[sukhoi_mmd]

You are mixing up two issues here. Whether CPF should be on a floating rate without protection is debatable, there are defined contribution plans on both sides of the spectrum globally and advocates from both sides can argue till the cows come home. I have also reflected quite a bit on this issue in several posts a few months ago, you can search for them if you are interested to know more. However this is not what is being discussed here.

What I am referring to is the divergence of the CPF's official benchmark policy with the spirit and intent of the policy when it was first set up in the first place which warrants a serious review. The idea behind the current policy is that the CPF would start off with an average person's opportunity cost in a risk free instrument and then provide a 1% premium to help citizens better achieve their retirement goals. In addition, in return for its members "giving up" on potential upside resulting from the government's investments in riskier investments, members are guaranteed a floor at 2.5% which also aligns with the idea to provide maximum pension stability.

The challenge now is the policy when implemented in a solely mathematical way has deviated substantially with the spirit and underlying rationale of its original intent. The 3MFD interest rates of the local banks no longer accurately reflect the average person's opportunity cost in a risk free instrument due to the presence of two interest rates operating in parallel - one is official (the CPF benchmark) which most monies are NOT parked under and the other is "real" (promotion) in the sense that most monies are parked under.

Personally, I'll be delighted if CPF pays higher interest, I received $34k interest in 2021, risk free. I use cash for my housing instalments, but how many members are like that? How many would be happy to get a cpf interest rate hike when they've substantially sunk their OA monies into property? For those members who want more, they can try their hand at investing under CPFIS - but we know how that has turned out for a good number.