Historical policy record
This article explains the CPF Advisory Panel’s 2015/2016 document. Amounts, account arrangements, projections and recommendations below belong to that publication, not current CPF entitlements, interest quotations or an investment offer. Check current CPF Board rules for an individual decision.
Question and method
Mercer assessed a small set of pooled, diversified, passively managed funds against leaving money in CPF. Its analysis used 2,000 stochastic simulations, regular monthly S$1,000 contributions over 30 years and SGD outcomes. Measures included expected balance gains, probability of underperforming OA/SA, short-term losses, investment horizon and fee sensitivity. Model outputs are neither forecasts nor guarantees.
Illustrative investment mixes and costs
Static-risk funds maintain a risk mix; lifecycle funds follow a glide path reducing equity as retirement approaches. The appendix’s static allocation and expense assumptions are below.
| Asset | Moderately conservative | Balanced | Growth | High growth |
|---|---|---|---|---|
| Developed equities | 15% | 28% | 38% | 50% |
| Emerging equities | 4% | 7% | 10% | 13% |
| Singapore equities | 8% | 15% | 21% | 27% |
| Global aggregate bonds | 21% | 13% | 7% | 0% |
| Singapore government bonds | 28% | 18% | 10% | 0% |
| Singapore corporate bonds | 14% | 9% | 4% | 0% |
| Asian credit | 10% | 10% | 10% | 10% |
| Cash | 0% | 0% | 0% | 0% |
| Total | 100% | 100% | 100% | 100% |
| Annual expense assumption | 0.45% | 0.50% | 0.55% | 0.60% |
Return illustration and limitations
The main return comparison uses a common 0.5% expense assumption. The appendix’s detailed fund expense assumptions differ as shown above. Both are historical modelling inputs; projected CPF interest also varies rather than simply assuming today’s floors forever.
| Option | Expected annual return |
|---|---|
| OA | 3.0% |
| SA | 5.2% |
| Lifecycle | 6.5% |
| Moderately conservative | 5.3% |
| Balanced | 6.3% |
| Growth | 6.9% |
| High growth | 7.4% |
Event risk, horizon and fees
The lifecycle illustration had a 5% probability of losing at least 20% in a year early when equity exposure was high, and even conservative late-stage allocations could lose. A downturn just before liquidation can harm retirement balances with insufficient recovery time. Longer horizons and lower fees improved outcomes in the model; the higher SA comparator made outperformance harder. Lifecycle de-risking reduces but does not remove these risks.
Capital-market assumptions and glide path
Appendix B starts from 1 January 2015 valuations and models mean reversion, economic growth, inflation, bond yields and currency movements in SGD. Its lifecycle equity allocation declines from about 90% at age 25 to 50% at 60 and 20% at 65. The model assumed a lifecycle fee of 50 basis points with aggregate assets around S$500 million. At year 30 it still estimated a 5% chance of a one-year loss of at least 5%. The chart comparing higher fees shows a greater probability of lagging CPF; none of the graphs presents a maximum possible loss.
| Asset | Geometric annual return | Annual volatility |
|---|---|---|
| Singapore equity | 7.6% | 26.3% |
| Global developed large-cap equity — unhedged | 6.5% | 19.3% |
| Global developed large-cap equity — hedged | 6.8% | 18.9% |
| Emerging equity — unhedged | 8.1% | 26.7% |
| Singapore cash | 2.4% | 1.1% |
| Singapore government bonds | 3.7% | 5.3% |
| Singapore non-government bonds | 4.0% | 4.2% |
| Global aggregate bonds — hedged | 3.3% | 4.9% |
| Asian hard-currency bonds — hedged | 5.1% | 6.0% |