthcare?

A responsible government would return more of the reserves for the retirement and healthcare protection of Singaporeans, as both the Workers’ Party and the Progress Singapore Party have said in their opening speeches in parliament. 

However, there is too much at stake for the PAP which has amassed billions in reserves from the CPF, Medisave, and land sales. 

The GIC was set up in 1981. Medisave was set up in 1984, land costs were included into HDB flat prices at market value in 1985 and the CPF Minimum Sum (also known as the Full Retirement Sum today) was set up in 1987, which together has enabled the PAP to siphon off a large proportion of these monies into the reserves. 

Opening the books and returning the money to Singaporeans in the form of social expenditure would require accountability the PAP has ran away from for the last 40 years. 

While Lee Hsien Loong called opposition voters "free riders," which party is the one really free-riding on the money of Singaporeans? 

This article was updated on September 4, 2020. 

READ NEXT: How Many Workers Can the Salaries of Singapore’s Ministers Pay For? 

TNL Editor: Nicholas Haggerty (@thenewslensintl)

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