Impact of Increased Volatility in GIC's Returns on Interest Rates of Special Singapore Government Securities

Parliamentary Question by Mr Fadli Fawzi:

To ask the Prime Minister and Minister for Finance (a) whether the drop in GIC’s 20-year annualised real returns and the expected increase in volatility in GIC’s returns over the next decade is expected to impact the interest rate of the Special Singapore Government Securities issued by the Government to the CPF Board; and (b) if not, why not.

Parliamentary Reply by Second Minister for Finance, Ms Indranee Rajah:

Interest rates of Special Singapore Government Securities (SSGS) are based on CPF interest rates and are independent of GIC’s returns. The CPF Board invests CPF savings entirely in risk-free SSGS issued by the Government. The Government then invests SSGS proceeds together with its other assets through GIC. The Government guarantees CPF savings and pays the SSGS interest rates to CPF Board regardless of GIC’s returns over any period. The Government is able to do so because it pursues a prudent fiscal policy that enables a healthy buffer of net assets which allows it to absorb risks across market cycles.