Saturday, January 16, 2016

Towards a safer SAVER plan for our SAF men and women

Singapore Armed Forces (SAF) officers who have entrusted their retirement savings to SAVER fund managers are likely to wonder how this week's stock market turmoil has affected their nest egg.

Is SAVER safe? One wishes there could be a definitive answer to that.

Need to know
Looking at how some unfortunate officer cohorts were hit by returns which were less than advertised - we hear a batch of fund managers were sacked by the Ministry of Defence (MINDEF) years ago - one ought to assess if the SAVings & Employee Retirement (SAVER) plan can live up to its name as an investment plan for savers worthy of supporting the men and women who keep us safe 24/365.

It is ironic that SAF key appointment holders probably know more about the commanders they may face in battle than the individuals who manage the millions of dollars of SAVER money that belongs to SAF personnel.

Beyond the fancy name of the equity fund and brand name investment officers, who are the "worker bee" individuals who actually manage the money?

What is their personal track record in making money grow and experience in the financial sector?

Have their own investments aced the market or have they tanked?

Buyer beware
For SAF officers left with no choice after the pension scheme was removed, it is a matter of choosing the SAVER plan option that reflects their individual risk appetite.

Market savvy officers will argue they can probably outperform the fund managers had they been given the option to invest their own funds. But they do not.

The risk averse among SAF officers need better assurance that the SAVER rate of return will indeed  see the light of day. But are they getting their money's worth?

Fund managers should save the sales talk for the naive and the impressionable. The SAF Officer Corps is hardwired to assess desired outcomes (a credible rate of return for their savings), courses of action and success factors. And these officers want to see their money work hard for their retirement. And indeed, they have every right to such expectations.

It will take time to purge the system of horror stories of SAF officers whose miserable SAVER returns failed to live up to the fund managers' hype at one point in time.

As the SAVER scheme is here to stay, what's needed is a bold transformation not of the logic behind the scheme - generating and sustaining savings for the employee's retirement - but the quantum of a decent return on investment for SAF officers.

Introduced in 1998, the staff work and studies that led to the SAVER plan began in mid 1996.

These studies pre-date the wild ride in stock market trading patterns and shorter economic cycles that kicked into play after the 1997 Asian Financial Crisis, the boom and bust in 2000, the 9/11 attacks in 2001, SARS in 2003 and the 2008 financial crisis.

The logic behind SAVER's Dynamic, Balanced and Stable investment war plans, hatched in the late 1990s, needs to be fundamentally and clinically reappraised to see if the promised ROI is realistic, achievable and sustainable.

If stock market gyrations and economic cycles make it difficult or too risky for fund managers to do their magic, we must recognise that the landscape has changed and adjust accordingly.

Time to forge a new partnership
Under the current state of play, is the risk really worth the reward?

Look around you: Big name financial houses have been burnt with bad trading calls. How successfully have fund manager safeguarded the savings for SAF officers who are expected to transition to a second career in their mid 40s, which is just about the time when their children are still in school and home mortgages have yet to be fully serviced?

Instead of generating returns by hiring fund managers to play the stock market, we should guarantee our SAF officers a decent yet secure rate of return through Government funds that can be budgeted for and sustained through taxes, levies and the like. With uncertainty over SAVER taken out of the conversation, our men and women in uniform can concentrate on the tasks at hand with full confidence that their retirement nest egg is secure.

The SAF has a slew of multi-spectrum capabilities on call 24/365 to defend Singapore against a range of threats.

Alas, one thing the men and women of the SAF Officer Corps cannot safeguard is their own retirement savings. They deserve better.

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