The CPF scheme has progressed over and beyond an old-age savings plan to a comprehensive savings scheme that caters to members’ needs for retirement, healthcare, home ownership, family protection and assets enhancement. With the passage of time, the scheme has been gradually liberalized to accommodate the investment needs of an increasingly sophisticated population. Finding a balance between a social security system with unrealistically generous benefits and one that adopts too obtrusive an approach is a difficult one. On balance, the CPF scheme, although not perfect, is worthy of consideration for other countries.

If you look outside our normal par dine, there are differences between the United States and Singapore. There are many positive aspects of the CPF:

90% of Singaporeans own a home – which is the American dream. Through an ingenious programme of deductions from wages into a CPF, Singapore has been able to build attractive apartments, and to continue to expand their size as the desire for larger units have intensified. In the brief period since independence in 1965, enough new units have been established that some 80 percent of the population is now housed in attractive, new, publicly financed units. By adjusting the costs and rates, the government makes it attractive for families to use withdrawals from the CPF to buy their homes rather than rent them. Thus a vast majority of Singapore families now have a commitment to their home and their community. It is social engineering at Singapore’s best.

The major feature of the largely successful Singaporean housing system is its economic basis. What was required was a careful connection of the housing system to the saving-investment process in the general economy. This connection should not be viewed in isolation. In Singapore, the state has performed a variety of roles. It has taken positive steps to attract overseas investment in industry; it has influenced the course of industrial relations; and it has made purposeful social investments in such spheres as health, education, and science and technology. These involvements have had various effects upon economic development, production, and of course of social change. In the social policy, investments in health education and housing have been "productive: in the sense that they have maintained the capacity. The qualities, the skills, and the contributions of labour in the economy. The role of the state and its instrument, the CPF, acting as financing and resourcing intermediaries, and thereby tilting economic resources in favor of the total housing system. In effect, the CPF is a means of obtaining forced savings, and although originally designed and constructed to secure economic provisions for old age, s a social fund it has been used for housing and other social and economic investment purposes. Our statistics show that in the 1975 – 84 periods, housing absorbed some 4.8 to 15.9 per cent of gross domestic product and some 11.6 to 34.1 per cent of gross capital formation. Public housing now amounts to some 92 percent of total residential construction. These statistics make Singapore’s efforts in social housing quite remarkable and along with Norwegian housing, the most impressive in the world. By using the CPF and the state’s income-transfer system in its annual budget, Singaporean policy makers have been able to avoid major conflicts between housing and non-housing capital. Also, the CPF funds have been used to develop social infrastructure, leaving private (unforced) savings-investment abundant opportunities in the private sector of a growing economy.

CPF gets better rates of returns than the U.S. Social Security System. CPF-approved unit trusts have been offering returns higher than the CPF interest rate, with one fund making about 155 percent in three years. Seventeen out of 22, (77%) of the unit trusts with a three-year track record made more money for their clients between July 1, 1996 and June 30, 1999. According to CPF investment consultant, only one of the 22 funds lost money. The best performer, the Dresdner International Provident Fund, gave a return of 154.7 percent after three years. Most of the other unit trusts gave returns of 20 percent and 40 percent.

Proprietary interest in the country. Being a member of the CPF has its privileges when the Government shares the rewards of the nation’s success with Singaporean CPF members in recognition of their contribution. . It was necessary to create a sense of belonging and to allow the people to sink their roots into the Singaporean soil. To increase the people’s stake in the country, the system of compulsory savings through provident funds, already in existence at independence, was developed further with the passing of the Central Provident Act.

Government invests in the infrastructure of the country. Cash contributions to, and other income of, the CPF, net of out-payments, are invested in government securities. The CPF system therefore has been a very important source of funds for government expenditures that are not covered by current revenues. There is relative constant gap between the size of CPF liabilities and government debt throughout the period. Statistics show that the Singapore Government during the period under review has succeeded in keeping within manageable range the need to borrow funds from the domestic capital market. It has done so by the avoidance of large expenditures on social welfare and income-redistribution schemes, and by being able to draw on the very large forced savings from the CPF. As a result, monetary policy in Singapore has been left free to pursue the main goal of price stability.

CPF is used as monetary policy – as time gets bad, the employer portion of the contribution is decreased. Singapore’s basic approach to economics has been essentially a pre-Keynesian balancing of budgets. Deductions from pay checks built up capital, the CPF, that people could draw upon to buy homes; and in the meantime the government could draw on this capital for housing and other infrastructure developments. The CPF proved so successful that it was expanded to cover payments for hospitalization. It led to perhaps the highest savings rate in the world, to a sound financial basis for developing Singapore’s infrastructure, and to substantial accumulated savings.

The aging of the population is a major consequence of the fertility decline that Singapore will continue to face until stability is reached. As in the United States and Europe, this will be aggravated by the increasing longevity of the population. Similarly, old age security is a potentially explosive issue in Singapore, as it is in the West. Opposition politician have capitalized on this issue by raising the spectre of the insolvency of the CPF, the government’s mandatory savings scheme by which the gainfully employed population can provide their own old-age security. The critics have exploited a similar Western fear by omitting to note its basis, namely, the European and American systems depend on intergenerational transfers (from present generation of workers to retirees from all previous generations), so that their viability is affected by both the diminution of the labour force (as a result of fertility declines since the 1960s and the utilization of more efficient production techniques) and the increasing longevity of the elderly. Under the CPF scheme, which is essentially a savings scheme, solvency is not in question unless there is gross mismanagement of the Fund.

There are differences with the United States:

U.S. citizens do not believe that Government should be in the business of business. For example, people would not want to see healthcare be taken over by government.

The Social Security system is founded on the principle of a social contract that aims to promote intergenerational solidarity (reciprocity) and social cohesion, i.e. the welfare state. Part of the New Deal reform was the creation of Social Security. Although even today retired people need more than their Social Security benefits to get by, there is no question that this program has provided tens of millions of retired people with a substantial income and has largely removed workers’ fear of being destitute and dependent in their old age.

There is the question of whether government should investment in private companies. It places morale value on business. Government would dictate morality by the companies it invested in, i.e. should the government have stock in Philip Morris, or would that condone smoking – it is believed that morality should be left to individuals.

The Social Security system is almost bankrupt. It cannot pay promised benefits to tomorrow’s retirees. But proposals to "save" Social Security by reducing benefits, including raising the retirement age or by raising payroll taxes will further reduce Social Security’s already low rate of return. In his 1999 State of the Union address, President Clinton provided more detail regarding his proposal to "save Social Security first." He called for using 62% of any surplus over the next 15 years to save Social Security; saving 15% of the surplus to shore up Medicare; and devoting 12% of the surplus to the creation of new Universal Savings Accounts which would provide additional retirement savings in addition to the base Social Security protection. We are in the period of reexamination of the achievements and the promise of Social Security and are engaged in a public policy debate about the future of Social Security-a debate that will determine the future history of the program.