CENTRAL PROVIDENT FUND (CPF) RETURNS AMID CHANGING YIELD CURVES: EVALUATION OF RETIREMENT ADEQUACY

Abstract

The Central Provident Fund (CPF) is a crucial component of Singapore’s retirement system that provides annuities to retirees. This thesis evaluates CPF returns amid rising yield curves and inflation. Will changing the Ordinary Account (OA) interest rate formula improve retirement adequacy? Our findings suggest the inclusion of Singapore Government Bond and Government of Singapore Investment Corporation returns, exploring raising the current OA pegged return of 2.5% p.a. to 3% p.a. The thesis also analyses the potential impact of the Lifetime Retirement Investment Scheme (LRIS) introduced in 2016. Using statistical modelling techniques such as time series analysis and Monte Carlo simulation methods, the study projected the expected returns of four investment fund options and assessed the resilience of CPF in providing adequate retirement security under various economic conditions. The findings suggest that while a basic retirement is still achievable, attaining a comfortable retirement may be challenging in the current economic climate.