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Why don't we spend more of the investment returns, since the reserves are growing?



Today, the NIRC is one of Singapore?s largest sources of revenue for annual spending. There have been calls to draw more NIRC, above the present spending limit of 50% of the annual investment returns. a. 50% places even emphasis on the needs of today and tomorrow. It allows us to tap on the investment returns for our current spending, while continuing to grow the reserves.  b. Drawing more NIRC for this generation would mean leaving less for the next generation, who would likely end up paying more taxes to fund their needs.  The pace of our reserves growth should be viewed against the growing size of the economy and spending needs. National spending needs, especially for healthcare and social spending, are growing faster than GDP. Meanwhile, the NIRC is only expected to continuing growing in step with GDP. a. Furthermore, it is not certain that the NIRC will continue to keep pace with economic growth. Investment returns are subject to significant headwinds in the global investment environment ? for example, due to ageing populations in the developed countries, lacklustre productivity growth, rising government debt levels and geopolitical tensions. b. Future generations can expect to face more challenges, for example due to climate change and rising sea levels, as well as public health emergencies which experts predict will happen with increasing frequency. With more emergencies to contend with, they are likely to need more reserves, not less.

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