The Government invests the SSGS proceeds together with its other assets through the GIC, which takes investment risks aimed at achieving good long-term returns. However, the consequence of taking risk as a long-term investor is that returns may be weak or even negative over shorter periods. Yet, the Government is able to guarantee CPF savings and pay the minimum interest rates on CPF savings regardless of GIC’s returns over any period, because the Government's balance sheet enables it to absorb risks. The Government has a significant buffer of net assets, i.e. assets which are well above its liabilities including its CPF commitments.

• For example, GIC experienced losses in investment value during the Global Financial Crisis, and low average returns for five years, before recovering (see GIC’s annual report).

• The Government was able to bear this investment risk because its substantial buffer of net assets ensures that it can meet its obligations.

This also means that GIC can invest without regard to the Government’s specific liabilities. This enables GIC to focus on achieving good long-term returns, in full knowledge that the portfolio will be exposed to significant risks over the shorter term as the markets experience cycles and volatility. The Government’s balance sheet would absorb these risks.

Find out more about what are our reserves used for and the management of our reserves.