New profit/loss measurement for CPF investment scheme report

SINGAPORE — Seventy-eight per cent of Central Provident Fund (CPF) investment scheme (CPFIS) members who invested their savings under the ordinary account (OA) made profits of more than 2.5 per cent per annum for financial year 2016.

The details are quantified following the new profit/loss measurement methodology revealed yesterday. The new measurement now only includes CPF members with investments in the reporting period, and includes both realised and unrealised profits/losses into the statistics. It also provides a cumulative measurement which allows members to take a longer term view on the performance.

The older measurement had added all CPFIS members including those with no investments in that reporting year, and counted only realised profits/losses.

For financial year 2016, which spans October 2015 to September 2016, a total of 441,000 members had profits of more than 2.5 per cent per annum. Meanwhile, financial year 2015 saw a total of 159,000 members, or 27 per cent, in the same category.

Referring to the old methodology, financial year 2015 would have seen 16 per cent, or 143,321 members hitting profits of more than 2.5 per cent per annum instead.

Industry experts have called the revision a better way to go, as it provides a more accurate picture of the investment scheme.

According to Mr Joseph Kwok, president of the Financial Planning Association of Singapore, the new method adopted by the CPF Board is a global investment performance standard adopted by many fund managers and is intended to provide consistency to the way portfolio returns are calculated internationally.

“This method takes into account the movement of money in and out of each member’s CPFIS account, and the timing of such movements. Adopting such an international standard is a good step to providing a better picture of how well CPF members invest under the CPFIS,” Mr Kwok said.

Financial adviser and fund management company Providend’s chief executive Christopher Tan said the revision is a better way to measure performance. “In the past, when we included members with no investments, the base was much bigger and thus it inaccurately skewed the data, falsely showing more CPF members not making a profit.”

“By showing only realised profits and losses previously, it did not take into account members who are really investing their CPF for the long term and thus not realising their profits or losses. The investment performance of these members need to be measured too,” Mr Tan added.

Mr Low Pat Chin, member accounts and investment group director at CPF Board said: “The new CPFIS-OA Total Profits/Losses report provides a more holistic representation of CPF members’ investment performance as it takes into account the total investment portfolio value and provides a longer term measurement of investment performance.”

The profit and loss indicator does not include individual members’ investment performance. “Members can refer to statements provided by their agent banks or product providers to find out their own investment performance under the CPFIS,” said Mr Low.

The Singapore Government had previously said that it would be reviewing the CPFIS. When queried about the review, a Ministry of Manpower spokesperson said it would share an update when it is ready.

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